Right now in New York and Northern New Jersey, there is a trend of cooperative buildings converting to common interest community condominiums. A cooperative or co-op is a combination of corporate ownership of shares of stock and a residential leasehold interest in real property. The corporation owns the land and the building which is a residential apartment house. Shares of the corporation’s stock are sold in blocks to individuals. Each block of shares is allocated to a particular apartment in the building. By purchasing the block of shares allocated, the owner of the stock becomes entitled to a lease, known as a “proprietary lease”, for the apartment to which such shares are allocated.

When a co-op building is converted to condominium ownership, the purchase buys an apartment. At the same time, the purchase, together with the other unit owners, buy an “undivided interest” in the common elements of the building. An owner of a condominium owns the actual unit and pays a monthly maintenance fee, special assessment fee, HOA fee, and/or condo fee.

Depending on the area of New York in which the building is located, different laws apply related to the conversion of co-ops and condominiums. Basic provisions include the Martin Act (PDF) which applies to the sale of all types of cooperatively owned real estate including sale of co-op shares, condo units and interests in homeowner associations. The Cooperative and Condo Conversion Act, also part of New York State’s General Business law, regulates the conversion of existing rental buildings to cooperative forms of ownership. These laws provide specific protection for tenants living in buildings undergoing conversion, and require that offering plans include explanations of the rights and obligations of purchasers and non-purchases.