March 26, 2025 • 38 mins
Condominiums and HOAs may dominate Florida's shared ownership landscape, but cooperative associations offer a fascinating alternative with their own distinct legal framework and operational quirks. This week, Board-certified community association attorney and Becker shareholder David Rogel joins Take It To The Board host Donna DiMaggio Berger to unravel the mysteries of this older form of shared ownership that continues to house Floridians in everything from high-rises to single-family homes.
At its core, understanding cooperatives requires grasping their fundamental difference from condominiums: in co-ops, the association owns the entire property, while residents own shares in the corporation with exclusive use rights to their units. This structure creates unique dynamics in financing, governance, and property transactions that directly impact property values and owner rights.
Donna and David navigate the evolution of cooperative law, explaining how these communities—many established in the 1950s and 1960s—operate under bylaws and articles of incorporation rather than declarations. They dispel common misconceptions, including the notion that Florida cooperative boards have unlimited discretion to reject potential buyers, a practice more commonly associated with New York City co-ops.
For those curious about conversion options, Donna and David outline the process of transforming a cooperative into a condominium, a trend gaining momentum as owners seek to increase property values despite the potential for higher property taxes. They also address the unique challenges of cooperative terminations, which lack the statutory framework available to condominiums.
Whether you're a cooperative resident wondering about your property rights, a board member navigating governance questions, or simply curious about alternative forms of community living, this episode provides valuable insights into a housing model that has served Floridians for generations and continues to evolve alongside its more prevalent condominium counterpart.
Conversation Highlights Include:
- Typical governing documents for a cooperative
- Different types of housing that can be used for a cooperative (e.g., vertical construction, mobile home, single-family homes)
- Legal implications of being a shareholder vs. unit owner
- Biggest misconceptions about co-ops
- Cooperatives and cash-only sales
- Why developers stopped using the cooperative form of ownership in Florida
- Process of converting cooperatives to a condominium form of ownership
- Procedural and Substantive differences in Chapter 718 and Chapter 719 of Florida Statutes
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Hi everyone, I'm attorney Donna DiMaggio-Berger,
and this is Take it to the Boardwhere we speak condo and HOA.
Condos and HOAs may dominatethe Florida landscape, but
there's another form of sharedownership that comes with its
own unique set of rules,challenges and, dare I say,
quirks.
Cooperative associations, orco-ops, aren't nearly as common
(00:24):
in Florida as their condocounterparts, but for those who
live in them, the experience canbe very different.
From shareholder rights toboard dynamics and financial
structuring, co-ops bring adistinct flavor to community
living.
Joining me today to demystifycooperative associations is my
law partner, david Rogel.
David is a board-certifiedcommunity association attorney
(00:45):
who knows the ins and outs ofFlorida cooperative governance,
and he's here to break down howthey operate, what makes them
different from condos, why someof them may want to convert to a
condominium form of ownership,and what challenges boards and
residents face.
Whether you're a shareholder ina co-op or just curious about
how they work, this episode'sfor you.
So, david, welcome to Take itto the Board.
Speaker 2 (01:06):
Thank you, Donna.
Speaker 1 (01:07):
For those people who are listening, who are
unfamiliar with co-ops, let'sjust start with the basics.
So how do they differ fromcondos and HOAs in terms of
ownership and governance?
Speaker 2 (01:17):
Well, I think the really primary difference, donna
, is the way they're owned.
A condominium has units whichare individually owned by owners
.
A homeowners association hasparcels which are individually
owned by homeowners Co-ops.
The units are not individuallyowned by the homeowner, they're
(01:38):
owned by the cooperativeassociation.
So the entire building or theentire piece of property, if
it's a land cooperative is ownedby the association and the
association is essentially theowner for almost all purposes
and governs the propertydifferently because of that.
Speaker 1 (02:00):
Do you think there's any insecurity, feelings of
insecurity, that you don't ownit?
You own a.
You know you're a leaseholderas opposed to an owner.
Speaker 2 (02:09):
There's absolutely insecurity, and for good reason.
You know co-ops existed beforecondominiums.
In many cases the co-ops thatanybody might live in today
especially in Florida butthroughout the country are some
of the oldest form ofmultifamily ownership that
(02:30):
exists.
Certainly in Florida theyexisted before condominiums and
the condominium law.
So in Florida we see a lot ofcooperatives that were created
in the 50s and the 60s and it'squite a bit of a different
animal.
But one of the reasons whypeople feel perhaps a little
concerned over the condominiumform of ownership is, in essence
(02:52):
, they don't own theircooperative unit.
Now, recently changes haveoccurred that make things a
little bit better.
Florida law has been clarifiedso that it's understood that if
you own a cooperative unit and Isay the word own in kind of air
parentheses the fact is you doown an interest in real property
(03:17):
.
Before that really the law andthere were two kinds of law that
impacted this the law reallydidn't recognize that you owned
anything and that the co-opowned everything.
The two areas where that existsis taxation and homestead
rights, or when you have theright of use of a cooperative
(03:37):
unit and that's really what youhave, you have a use right in
the cooperative unit in commonwith all the rights of other
owners in the common area.
But it now makes it clear thatthat's a real property interest.
So that's good for homesteadpurposes and good for taxation
(04:00):
purposes.
Speaker 1 (04:02):
Why don't you hit on that point?
Because I wanted to ask you.
So.
I have a few cooperativeclients as well.
I know you do, because that'swhy I asked you to come on the
podcast and talk about them.
There's typically that language, david, in the bylaws, which
says you know what, if you'redoing things wrong, you don't
pay your assessments or you'renot following the rules, we can
(04:24):
terminate your lease and you'reout of here.
And I know I always have toexplain to them.
It's not that simple.
You're going to have to gothrough a regular foreclosure
process to actually take awaythe real property rights this
owner has.
Speaker 2 (04:38):
That's true Absolutely, and that's been the
way it is since Chapter 719Florida statutes was created and
essentially started travelingwith this very similar language
to what condominium associationsdeal with, both in terms of
collection of unpaid assessmentsand other things.
(05:01):
You can't just take people'srights away.
Now cooperatives are again adifferent animal, and so, while
the process of foreclosure onliens and collection of
assessments is fairly similar,there are a lot of differences
between even the co-op laws andcondominium laws.
Speaker 1 (05:21):
Step back, because I kind of jumped ahead.
Speaker 2 (05:23):
I was referencing what's in the bylaws.
Speaker 1 (05:25):
What are the typical governing documents for a
cooperative?
Speaker 2 (05:28):
Well, you know, that's the other area as to
where a cooperative is differentfrom condominiums and HOAs.
A condominium or a homeownersassociation will have a
declaration, whether it's adeclaration of condominium or a
declaration of covenants.
Cooperative associations don't.
They typically are acorporation and because they own
(05:50):
all the real property, they arethe master in control of the
use rights which would typicallybe limited by a declaration of
covenants or condominium.
Here the only typical governingdocuments are the bylaws and
articles of incorporation of thecooperative association.
(06:12):
Now there are other documentsthat we consider governing
documents, but those are the twomain corporate governing
documents.
Many cases not recorded like adeclaration of condominium or a
declaration of covenants wouldbe, and in many cases, because a
lot of these co-ops are 60years old or older, those
(06:35):
documents aren't always as clearand written in a way that, as
lawyers, I'm certain that wefeel comfortable with them In
cases.
So when we get these kinds ofdocuments from our clients,
especially new ones, they'reillegible.
So it's kind of a funny thing,but funny, ha ha, funny, unusual
, I'm not sure.
Speaker 1 (06:56):
Well, we talk about, you know, a lot of times with
condos and HOAs and we'retalking to volunteer board
members, they'll use thecatch-all phrase, the bylaws.
But that means something quitedifferent for a condo, a HOA.
When we're talking about acooperative, the bylaws really
contain the meat of the userestrictions and everything else
, and we don't really have thatsame order of priority, david,
(07:17):
do we?
I mean, if you're looking toamend use restrictions in a
cooperative, it's going to go inthe bylaws, or you haven't
mentioned proprietary leases yet.
