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Cooperative Living in Connecticut
Cooperative associations are not common in Connecticut, and the difference between condominiums and cooperatives escapes many. Both are forms of living in a community, be it in apartment-style buildings, townhouse-style buildings, or some other form of construction. Both can offer very similar benefits and privileges. But the legal set-up of the associations and land which lay behind these developments is significantly different. In this blog, we will discuss primarily cooperative living arrangements, also known as “co-op’s,” whose setup is governed primarily by Chapter 828 of the Connecticut General Statutes, also known as the Common Interest Ownership Act (“CIOA”).
By its very nature, and contrary to the thinking of most, the individual units of a co-op are not real estate. One corporation (or other legal entity), usually titled something like “XYZ Cooperative Association,” owns the land and all property upon it, including the individual units. This is the only real estate that truly exists – the unit “owners” do not own any real estate. There is then propriety leases signed between the unit owners and the association. This is the way it was, at least, until CIOA.
Not owning actual real estate has certain serious implications. For example, ownership of the unit would not be recorded in the land records of your town (or county). There would therefore be no way to record a lien against only one unit. This means that, for instance, a loan could not be secured by a mortgage deed against only one unit. To be clear, the association could still mortgage property and have liens filed against it, but the unit owners could not. It also means that real estate taxes could not be levied against the property.
CIOA changes some of this. In exchange following certain formalities, which a good real estate attorney could handle, co-ops (and their individual unit owners) can now treat everything as individual real estate. Transfers are now accomplished by deed, rather than simply corporate records. Therefore mortgages and others liens can be recorded against the individual units. But still, real estate taxes are levied against the corporation and not against the individual. This means that your association fees still pay your taxes, and that you get no separate tax bill.
In addition to the benefits inherent in organizing as a co-op rather than a condominium association, such as the bundling of taxes, co-ops are supposed to offer a form of living where the owners more closely work together. Co-ops may bundle other fees, such as heat, sharing furnaces and the like, rather than requiring each other to buy and maintain their own furnace.
In the end, it’s up to each individual association to decide both how to organize, and what to allow. A co-op can act basically as a condominium association, or can be quite different. There is a great deal of choice in the matter.