National Real Estate Exam (PSI)Property OwnershipMedium
A buyer purchases a unit in a residential building that is legally organized as a cooperative. What does the buyer actually receive as their ownership interest?
- AA tenancy-in-common interest in the entire building with the other unit owners
- BFee simple title to the unit plus an undivided interest in common elements
- CShares of stock in the cooperative corporation and a proprietary lease to occupy the unit
- DA life estate in the unit that ends upon the buyer's death
Show answer & explanationAnswer & explanation
Correct answer: C. Shares of stock in the cooperative corporation and a proprietary lease to occupy the unit
In a cooperative, the corporation holds title to the entire building. Individual buyers purchase shares of stock in that corporation, which entitle them to a proprietary lease granting the right to occupy a specific unit. This differs from a condominium, where the owner holds fee simple title to the unit itself.
Why the other options are wrong
- A. Incorrect — the corporation, not the individual owners directly, holds title as tenants in common.
- B. Incorrect — this describes condominium ownership, not a cooperative.
- D. Incorrect — cooperative interests are not life estates and can be sold or transferred.
Cooperative Ownership
A form of ownership where a corporation holds title to the building, and residents own shares of stock entitling them to a proprietary lease for their unit.
- Corporation holds title; owners hold stock, not real property title directly
- Proprietary lease grants right to occupy a specific unit
- Differs from condos, where each owner holds fee simple title to their unit
Memory trick: Co-op = Corporation owns it; you just hold stock and a lease.