Speaker 2 (07:27):
Right.
So again, the difference in aco-op, you don't have a deed to
your unit.
What you have is what the lawcalls and I always like to use
the term because it makes peoplego what it's called a muniment
of title.
That's what the law calls it.
So it's different in differentplaces.
You spoke out about aproprietary lease and that would
(07:51):
be the typical agreement, ifyou will, that someone gets when
they buy an interest in acooperative association or in a
cooperative.
But there are other instruments, membership agreements, what
have you?
All these things stand for oneproposition you have an
exclusive use right to yourcooperative unit and there are
(08:14):
certain things within thoseproprietary leases, occupancy
agreements and other similarinstruments which provide
certain rights andresponsibilities, including the
carrying charges.
Again, in the old documentsthey call them carrying charges,
we call them assessments andthat's how they're treated.
Assessments are levied justlike in a condo or an HOA, to
(08:39):
manage and operate the propertyand to take care of all the
things that need to be done in acooperative, just like in a
condominium.
Speaker 1 (08:48):
You know, in some of my cooperative communities
there's really been longevity onthe board, david.
I mean people have been therefor decades so they've kind of
kept their operations consistentthroughout the years.
And I want to reference theissuance of shares or
certificates, because in some ofthose older communities they
(09:08):
still do it the way thedeveloper set it up.
In others they've kind ofdropped off.
In your experience, do theytypically issue shares still?
Speaker 2 (09:17):
to this day Not well, however, it began is how it
goes on now.
Now, back in the 50s and the60s, the difference between a
for-profit and a not-for-profitcorporation under Florida law
was a bit more gray.
So I have had clients come tome and go.
They have us listed as a thisand we should be a that.
(09:40):
So there is not always, thereare not always shares.
But again, in the typical oldcooperative, again you bought
shares in the cooperativeassociation and, just like
shares that you buy in a publicor privately traded corporation,
you bought shares and you had anumber of shares and many times
(10:03):
I own 3.5 shares in thecorporation.
Shares of stock arespecifically for for-profit
corporations.
Not for-profit corporations,which is what most community
associations are, do not issueshares.
But that doesn't mean thatthere weren't some form of
(10:27):
measurement of ownership in theterms of membership certificates
and whatnot.
But it's not always a situationwhere you own shares of stock.
I might add.
They're not always Floridacorporations.
I have had a couple ofcooperative associations that
anybody who deals incorporations and whatnot will
(10:48):
not be surprised.
They were Delaware corporationsand Delaware law is
significantly different thanFlorida law in terms of
corporate governance and inhistory a lot of corporations
were incorporated in Delawarefor various business reasons.
Corporations were incorporatedin Delaware for various business
(11:08):
reasons but for those samereasons these cooperative
associations were found and setup in Delaware.
We typically, when we see that,we typically recommend that our
clients actually convert theircorporate status to a Florida
corporation and get out ofDelaware.
Among other things, it's veryexpensive to maintain your
status in Delaware.
You have to have a Delawareregistered agent and a Delaware
(11:30):
attorney and a lot of money toDelaware where in Florida
maintaining your corporatestatus is not nearly as
expensive.
But again, whether they haveshares of stock or some other
basis on which they own theirinterest in the corporation,
it's tantamount to shares ofstock.
Speaker 1 (11:53):
I mean, I think that's one of the main
differences as well is thatwhenever there's a conveyance of
property in a cooperative, thecooperative association gets a
lot more involved in thatconveyance than you would in a
condo or an HOA Condo or HOA.
The interaction and thetransaction between the seller
(12:14):
and the purchaser it's done.
I mean, they don't ask theassociation typically to weigh
in on the warranty deed.
Sometimes they do if there's animpertinent storage space or an
impertinent parking space.
But for the co-ops, I find alot of times there's an you know
if there's an impertinentstorage space or an impertinent
parking space.
But for the co-ops, I find alot of times there's a lot of
confusion with closing agents interms of the occupancy
agreement, the issuance of stockif they actually do issue
(12:35):
shares the proprietary lease,all of that and the approval.
Speaker 2 (12:40):
Yeah, again, because of the way they're set up, there
can be confusion, although,again, less and less.
I find nowadays that most realestate lawyers do understand the
difference and do understandwhat's going on to a great
extent to mortgages used to bethat you could not get any
(13:04):
financing when you were buying acooperative unit and now you
can.
It's kind of been a bit of abell curve.
It's actually we're seeing lessand less financing of
cooperatives because banks againdon't understand it completely.
In many cases we'll want theassociation to subordinate all
(13:26):
of its interests to those of thelender, and cooperative
associations don't need to dothat and to a certain extent
that scares financing away.
This is one of the reasons whyin my world, or in our world, we
see that the typicalcooperative unit is worth less
(13:47):
than the typical condominiumunit because of the legal
certainties that exist incondominium law and governance
and the lack of thosecertainties.
Banks don't get involved asmuch and, generally speaking,
just the value for the squarefoot of a unit is less.
(14:08):
And so we see these days I haverecently handled a couple of
cooperative conversions, if youwill, to condominiums, and it
can be done.
It's a convoluted process butin the end.
Switching from co-op to condoincreases the value of the units
(14:30):
, and so that's something that Ido see some cooperative
associations looking into.
Now.
The yin with the yang is thatwhile the value of units
increases, that means realproperty taxes on that valuation
also increase.
So there's things to beconsidered on both sides of that
(14:53):
equation.
Speaker 1 (14:53):
I want to ask you, in a few minutes, to walk us
through that conversion process,but it's funny because I'm
listening to you talk about thedifference in value between
maybe the same size condo unit,maybe, versus a co-op.
If you really dug into it,though and in terms of the
differences in the statute I'mthinking about insurance it may
not make much sense why thecondo unit would be valued
(15:17):
higher, because there have beensome benefits to cooperatives
being under the radar.
But this kind of segues nicelyinto what are some of the
misperceptions people have aboutcooperatives, because that
could be also a factor in thedevaluation.
Speaker 2 (15:33):
Yeah, I really don't know how to answer that, donna,
because again the misperceptionsof the past tend to be going
away.
Insurance is one of know one ofthose things, although again
co-op laws.
It relates to these newreserves and things like that
pretty much the same thing ascondos.
On the other hand, insurance isnot as regulated in co-ops.
(15:55):
Now, that may be good and thatmay be bad because, again, while
condominiums are regulated andhave requirements to get certain
kinds of now extremelyexpensive insurance, co-ops
don't.
But they typically get itanyway.
So you know, the same expenseburden exists in a co-op as in a
condo for things like insurance.
(16:16):
Otherwise, you know, themisperceptions may be because
you and I deal with it all thetime it's not as clear that
there is any misperceptionanymore.
But I certainly think thatthere's a place in the world for
co-ops and you know, again, inother jurisdictions co-op
(16:37):
ownership is far more prevalentthan condominium ownership.
Condominium ownership Talkabout New York City and a lot of
areas like that, where verticaldevelopment existed before
condominiums existed andtherefore they were co-ops and
that's how it works.
I expect that, while the powerof a cooperative may be similar
(17:02):
to that of a condo, here co-opboards can probably get away
with a little bit more than acondo board can, because, again,
the co-op owns the building andso share rights are a little
bit different than unit ownerrights, and that's where that
difference comes in.
Speaker 1 (17:22):
And I've stumbled across that misperception, David
, with some cooperative boardsdown here who think they have an
unfettered right to disapproveapplicants for purchase or for
lease.
I think that comes out of thestories in the 80s and 90s.
I think Madonna and othercelebrities were turned down by
their New York cooperative boardbecause they just felt they
(17:43):
would, you know, the paparazziwould be too much of a nuisance
to have them in the building.
I have had Florida cooperativessay to me well, we can, you
know, pretty much turn downanybody, and the answer is no,
you can't.
And that's to me one of the bigmisperceptions among some
Florida cooperatives.
It could be a misperceptionamong some potential purchasers
(18:04):
as well who don't understandthat Florida cooperatives just
don't have that same level ofdiscretion.
Speaker 2 (18:10):
I don't think they do , even though the documents
might suggest otherwise.
