By Kathleen G. Moriarty, Peters & Moriarty, Attorneys and Counselors of Law
Legal Matters is a regular column intended to address general legal concerns. Since every client walks in the door with a different set of circumstances, you should not rely on this column to provide specific legal advice. If you are in need of specific legal advice, please consult with an attorney; he or she will provide advice that is unique and tailored to your legal needs.
When a person purchases a co-operative unit (“co-op”), she is really buying shares of stock in a corporation (personal property); the primary asset of the corporation is the building and the ground it sits on (real property) in which the unit is situated. Thus, the buyer is purchasing an interest in the entire building; each shareholder then leases a specific unit.
In comparison, when a person buys a condominium, he buys his individual unit and also buys a percentage interest in the common space. Co-ops are also unique in that most allow the shareholders to screen and select who purchases shares — in effect, having control over who lives in the building.
From a closing perspective, though, the transfer process is more or less the same. There are still NYS tax documents that need to be prepared and submitted to the State. Instead of running a title search against the real property, the buyer’s attorney will run judgment and UCC searches against the corporation (and its assets).
Seller still pays a “deed transfer tax” ($4.00 per $1,000), which is a tax associated with any conveyance of an interest in real property. Here, the interest is the transfer of stock shares of a corporation that owns real property. Seller is also responsible for paying capital gains taxes, if applicable.
Instead of signing a deed, the seller will sign over his stock shares to the buyer; the co-op management will then reissue the stock certificates in the buyer’s name.
Although the transaction is, in theory, less cumbersome than a true conveyance of real property, there is still a legal process to adhere to, and both parties should consult with an attorney to chart a course of action.