Don’t Lose Your Proof of Ownership

Co-op stock or condo deed. When you buy into a housing cooperative, you’re buying into a unique type of investment that doesn’t exist in a lot of parts of this country. Usually, when people buy a home — a house or a condominium — there’s a recorded deed in a local registrar’s or county clerk’s office. It’s real estate, and it can always be determined who owns that property. In a co-op, you’re buying into a private corporation, and you get a stock certificate and a proprietary lease. That’s your proof of ownership.

Cash or credit. There are two two main buckets that people fall into when purchasing a co-op. There are some people who pay all cash; most people obtain some kind of financing from a bank. If you purchased with bank financing, you’re not going to leave the closing room with the stock certificate and proprietary lease. Those are going to be held by the bank — it’s their collateral. And they don’t give that up until they get paid off, either because you refinanced your loan or paid it off.

If you’re in Bucket 1, where you paid cash and had your stock and lease from the beginning, hopefully you put them somewhere safe. If you financed with a bank and you paid that loan off, the bank is supposed to automatically send you those documents. But we know that banks make mistakes, and banks even lose documents sometimes. 

You’ve got to make sure that you follow-up with them and that they send you your original documents. Because if they don’t, you’re going to wake up one day when you go to sell your apartment, and you’re going to have to start looking for those documents.

In search of lost documents. At this point, my office, which works as the transfer agent for the co-op, starts to run a history as we do for each closing, trying to determine where the stock and the lease could be. The attorney representing the seller is going to ask the same questions. I need to make sure that the co-op has everything it needs to protect its interests. We don’t want to be handing out multiple stock certificates for the same apartment at the same time. That would create a problem.

If the bank was holding the stock certificate and can’t find it, then the bank should execute an agreement indemnifying the co-op in case someone turns up with that stock certificate later and says that they have an interest in the apartment. So if it was a bank that had it and lost it, my office will accept the indemnification from the bank alone. I know we can collect against them.

However, if the seller had the stock certificate and lost it, then he has to provide what’s called a title insurance policy. It insures the co-op if someone else shows up and makes a claim against that stock. That’s probably going to cost around $750 to $1,000 on average, plus the seller is going to have to pay to have the old documents re-issued. So you’re talking about a whole bunch of fees that can be avoided if you’d just kept track of that stock and lease. 

The lesson. When you’re buying into a co-op, remember that those two pieces of paper are very, very important. Keep them in a safe place, and try to remember where they are. If they’re with a bank, pay attention when you pay off the loan, and make sure that you get your collateral back. In this digitized world we live in, it’s hard to believe two pieces of paper can be so important.