Although I don't know whyanybody would turn down Madonna,
I did see an interestingepisode of Frasier once and it
involved a New York cooperative.
So you know I expect thatthey're different up there and
(18:31):
down here.
I would follow pretty much thesame reasonableness
anti-discriminatory typeprovisions that you would in any
condo review of any condopurchase.
Speaker 1 (18:44):
Are you watching the show?
Speaker 2 (18:46):
Only Murders in the Building it's a New York City
cooperative On and off andthat's a co-op I would not want
to live in.
Speaker 1 (18:54):
Oh well, you know, I mean it sounds exciting.
I mean you've got Steve Martin,martin Short, selena.
I mean I actually tried to getthe showrunner, Jonathan Hoffman
, on the podcast.
Speaker 2 (19:06):
That would have been fun.
Speaker 1 (19:07):
That would have been fun, because I do enjoy that
show.
Well, we've been.
You know, listen.
When I think about cooperatives, I normally just think of
vertical construction.
Speaker 2 (19:17):
David right Like is it the?
Speaker 1 (19:20):
Arconia.
I think that's the name of theco-op in that show.
Arconia, I think that's thename of the co-op in that show.
So that's, I think, in my mind,in many people's mind.
When you're talking aboutcooperative lifestyle, you're
talking about verticalconstruction, a multifamily
building, but there's a host ofother housing options right that
can fit within a cooperativeassociation.
Speaker 2 (19:39):
Well, and anything that can exist in the framework
that we discussed earlier cancertainly be a co-op, a piece of
real property that's and I usethe term subdivided again in air
quotes, because you can'treally you're not really
subdividing the property, butyou know lots in what would
(20:02):
typically look like ahomeowner's association could,
in fact, the entire area couldbe owned by an association and
people could have lots land,lots in a cooperative
association, subject to the sameleasing or other rights that we
talk about for a high-risebuilding.
Speaker 1 (20:25):
What mobile homes too .
Speaker 2 (20:27):
Mobile homes?
Yes, absolutely.
There are many cooperativemobile homes.
I don't represent any, andmobile homes is a whole
different category.
It really is because there aremultiple laws that impact mobile
homes Cooperative law might,mobile home law might, regular
(20:47):
corporate law might and it getsvery confusing.
So again, certainly I know thatthere are a number of them and
we have one that is acondominium now that used to be
a mobile home cooperative.
Speaker 1 (21:00):
I was asked to come out to a potential new client
community last year.
I drove up it looked like atypical homeowners association
single family homes.
Turned out it was a cooperativeassociation.
The association, david, ownedall the homes, the underlying
real property, the homes it waslike stuck in the 1950s and the
(21:24):
website still had that everyhome would come with a brand new
RCA color television.
Speaker 2 (21:30):
Really.
Speaker 1 (21:31):
I've rendered you speechless.
No, I mean, it was reallyinteresting to me.
The Cooperative Associationowned all of these lots and all
of these single family homes.
Speaker 2 (21:42):
Yeah, and all of these single family homes, yeah,
and I'm dealing with asituation now where we're
recreating something that lookedlike and was a mobile home park
at one time and now looks morelike what you're talking about,
and there is discussion aboutwhether the association which
owns the land actually ownswhat's on top of it.
So I'm not really sure you knowwhether an improvement we as
(22:09):
semi-real estate lawyers,believe that anything affixed to
the real property is owned bythe owner of the real property
and in the case you'rediscussing, would be the co-op.
But again, it depends greatlyon, you know, a number of
factors, Of course, if it's astick-built home versus a mobile
(22:29):
home or a modular home, whichyou know may ultimately maintain
some sort of personal propertyor other property status that's
owned by the person who built itor lives in it versus the land
itself Very complicated areabuilt it or lives in it versus
the land itself Very complicatedarea.
Obviously something that wedon't see much, but I'm
(22:50):
certainly dealing with it rightnow.
Speaker 1 (22:52):
Do you have any clients that require cash only
sales?
Speaker 2 (22:55):
No, I had.
Over my years of practice I didhave some that suggested that.
You know we don't do financing,but the places that I represent
are all currently at least inthe 20th century, if not the
21st, and want to make sure thatpeople can buy and sell freely,
(23:17):
and that obviously includes theability to get financing for a
purchase or a sale.
Speaker 1 (23:23):
You're right.
It definitely narrows the poolof eligible purchasers.
The upside is you don't have toworry about foreclosing because
there's full equity in theunits, sure, sure.
So we have both mentioned thatcooperatives are the oldest
housing stock in Florida and you, just a minute ago, mentioned
how they are much more popularin the Northeast New York City
(23:45):
in particular.
Why do you think I meandevelopers just stopped building
these things?
When's the last time you'veever heard of a cooperative
being built in Florida?
Speaker 2 (23:54):
Well, again, it's not really that they stopped
building them.
They continued buildingbuildings.
Co-op buildings look like condobuildings.
There's condominium law now andtherefore that's what's being
built are condominiums.
The building is built and itbecomes something.
They become condominiums.
Now, I might add, in New Yorkas well.
You know newer buildings orcondominium buildings in New
(24:17):
York, cooperatives.
Just, you know they existedback then because that's all
there was.
Now there's a condominium formof ownership.
That's what really developersare building.
Speaker 1 (24:29):
So walk us through the conversion process.
Cooperative comes to you andthey say you know what we want
to convert?
To be a condo.
What's the process?
Speaker 2 (24:38):
Well, you have to create a set of condo docs.
You have to understand whatthat particular building's needs
are.
Not all condo buildings andcondo docs are the same, as you
well know.
But once you have the form ofownership and you have to get a
title company involved, becausepeople, when they acquire a unit
(25:00):
in a condominium, will want toacquire a marketable title.
So a title company will walk usthrough the things that are
necessary.
Again, it usually ultimatelyrequires everybody to agree.
But, unlike a lot of otherthings that you'd get a vote on
and get people to agree on,converting to condominiums a
(25:23):
little bit easier to geteverybody's approval because in
the end, instead of having someless than clear interest in a
corporation that owns all theproperty, everybody will own
their own unit.
So the process leads to a pointwhere a closing occurs and
(25:43):
somebody is acquiring their unitand they're going to get a deed
from the cooperativeassociation and in signing off
on that deed they're agreeing tobe a condominium rather than a
cooperative.
I've had several that you know.
Again, while some people mightnot understand it completely, in
(26:04):
the end they sign off on itbecause again, they're getting a
more valuable interest in realproperty than in a cooperative.
But there's a lot of littlethings.
There's certainly a lot oflittle things that have to go on
, including all the real estatetransactions for each unit,
including surveys, because,again, a cooperative doesn't the
(26:25):
cooperative documents, condodocs always have surveys.
Why?
Because, in order to know whatyou own, there has to be a
survey showing your unit, and ina cooperative that's not the
case.
So the survey has to be createdthat will show everybody's unit
, show the common areas, showall the easements and things
like that.
So those are all things thathave to be considered when you
(26:48):
do a conversion.
But more and more you're seeingless cooperatives, because even
the cooperatives that do existare converting to condominium
ownership.
Speaker 1 (26:58):
Yeah, I can imagine that the first sales
post-conversion may include alittle bit of a challenge for
the closing agent.
Once you get past that initialsale after conversion, you're
probably fine.
Just the first one after youconverted to condo.
Speaker 2 (27:16):
Well, I can tell you, in the two that I've dealt with
recently, we've had nothing butpositive.
Speaker 1 (27:23):
So I said a few minutes ago that cooperatives
have somewhat flown under theradar in terms of the Florida
legislature.
And, yeah, for CSRS, theStructural Integrity Reserve
Study and the milestoneinspections, they hit 719 with
that.
But can you talk about some ofthe major differences between
the Condominium Act in Florida,which is 718, and the
Cooperative Act, which is 719?
Speaker 2 (27:45):
There aren't many Really.
Again, in recent times thelegislature when it's been
adopting changes to 718, they'vealways seemed to adopt the same
changes for 719.
And when they're doing that Ithink they pick up on things
that don't exist there and putthem in.
