An Attorney Answers: How Does the Stock Market Affect My Co-op Shares?

Indeed, New York law considers the sale of co-op stock the sale of securities, with requirements similar to those that the federal securities laws and regulations impose on the sale of publicly owned business corporation stock. The co-op stock sold by investors (either the original sponsor of your co-op or those called "holders of unsold shares") must be registered and accompanied by a disclosure document (an offering plan) describing the rights, obligations, and risks of the ownership of such stock. And so long as such investors continue to sell apartments, they must be updated with amendments that disclose the ongoing condition of the co-op and any material new developments.

Unlike with conventional securities,

the financial condition of your

cooperative corporation and its

physical condition are what's critical.

Co-op stockholders like yourself should realize that the financial condition of their co-ops, and the physical condition of their property, will be critical to well-informed or counseled potential purchasers, just as the results and condition of publicly traded business corporations are, or should be, important to potential purchasers of their stock.
 
 All that said, the value of your co-op stock correlates most strongly to the ups and downs of the real estate market generally. It is certainly true, of course, that when the stock market is doing well, purchasers may be more likely to also feel "bullish" about real estate, although many experts caution these days that the stock market is not the economy.
 
 The good news is that apartment purchasers, of co-ops in particular, usually live in their investments. So they are less motivated (or able) to rapidly get into and out of such investments. Thus, the values of these co-ops will not have nearly the same degree of volatility as the value of even "blue chip" stocks.

In the end, even if you suffer a downward hit in the value of your co-op apartment (as most have done over the past few years), you can grit your teeth a bit, stay put if at all feasible, and wait for the economy and co-op market to rebound.

Robert D. Tierman, a longtime co-op and condo attorney, is a partner at Litwin & Tierman.

From the December 2011 issue of Habitat magazine. For print-magazine articles back to 2002, join our Archive >>