Insurance is the main one thatI brought up earlier.
(28:07):
They really haven't hit on therequirements for insurance like
in condominiums, and thecooperative documents typically
don't much do that either.
But that's really the maindifference Collections,
foreclosures, governance,changing the common property,
alterations that we see incondominiums.
(28:28):
There's sections there may be alittle bit different
organization, maybe a littleless organization.
Sometimes you have to reallypick and choose and find them.
One area of course istermination, and again we see
now a lot of condominiumassociations facing older condos
, facing the potential of thesale of the building, and
(28:49):
cooperatives don't have aprovision in the law, like
condominiums do, for the sale ofthe cooperative property.
So that's another major areaand that's a bit of a
head-scratcher as well.
I've got a couple of places nowthat developers are interested
in buying out that arecooperatives and again you have
(29:11):
to deal with that sort of thingdifferently in a cooperative
because not only is the propertygoing to be sold, but the
interests of the owners in theirexclusive use rights, which are
completely separate from theownership, have to be dealt with
.
Speaker 1 (29:29):
I wanted to ask you that.
Let me give you a scenariobecause you're right, there's no
statutory protection baked into719 like there is in 718, where
there's an approval thresholdper the statute.
Let's say your governing doctor, let's say your bylaws, your
cooperative bylaws say with twothirds approval of the
shareholders, the cooperativeassociation may sell the
(29:50):
property to a developer.
And again, this is old housingstock in Florida and it's
usually in very prime locationsaround the coast.
But let's say all of our ownershave proprietary leases, do you
?
go into two-thirds or can theyget to?
I think they have a real.
I think the developer is goingto have a title problem if they
don't get 100% approval.
Speaker 2 (30:10):
Yeah, well, listen, even in condominium terminations
and even using the condominiumstatute, which suggests you
don't need 100%, you alwaysultimately need 100%.
But again, when you deal withthat, you're dealing with title
issues and what do you end upwith?
You end up with what the titleinsurance company says you're
(30:32):
going to need.
So, yes, I don't think justbecause the co-op documents say
the cooperative can be sold forthat.
Well, let me say this I thinkit can be and I think that if
you get that vote, thecooperative association can sell
the cooperative property.
The question is is does theperson buying it, can they go
off and run them up?
(30:52):
And the answer is no.
They're going to need to dotthe I's and cross the T's that
the title company looks at.
The other problem withcooperative sales the sale of
the entire cooperative property,which obviously is a very deep
and interesting conversation forthose folks who like taxes
there's a significant differencein what happens when you sell
(31:15):
cooperative property, becausethe property is corporate
property and so if you'reselling the property, there are
all sorts of corporate taxes anda lot of issues relating to how
much people have to pay interms of both taxes individual
taxes on the sale of their unitinterest but on the sale of the
corporate property.
(31:35):
So there's a lot of things thatare a little bit different in
cooperatives than there are incondominiums.
Speaker 1 (31:43):
The dreaded double taxation factor.
Speaker 2 (31:47):
Yes.
Speaker 1 (31:48):
The cooperative property and, to your point, I
think there are developers thatare more comfortable with the
risks associated with less than100% approval, others that
that's going to be a dealbreaker.
Speaker 2 (32:03):
Yeah, but again, typically if it's a good deal,
you end up getting everybody,and that's the only way it
really ultimately happens in allof these settings.
So not much of a difference,but there is a different path to
follow.
Speaker 1 (32:19):
So we can't have this conversation on cooperatives
without talking about thelong-term land leases.
Most of these cooperatives didhave long-term underlying land
leases at least in my experience.
Has that been your experienceas well?
Speaker 2 (32:33):
Not at all.
Actually, what they had wasgovernment, us government-backed
mortgages.
A lot of these places were setup as I don't know that I want
to call it affordable housing,but it was set up for housing by
the federal government'sfinancing and they had mortgages
(32:54):
on the property.
And you know, I know from whatyou talk about.
I don't know that I had anycooperatives that had land
leases.
But for cooperatives and condosthat had land leases, you know
there was the day you burned thelease because you finally got
out of it Well with all of youknow there was the day you
burned the lease because youfinally got out of it Well with
(33:15):
all of my clients.
It was the day they burned themortgage and the federal
government was.
Typically, when these thingswere set up, there were two
classes of shares.
There was class A and class Bshares and class A shares were
the federal government Untilthat mortgage was satisfied.
Those Class A shares controlleda lot.
(33:37):
But once the mortgage goes away, the Class A shares go away,
then everybody's the same interms of share ownership.
Speaker 1 (33:45):
Yeah, you're right, these long-term land leases or
recreational leases, they couldbe found in condominium projects
as well.
I really thought, David, thatover the last few years, with
the heightened obligationsrelated to reserve funding and
engineering inspections,potential liability for the
condition of the property, thatwe'd see more of these lessors
(34:08):
opening up to a purchase by theassociations.
That hasn't happened and it'sreally surprising to me.
It is and it isn't because Iguess for a lot of them because
a lot of them it's heirs andsuccessors it's like an annuity,
the long-term lease for them.
Speaker 2 (34:24):
It's better than an annuity.
Speaker 1 (34:26):
Yeah, no, it is so.
I mean, but I would havethought that there would have
been a factoring in of thepotential liability of
continuing to be the realproperty owner and whether or
not the association ismaintaining that property.
Speaker 2 (34:41):
Right?
Well, maybe yes, maybe no,because in the end, if somebody
were to reacquire the leaseholdproperty or take it back, or
what have you, they're going toredevelop it Whatever existed 30
, 40 years ago, they don't wantthat anymore.
So nobody does 50, 60, even 70years ago.
Speaker 1 (35:03):
So one of our partners told me I didn't know
this that you were a prosecutoryears ago.
So I have to ask you anylessons that stuck from your
time in the state attorney'soffice that I don't know shaped
or informed your associationpractice.
Speaker 2 (35:19):
Well, don't break the law.
Speaker 1 (35:22):
That's a good starting point.
Speaker 2 (35:23):
Right, right, yeah, no, I mean, you know that's a
whole different area of law andit was certainly something that
was very enjoyable back in theday for me to do, but I don't
know that any of this informs mymy current practice, other than
when I want to impress somebody.
Speaker 1 (35:42):
What kind of cases did you?
Did you try A?
Speaker 2 (35:44):
to Z thefts from the local drugstore on Miami Beach,
which, incidentally, was theonly time I was on 60 Minutes
all the way up to murder.
So I handled it all over thefew years that I did that.
Speaker 1 (36:03):
I just watched the latest OJ documentary on Netflix
with all the evidence thatwasn't presented at trial and I
mean, you know, you think you'veheard it all and then they come
up with something new and itreally kind of did transport me
back.
The verdict came out on my sonRyan's birthday, but what's?
Speaker 2 (36:21):
one of the most memorable.
Speaker 1 (36:22):
You said A to Z but do you have one particular case
that when you're, you know at aparty and somebody asks you
about your time as a prosecutorit's certainly Mama Steals Drugs
from FedEx.
Speaker 2 (36:35):
It's certainly mama steals drugs from FedEx, the
Fedco drugstore on Miami Beach.
Me, the judge, the publicdefender, if there was one, I
don't recall.
But I'll never forget my little15 minutes of fame on 60
Minutes where they wereinvestigating, you know the many
routine arrests of old peoplewho were stealing from the Fedco
drugstore on my in Miami Beach,on Alton Road.
(36:57):
And it was a thing, a sad thing, because again, and at that
time it involved, you know,folks who maybe didn't have
money, but you know there was,there was a lot of just
kleptomania as well.
Speaker 1 (37:10):
So were they stealing food or?
Speaker 2 (37:13):
other.
No, you name it, they stole it.
You know personal items, thingslike that Candy, you name it,
it was.
It was a lot of stuff and andand you know I was you know at
the time I was became goodfriends with all the people in
that in that area, south MiamiBeach, judge Gersten, who was
(37:35):
the judge over there at the time, and you know it was a kick for
us for them to come in and filmthat sort of thing.
So you know it was a lot of funand that's certainly the one
thing that sticks in my mind,that and, of course, working
with Janet Reno, who was anamazing force of a human being.
Speaker 1 (37:56):
Yeah, that must have been something.
You probably got some storiesto tell.
You also have a big practicedown in the Keys.
How did you get a presence inthe Keys?
Speaker 2 (38:06):
Well, I just like the Florida Keys and they like me.
Speaker 1 (38:10):
Are you a fisherman?
Were you down there fishing?
No?
Speaker 2 (38:13):
I'm more of a diver than a fisherman.
But you know, one day, when Iget a boat again, I'll be
fishing as well as diving.
Speaker 1 (38:22):
All right, Well listen, David.
Thank you so much for your timetoday.
This has been truly enjoyable,yeah.
Speaker 2 (38:29):
Thank you, Donna.
Speaker 1 (38:31):
Thank you for joining us today.
Don't forget to follow and rateus on your favorite podcast
platform, or visitTakeItToTheBoardcom for more
ways to connect.
Hi everyone, I'm attorney Donna DiMaggio-Berger,
and this is Take it to the Boardwhere we speak condo and HOA.
Condos and HOAs may dominatethe Florida landscape, but
there's another form of sharedownership that comes with its
own unique set of rules,challenges and, dare I say,
quirks.
Cooperative associations, orco-ops, aren't nearly as common
(00:24):
in Florida as their condocounterparts, but for those who
live in them, the experience canbe very different.
From shareholder rights toboard dynamics and financial
structuring, co-ops bring adistinct flavor to community
living.
Joining me today to demystifycooperative associations is my
law partner, david Rogel.
David is a board-certifiedcommunity association attorney
(00:45):
who knows the ins and outs ofFlorida cooperative governance,
and he's here to break down howthey operate, what makes them
different from condos, why someof them may want to convert to a
condominium form of ownership,and what challenges boards and
residents face.
Whether you're a shareholder ina co-op or just curious about
how they work, this episode'sfor you.
So, david, welcome to Take itto the Board.
Speaker 2 (01:06):
Thank you, Donna.
Speaker 1 (01:07):
For those people who are listening, who are
unfamiliar with co-ops, let'sjust start with the basics.
So how do they differ fromcondos and HOAs in terms of
ownership and governance?
Speaker 2 (01:17):
Well, I think the really primary difference, donna
, is the way they're owned.
A condominium has units whichare individually owned by owners
.
A homeowners association hasparcels which are individually
owned by homeowners Co-ops.
The units are not individuallyowned by the homeowner, they're
(01:38):
owned by the cooperativeassociation.
So the entire building or theentire piece of property, if
it's a land cooperative is ownedby the association and the
association is essentially theowner for almost all purposes
and governs the propertydifferently because of that.
Speaker 1 (02:00):
Do you think there's any insecurity, feelings of
insecurity, that you don't ownit?
You own a.
You know you're a leaseholderas opposed to an owner.
Speaker 2 (02:09):
There's absolutely insecurity, and for good reason.
You know co-ops existed beforecondominiums.
In many cases the co-ops thatanybody might live in today
especially in Florida butthroughout the country are some
of the oldest form ofmultifamily ownership that
(02:30):
exists.
Certainly in Florida theyexisted before condominiums and
the condominium law.
So in Florida we see a lot ofcooperatives that were created
in the 50s and the 60s and it'squite a bit of a different
animal.
But one of the reasons whypeople feel perhaps a little
concerned over the condominiumform of ownership is, in essence
(02:52):
, they don't own theircooperative unit.
Now, recently changes haveoccurred that make things a
little bit better.
Florida law has been clarifiedso that it's understood that if
you own a cooperative unit and Isay the word own in kind of air
parentheses the fact is you doown an interest in real property
(03:17):
.
Before that really the law andthere were two kinds of law that
impacted this the law reallydidn't recognize that you owned
anything and that the co-opowned everything.
The two areas where that existsis taxation and homestead
rights, or when you have theright of use of a cooperative
(03:37):
unit and that's really what youhave, you have a use right in
the cooperative unit in commonwith all the rights of other
owners in the common area.
But it now makes it clear thatthat's a real property interest.
So that's good for homesteadpurposes and good for taxation
(04:00):
purposes.
Speaker 1 (04:02):
Why don't you hit on that point?
Because I wanted to ask you.
So.
I have a few cooperativeclients as well.
I know you do, because that'swhy I asked you to come on the
podcast and talk about them.
There's typically that language, david, in the bylaws, which
says you know what, if you'redoing things wrong, you don't
pay your assessments or you'renot following the rules, we can
(04:24):
terminate your lease and you'reout of here.
And I know I always have toexplain to them.
It's not that simple.
You're going to have to gothrough a regular foreclosure
process to actually take awaythe real property rights this
owner has.
Speaker 2 (04:38):
That's true Absolutely, and that's been the
way it is since Chapter 719Florida statutes was created and
essentially started travelingwith this very similar language
to what condominium associationsdeal with, both in terms of
collection of unpaid assessmentsand other things.
(05:01):
You can't just take people'srights away.
Now cooperatives are again adifferent animal, and so, while
the process of foreclosure onliens and collection of
assessments is fairly similar,there are a lot of differences
between even the co-op laws andcondominium laws.
Speaker 1 (05:21):
Step back, because I kind of jumped ahead.
Speaker 2 (05:23):
I was referencing what's in the bylaws.
Speaker 1 (05:25):
What are the typical governing documents for a
cooperative?
Speaker 2 (05:28):
Well, you know, that's the other area as to
where a cooperative is differentfrom condominiums and HOAs.
A condominium or a homeownersassociation will have a
declaration, whether it's adeclaration of condominium or a
declaration of covenants.
Cooperative associations don't.
They typically are acorporation and because they own
(05:50):
all the real property, they arethe master in control of the
use rights which would typicallybe limited by a declaration of
covenants or condominium.
Here the only typical governingdocuments are the bylaws and
articles of incorporation of thecooperative association.
(06:12):
Now there are other documentsthat we consider governing
documents, but those are the twomain corporate governing
documents.
Many cases not recorded like adeclaration of condominium or a
declaration of covenants wouldbe, and in many cases, because a
lot of these co-ops are 60years old or older, those
(06:35):
documents aren't always as clearand written in a way that, as
lawyers, I'm certain that wefeel comfortable with them In
cases.
So when we get these kinds ofdocuments from our clients,
especially new ones, they'reillegible.
So it's kind of a funny thing,but funny, ha ha, funny, unusual
, I'm not sure.
Speaker 1 (06:56):
Well, we talk about, you know, a lot of times with
condos and HOAs and we'retalking to volunteer board
members, they'll use thecatch-all phrase, the bylaws.
But that means something quitedifferent for a condo, a HOA.
When we're talking about acooperative, the bylaws really
contain the meat of the userestrictions and everything else
, and we don't really have thatsame order of priority, david,
(07:17):
do we?
I mean, if you're looking toamend use restrictions in a
cooperative, it's going to go inthe bylaws, or you haven't
mentioned proprietary leases yet.
Speaker 2 (07:27):
Right.
So again, the difference in aco-op, you don't have a deed to
your unit.
What you have is what the lawcalls and I always like to use
the term because it makes peoplego what it's called a muniment
of title.
That's what the law calls it.
So it's different in differentplaces.
You spoke out about aproprietary lease and that would
(07:51):
be the typical agreement, ifyou will, that someone gets when
they buy an interest in acooperative association or in a
cooperative.
But there are other instruments, membership agreements, what
have you?
All these things stand for oneproposition you have an
exclusive use right to yourcooperative unit and there are
(08:14):
certain things within thoseproprietary leases, occupancy
agreements and other similarinstruments which provide
certain rights andresponsibilities, including the
carrying charges.
Again, in the old documentsthey call them carrying charges,
we call them assessments andthat's how they're treated.
Assessments are levied justlike in a condo or an HOA, to
(08:39):
manage and operate the propertyand to take care of all the
things that need to be done in acooperative, just like in a
condominium.
Speaker 1 (08:48):
You know, in some of my cooperative communities
there's really been longevity onthe board, david.
I mean people have been therefor decades so they've kind of
kept their operations consistentthroughout the years.
And I want to reference theissuance of shares or
certificates, because in some ofthose older communities they
(09:08):
still do it the way thedeveloper set it up.
In others they've kind ofdropped off.
In your experience, do theytypically issue shares still?
Speaker 2 (09:17):
to this day Not well, however, it began is how it
goes on now.
Now, back in the 50s and the60s, the difference between a
for-profit and a not-for-profitcorporation under Florida law
was a bit more gray.
So I have had clients come tome and go.
They have us listed as a thisand we should be a that.
(09:40):
So there is not always, thereare not always shares.
But again, in the typical oldcooperative, again you bought
shares in the cooperativeassociation and, just like
shares that you buy in a publicor privately traded corporation,
you bought shares and you had anumber of shares and many times
(10:03):
I own 3.5 shares in thecorporation.
Shares of stock arespecifically for for-profit
corporations.
Not for-profit corporations,which is what most community
associations are, do not issueshares.
But that doesn't mean thatthere weren't some form of
(10:27):
measurement of ownership in theterms of membership certificates
and whatnot.
But it's not always a situationwhere you own shares of stock.
I might add.
They're not always Floridacorporations.
I have had a couple ofcooperative associations that
anybody who deals incorporations and whatnot will
(10:48):
not be surprised.
They were Delaware corporationsand Delaware law is
significantly different thanFlorida law in terms of
corporate governance and inhistory a lot of corporations
were incorporated in Delawarefor various business reasons.
Corporations were incorporatedin Delaware for various business
(11:08):
reasons but for those samereasons these cooperative
associations were found and setup in Delaware.
We typically, when we see that,we typically recommend that our
clients actually convert theircorporate status to a Florida
corporation and get out ofDelaware.
Among other things, it's veryexpensive to maintain your
status in Delaware.
You have to have a Delawareregistered agent and a Delaware
(11:30):
attorney and a lot of money toDelaware where in Florida
maintaining your corporatestatus is not nearly as
expensive.
But again, whether they haveshares of stock or some other
basis on which they own theirinterest in the corporation,
it's tantamount to shares ofstock.
Speaker 1 (11:53):
I mean, I think that's one of the main
differences as well is thatwhenever there's a conveyance of
property in a cooperative, thecooperative association gets a
lot more involved in thatconveyance than you would in a
condo or an HOA Condo or HOA.
The interaction and thetransaction between the seller
(12:14):
and the purchaser it's done.
I mean, they don't ask theassociation typically to weigh
in on the warranty deed.
Sometimes they do if there's animpertinent storage space or an
impertinent parking space.
But for the co-ops, I find alot of times there's an you know
if there's an impertinentstorage space or an impertinent
parking space.
But for the co-ops, I find alot of times there's a lot of
confusion with closing agents interms of the occupancy
agreement, the issuance of stockif they actually do issue
(12:35):
shares the proprietary lease,all of that and the approval.
Speaker 2 (12:40):
Yeah, again, because of the way they're set up, there
can be confusion, although,again, less and less.
I find nowadays that most realestate lawyers do understand the
difference and do understandwhat's going on to a great
extent to mortgages used to bethat you could not get any
(13:04):
financing when you were buying acooperative unit and now you
can.
It's kind of been a bit of abell curve.
It's actually we're seeing lessand less financing of
cooperatives because banks againdon't understand it completely.
In many cases we'll want theassociation to subordinate all
(13:26):
of its interests to those of thelender, and cooperative
associations don't need to dothat and to a certain extent
that scares financing away.
This is one of the reasons whyin my world, or in our world, we
see that the typicalcooperative unit is worth less
(13:47):
than the typical condominiumunit because of the legal
certainties that exist incondominium law and governance
and the lack of thosecertainties.
Banks don't get involved asmuch and, generally speaking,
just the value for the squarefoot of a unit is less.
(14:08):
And so we see these days I haverecently handled a couple of
cooperative conversions, if youwill, to condominiums, and it
can be done.
It's a convoluted process butin the end.
Switching from co-op to condoincreases the value of the units
(14:30):
, and so that's something that Ido see some cooperative
associations looking into.
Now.
The yin with the yang is thatwhile the value of units
increases, that means realproperty taxes on that valuation
also increase.
So there's things to beconsidered on both sides of that
(14:53):
equation.
Speaker 1 (14:53):
I want to ask you, in a few minutes, to walk us
through that conversion process,but it's funny because I'm
listening to you talk about thedifference in value between
maybe the same size condo unit,maybe, versus a co-op.
If you really dug into it,though and in terms of the
differences in the statute I'mthinking about insurance it may
not make much sense why thecondo unit would be valued
(15:17):
higher, because there have beensome benefits to cooperatives
being under the radar.
But this kind of segues nicelyinto what are some of the
misperceptions people have aboutcooperatives, because that
could be also a factor in thedevaluation.
Speaker 2 (15:33):
Yeah, I really don't know how to answer that, donna,
because again the misperceptionsof the past tend to be going
away.
Insurance is one of know one ofthose things, although again
co-op laws.
It relates to these newreserves and things like that
pretty much the same thing ascondos.
On the other hand, insurance isnot as regulated in co-ops.
(15:55):
Now, that may be good and thatmay be bad because, again, while
condominiums are regulated andhave requirements to get certain
kinds of now extremelyexpensive insurance, co-ops
don't.
But they typically get itanyway.
So you know, the same expenseburden exists in a co-op as in a
condo for things like insurance.
(16:16):
Otherwise, you know, themisperceptions may be because
you and I deal with it all thetime it's not as clear that
there is any misperceptionanymore.
But I certainly think thatthere's a place in the world for
co-ops and you know, again, inother jurisdictions co-op
(16:37):
ownership is far more prevalentthan condominium ownership.
Condominium ownership Talkabout New York City and a lot of
areas like that, where verticaldevelopment existed before
condominiums existed andtherefore they were co-ops and
that's how it works.
I expect that, while the powerof a cooperative may be similar
(17:02):
to that of a condo, here co-opboards can probably get away
with a little bit more than acondo board can, because, again,
the co-op owns the building andso share rights are a little
bit different than unit ownerrights, and that's where that
difference comes in.
Speaker 1 (17:22):
And I've stumbled across that misperception, David
, with some cooperative boardsdown here who think they have an
unfettered right to disapproveapplicants for purchase or for
lease.
I think that comes out of thestories in the 80s and 90s.
I think Madonna and othercelebrities were turned down by
their New York cooperative boardbecause they just felt they
(17:43):
would, you know, the paparazziwould be too much of a nuisance
to have them in the building.
I have had Florida cooperativessay to me well, we can, you
know, pretty much turn downanybody, and the answer is no,
you can't.
And that's to me one of the bigmisperceptions among some
Florida cooperatives.
It could be a misperceptionamong some potential purchasers
(18:04):
as well who don't understandthat Florida cooperatives just
don't have that same level ofdiscretion.
Speaker 2 (18:10):
I don't think they do , even though the documents
might suggest otherwise.
Although I don't know whyanybody would turn down Madonna,
I did see an interestingepisode of Frasier once and it
involved a New York cooperative.
So you know I expect thatthey're different up there and
(18:31):
down here.
I would follow pretty much thesame reasonableness
anti-discriminatory typeprovisions that you would in any
condo review of any condopurchase.
Speaker 1 (18:44):
Are you watching the show?
Speaker 2 (18:46):
Only Murders in the Building it's a New York City
cooperative On and off andthat's a co-op I would not want
to live in.
Speaker 1 (18:54):
Oh well, you know, I mean it sounds exciting.
I mean you've got Steve Martin,martin Short, selena.
I mean I actually tried to getthe showrunner, Jonathan Hoffman
, on the podcast.
Speaker 2 (19:06):
That would have been fun.
Speaker 1 (19:07):
That would have been fun, because I do enjoy that
show.
Well, we've been.
You know, listen.
When I think about cooperatives, I normally just think of
vertical construction.
Speaker 2 (19:17):
David right Like is it the?
Speaker 1 (19:20):
Arconia.
I think that's the name of theco-op in that show.
Arconia, I think that's thename of the co-op in that show.
So that's, I think, in my mind,in many people's mind.
When you're talking aboutcooperative lifestyle, you're
talking about verticalconstruction, a multifamily
building, but there's a host ofother housing options right that
can fit within a cooperativeassociation.
Speaker 2 (19:39):
Well, and anything that can exist in the framework
that we discussed earlier cancertainly be a co-op, a piece of
real property that's and I usethe term subdivided again in air
quotes, because you can'treally you're not really
subdividing the property, butyou know lots in what would
(20:02):
typically look like ahomeowner's association could,
in fact, the entire area couldbe owned by an association and
people could have lots land,lots in a cooperative
association, subject to the sameleasing or other rights that we
talk about for a high-risebuilding.
Speaker 1 (20:25):
What mobile homes too .
Speaker 2 (20:27):
Mobile homes?
Yes, absolutely.
There are many cooperativemobile homes.
I don't represent any, andmobile homes is a whole
different category.
It really is because there aremultiple laws that impact mobile
homes Cooperative law might,mobile home law might, regular
(20:47):
corporate law might and it getsvery confusing.
So again, certainly I know thatthere are a number of them and
we have one that is acondominium now that used to be
a mobile home cooperative.
Speaker 1 (21:00):
I was asked to come out to a potential new client
community last year.
I drove up it looked like atypical homeowners association
single family homes.
Turned out it was a cooperativeassociation.
The association, david, ownedall the homes, the underlying
real property, the homes it waslike stuck in the 1950s and the
(21:24):
website still had that everyhome would come with a brand new
RCA color television.
Speaker 2 (21:30):
Really.
Speaker 1 (21:31):
I've rendered you speechless.
No, I mean, it was reallyinteresting to me.
The Cooperative Associationowned all of these lots and all
of these single family homes.
Speaker 2 (21:42):
Yeah, and all of these single family homes, yeah,
and I'm dealing with asituation now where we're
recreating something that lookedlike and was a mobile home park
at one time and now looks morelike what you're talking about,
and there is discussion aboutwhether the association which
owns the land actually ownswhat's on top of it.
So I'm not really sure you knowwhether an improvement we as
(22:09):
semi-real estate lawyers,believe that anything affixed to
the real property is owned bythe owner of the real property
and in the case you'rediscussing, would be the co-op.
But again, it depends greatlyon, you know, a number of
factors, Of course, if it's astick-built home versus a mobile
(22:29):
home or a modular home, whichyou know may ultimately maintain
some sort of personal propertyor other property status that's
owned by the person who built itor lives in it versus the land
itself Very complicated areabuilt it or lives in it versus
the land itself Very complicatedarea.
Obviously something that wedon't see much, but I'm
(22:50):
certainly dealing with it rightnow.
Speaker 1 (22:52):
Do you have any clients that require cash only
sales?
Speaker 2 (22:55):
No, I had.
Over my years of practice I didhave some that suggested that.
You know we don't do financing,but the places that I represent
are all currently at least inthe 20th century, if not the
21st, and want to make sure thatpeople can buy and sell freely,
(23:17):
and that obviously includes theability to get financing for a
purchase or a sale.
Speaker 1 (23:23):
You're right.
It definitely narrows the poolof eligible purchasers.
The upside is you don't have toworry about foreclosing because
there's full equity in theunits, sure, sure.
So we have both mentioned thatcooperatives are the oldest
housing stock in Florida and you, just a minute ago, mentioned
how they are much more popularin the Northeast New York City
(23:45):
in particular.
Why do you think I meandevelopers just stopped building
these things?
When's the last time you'veever heard of a cooperative
being built in Florida?
Speaker 2 (23:54):
Well, again, it's not really that they stopped
building them.
They continued buildingbuildings.
Co-op buildings look like condobuildings.
There's condominium law now andtherefore that's what's being
built are condominiums.
The building is built and itbecomes something.
They become condominiums.
Now, I might add, in New Yorkas well.
You know newer buildings orcondominium buildings in New
(24:17):
York, cooperatives.
Just, you know they existedback then because that's all
there was.
Now there's a condominium formof ownership.
That's what really developersare building.
Speaker 1 (24:29):
So walk us through the conversion process.
Cooperative comes to you andthey say you know what we want
to convert?
To be a condo.
What's the process?
Speaker 2 (24:38):
Well, you have to create a set of condo docs.
You have to understand whatthat particular building's needs
are.
Not all condo buildings andcondo docs are the same, as you
well know.
But once you have the form ofownership and you have to get a
title company involved, becausepeople, when they acquire a unit
(25:00):
in a condominium, will want toacquire a marketable title.
So a title company will walk usthrough the things that are
necessary.
Again, it usually ultimatelyrequires everybody to agree.
But, unlike a lot of otherthings that you'd get a vote on
and get people to agree on,converting to condominiums a
(25:23):
little bit easier to geteverybody's approval because in
the end, instead of having someless than clear interest in a
corporation that owns all theproperty, everybody will own
their own unit.
So the process leads to a pointwhere a closing occurs and
(25:43):
somebody is acquiring their unitand they're going to get a deed
from the cooperativeassociation and in signing off
on that deed they're agreeing tobe a condominium rather than a
cooperative.
I've had several that you know.
Again, while some people mightnot understand it completely, in
(26:04):
the end they sign off on itbecause again, they're getting a
more valuable interest in realproperty than in a cooperative.
But there's a lot of littlethings.
There's certainly a lot oflittle things that have to go on
, including all the real estatetransactions for each unit,
including surveys, because,again, a cooperative doesn't the
(26:25):
cooperative documents, condodocs always have surveys.
Why?
Because, in order to know whatyou own, there has to be a
survey showing your unit, and ina cooperative that's not the
case.
So the survey has to be createdthat will show everybody's unit
, show the common areas, showall the easements and things
like that.
So those are all things thathave to be considered when you
(26:48):
do a conversion.
But more and more you're seeingless cooperatives, because even
the cooperatives that do existare converting to condominium
ownership.
Speaker 1 (26:58):
Yeah, I can imagine that the first sales
post-conversion may include alittle bit of a challenge for
the closing agent.
Once you get past that initialsale after conversion, you're
probably fine.
Just the first one after youconverted to condo.
Speaker 2 (27:16):
Well, I can tell you, in the two that I've dealt with
recently, we've had nothing butpositive.
Speaker 1 (27:23):
So I said a few minutes ago that cooperatives
have somewhat flown under theradar in terms of the Florida
legislature.
And, yeah, for CSRS, theStructural Integrity Reserve
Study and the milestoneinspections, they hit 719 with
that.
But can you talk about some ofthe major differences between
the Condominium Act in Florida,which is 718, and the
Cooperative Act, which is 719?
Speaker 2 (27:45):
There aren't many Really.
Again, in recent times thelegislature when it's been
adopting changes to 718, they'vealways seemed to adopt the same
changes for 719.
And when they're doing that Ithink they pick up on things
that don't exist there and putthem in.
Insurance is the main one thatI brought up earlier.
(28:07):
They really haven't hit on therequirements for insurance like
in condominiums, and thecooperative documents typically
don't much do that either.
But that's really the maindifference Collections,
foreclosures, governance,changing the common property,
alterations that we see incondominiums.
(28:28):
There's sections there may be alittle bit different
organization, maybe a littleless organization.
Sometimes you have to reallypick and choose and find them.
One area of course istermination, and again we see
now a lot of condominiumassociations facing older condos
, facing the potential of thesale of the building, and
(28:49):
cooperatives don't have aprovision in the law, like
condominiums do, for the sale ofthe cooperative property.
So that's another major areaand that's a bit of a
head-scratcher as well.
I've got a couple of places nowthat developers are interested
in buying out that arecooperatives and again you have
(29:11):
to deal with that sort of thingdifferently in a cooperative
because not only is the propertygoing to be sold, but the
interests of the owners in theirexclusive use rights, which are
completely separate from theownership, have to be dealt with
.
Speaker 1 (29:29):
I wanted to ask you that.
Let me give you a scenariobecause you're right, there's no
statutory protection baked into719 like there is in 718, where
there's an approval thresholdper the statute.
Let's say your governing doctor, let's say your bylaws, your
cooperative bylaws say with twothirds approval of the
shareholders, the cooperativeassociation may sell the
(29:50):
property to a developer.
And again, this is old housingstock in Florida and it's
usually in very prime locationsaround the coast.
But let's say all of our ownershave proprietary leases, do you
?
go into two-thirds or can theyget to?
I think they have a real.
I think the developer is goingto have a title problem if they
don't get 100% approval.
Speaker 2 (30:10):
Yeah, well, listen, even in condominium terminations
and even using the condominiumstatute, which suggests you
don't need 100%, you alwaysultimately need 100%.
But again, when you deal withthat, you're dealing with title
issues and what do you end upwith?
You end up with what the titleinsurance company says you're
(30:32):
going to need.
So, yes, I don't think justbecause the co-op documents say
the cooperative can be sold forthat.
Well, let me say this I thinkit can be and I think that if
you get that vote, thecooperative association can sell
the cooperative property.
The question is is does theperson buying it, can they go
off and run them up?
(30:52):
And the answer is no.
They're going to need to dotthe I's and cross the T's that
the title company looks at.
The other problem withcooperative sales the sale of
the entire cooperative property,which obviously is a very deep
and interesting conversation forthose folks who like taxes
there's a significant differencein what happens when you sell
(31:15):
cooperative property, becausethe property is corporate
property and so if you'reselling the property, there are
all sorts of corporate taxes anda lot of issues relating to how
much people have to pay interms of both taxes individual
taxes on the sale of their unitinterest but on the sale of the
corporate property.
(31:35):
So there's a lot of things thatare a little bit different in
cooperatives than there are incondominiums.
Speaker 1 (31:43):
The dreaded double taxation factor.
Speaker 2 (31:47):
Yes.
Speaker 1 (31:48):
The cooperative property and, to your point, I
think there are developers thatare more comfortable with the
risks associated with less than100% approval, others that
that's going to be a dealbreaker.
Speaker 2 (32:03):
Yeah, but again, typically if it's a good deal,
you end up getting everybody,and that's the only way it
really ultimately happens in allof these settings.
So not much of a difference,but there is a different path to
follow.
Speaker 1 (32:19):
So we can't have this conversation on cooperatives
without talking about thelong-term land leases.
Most of these cooperatives didhave long-term underlying land
leases at least in my experience.
Has that been your experienceas well?
Speaker 2 (32:33):
Not at all.
Actually, what they had wasgovernment, us government-backed
mortgages.
A lot of these places were setup as I don't know that I want
to call it affordable housing,but it was set up for housing by
the federal government'sfinancing and they had mortgages
(32:54):
on the property.
And you know, I know from whatyou talk about.
I don't know that I had anycooperatives that had land
leases.
But for cooperatives and condosthat had land leases, you know
there was the day you burned thelease because you finally got
out of it Well with all of youknow there was the day you
burned the lease because youfinally got out of it Well with
(33:15):
all of my clients.
It was the day they burned themortgage and the federal
government was.
Typically, when these thingswere set up, there were two
classes of shares.
There was class A and class Bshares and class A shares were
the federal government Untilthat mortgage was satisfied.
Those Class A shares controlleda lot.
(33:37):
But once the mortgage goes away, the Class A shares go away,
then everybody's the same interms of share ownership.
Speaker 1 (33:45):
Yeah, you're right, these long-term land leases or
recreational leases, they couldbe found in condominium projects
as well.
I really thought, David, thatover the last few years, with
the heightened obligationsrelated to reserve funding and
engineering inspections,potential liability for the
condition of the property, thatwe'd see more of these lessors
(34:08):
opening up to a purchase by theassociations.
That hasn't happened and it'sreally surprising to me.
It is and it isn't because Iguess for a lot of them because
a lot of them it's heirs andsuccessors it's like an annuity,
the long-term lease for them.
Speaker 2 (34:24):
It's better than an annuity.
Speaker 1 (34:26):
Yeah, no, it is so.
I mean, but I would havethought that there would have
been a factoring in of thepotential liability of
continuing to be the realproperty owner and whether or
not the association ismaintaining that property.
Speaker 2 (34:41):
Right?
Well, maybe yes, maybe no,because in the end, if somebody
were to reacquire the leaseholdproperty or take it back, or
what have you, they're going toredevelop it Whatever existed 30
, 40 years ago, they don't wantthat anymore.
So nobody does 50, 60, even 70years ago.
Speaker 1 (35:03):
So one of our partners told me I didn't know
this that you were a prosecutoryears ago.
So I have to ask you anylessons that stuck from your
time in the state attorney'soffice that I don't know shaped
or informed your associationpractice.
Speaker 2 (35:19):
Well, don't break the law.
Speaker 1 (35:22):
That's a good starting point.
Speaker 2 (35:23):
Right, right, yeah, no, I mean, you know that's a
whole different area of law andit was certainly something that
was very enjoyable back in theday for me to do, but I don't
know that any of this informs mymy current practice, other than
when I want to impress somebody.
Speaker 1 (35:42):
What kind of cases did you?
Did you try A?
Speaker 2 (35:44):
to Z thefts from the local drugstore on Miami Beach,
which, incidentally, was theonly time I was on 60 Minutes
all the way up to murder.
So I handled it all over thefew years that I did that.
Speaker 1 (36:03):
I just watched the latest OJ documentary on Netflix
with all the evidence thatwasn't presented at trial and I
mean, you know, you think you'veheard it all and then they come
up with something new and itreally kind of did transport me
back.
The verdict came out on my sonRyan's birthday, but what's?
Speaker 2 (36:21):
one of the most memorable.
Speaker 1 (36:22):
You said A to Z but do you have one particular case
that when you're, you know at aparty and somebody asks you
about your time as a prosecutorit's certainly Mama Steals Drugs
from FedEx.
Speaker 2 (36:35):
It's certainly mama steals drugs from FedEx, the
Fedco drugstore on Miami Beach.
Me, the judge, the publicdefender, if there was one, I
don't recall.
But I'll never forget my little15 minutes of fame on 60
Minutes where they wereinvestigating, you know the many
routine arrests of old peoplewho were stealing from the Fedco
drugstore on my in Miami Beach,on Alton Road.
(36:57):
And it was a thing, a sad thing, because again, and at that
time it involved, you know,folks who maybe didn't have
money, but you know there was,there was a lot of just
kleptomania as well.
Speaker 1 (37:10):
So were they stealing food or?
Speaker 2 (37:13):
other.
No, you name it, they stole it.
You know personal items, thingslike that Candy, you name it,
it was.
It was a lot of stuff and andand you know I was you know at
the time I was became goodfriends with all the people in
that in that area, south MiamiBeach, judge Gersten, who was
(37:35):
the judge over there at the time, and you know it was a kick for
us for them to come in and filmthat sort of thing.
So you know it was a lot of funand that's certainly the one
thing that sticks in my mind,that and, of course, working
with Janet Reno, who was anamazing force of a human being.
Speaker 1 (37:56):
Yeah, that must have been something.
You probably got some storiesto tell.
You also have a big practicedown in the Keys.
How did you get a presence inthe Keys?
Speaker 2 (38:06):
Well, I just like the Florida Keys and they like me.
Speaker 1 (38:10):
Are you a fisherman?
Were you down there fishing?
No?
Speaker 2 (38:13):
I'm more of a diver than a fisherman.
But you know, one day, when Iget a boat again, I'll be
fishing as well as diving.
Speaker 1 (38:22):
All right, Well listen, David.
Thank you so much for your timetoday.
This has been truly enjoyable,yeah.
Speaker 2 (38:29):
Thank you, Donna.
Speaker 1 (38:31):
Thank you for joining us today.
Don't forget to follow and rateus on your favorite podcast
platform, or visitTakeItToTheBoardcom for more
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