Co-ownership of a cooperative apartment

Acquisition of a cooperative apartment by partners

Our law firm was contacted by Mrs Ilona and her partner who were planning to buy a flat together. They were looking for a two-room cooperative apartment, however, according to the statutes of the cooperative only one of them could be registered as a member of the cooperative. Ilona wondered what the solution to this situation was.

It is typical of cooperative housing that it cannot be acquired through co-ownership. However, contrary to public opinion, this option is not prohibited by law. On the contrary, according to the law , it is possible for two or more persons to acquire a cooperative flat under a purchase contract (or inherit or receive it as a gift) into joint ownership. The snag is that the Corporations Act gives individual condominium associations the ability to prohibit co-ownership of condominiums. Co-ownership of a condominium can only be prohibited in the bylaws of the condominium. This is what many co-operatives use.

This is the same approach taken by the co-operative in the building sought by Mrs Ilona. Since the partners were planning to get married soon, the easiest solution was to get the flat as husband and wife. In the present case, joint membership of the spouses in a housing cooperative arises by law even in cases where the statutes of the housing cooperative otherwise exclude co-ownership of the shares.

However, if the partners were not planning to marry, a solution could also be offered whereby only one of them would acquire the co-operative share and at the same time jointly conclude a contract which would secure the claim of the other partner, for example, in the event of separation. However, such a solution usually requires the assistance of a lawyer.

Co-operative housing and co-ownership

As mentioned above, co-ownership of a cooperative flat may or may not be allowed depending on the intention of the housing association.

If the by-laws of the housing association do not contain a provision that excludes co-ownership of the cooperative flat, it is true that the cooperative flat may be co-owned. However, caution must be exercised when checking the statutes of the cooperative. The prohibition need not necessarily be couched in words: ‘co-ownership of a share in a housing association is excluded…’, butmay be described by a number of other formulations, for example: ‘acooperative share may be owned exclusively by only one person…’.If you are unsure how to interpret any of the provisions of the by-laws, it is advisable to consult an attorney.

For the purpose of managing a cooperative flat which is owned under the co-ownership regime, the co-owners must elect one of them who then acts as administrator. The co-owner-manager then represents the remaining co-owners of the condominium in relation to the condominium. In practice, this means that he or she votes at membership meetings, negotiates with the cooperative’s board of directors, etc. If the cooperative flat is owned by spouses under the co-ownership regime, each spouse is also the manager of the cooperative flat.

In the case of major dispositions of the cooperative flat (typically transfer of the cooperative share, creation of a mortgage, etc.) , the consent of all co-owners is required.

Co-operative housing and community property

The community of property regime (SJM) can only arise between spouses. If a cooperative share is acquired by either or both spouses during the marriage, it normally becomes part of the community property (unless another property regime is agreed between the spouses). As stated above, the statutes of a housing association , unlike co-ownership, cannot exclude the regime of community of property. In this case, therefore, multiple ownership of shares is possible.

However, even during the marriage, it is possible to acquire a cooperative share in the sole ownership of one of the spouses if it is acquired, for example, by gift or inheritance.

If you are buying a cooperative apartment (or a share in a cooperative) occupied by a married couple, it is very important for you to know under which regime the cooperative apartment is owned, as this fact may have serious legal implications for the validity of the contract for the purchase of a share in a housing cooperative. If you are not sure who actually owns the condominium, it is again advisable to consult a lawyer.

If the condominium is owned under the SJM regime, each spouse exercises the normal administration towards the condominium.

As with co-ownership, the consent of both spouses is required for the transfer of the cooperative share and other similar dispositions of the flat.

What happens to a condominium after a divorce?

If the marriage is dissolved by divorce, the community property also ceases to exist, either by the settlement of the community property or by the expiry of the time limit for its settlement under the Civil Code (3 years from the reduction, dissolution or termination of the community property).

The division of the property may be effected either by agreement of both (former) spouses or by a court decision. In the case of living in a cooperative apartment, the court determines which spouse gets the cooperative share in the housing cooperative. According to the law, the condominium share is to be owned by the spouse who exclusively uses it as owner. If both spouses use the cooperative share in the housing cooperative (e.g. if divorced spouses – formerly joint members of the cooperative – jointly occupy the cooperative flat), the cooperative share may be owned jointly by both former spouses.

Inheritance of the cooperative flat

If the owner of a membership share in a cooperative dies, the membership share becomes subject to inheritance proceedings. From a legal point of view, the simplest situation is one in which there is only one heir. The cooperative share and therefore the right to rent passes to him.

But what if there are more than one heir? In such a situation, the agreement takes precedence. If one of the heirs is more interested in the apartment and the others are content with other assets from the estate or a payout, they can conclude an inheritance agreement to that effect. If such an agreement is not possible, e.g. because there are no other assets in the estate and none of the heirs has sufficient funds to pay the others, an agreement can be made to the effect that one of the heirs becomes the purchaser of the share and pays the other heirs within a certain period during which he sells his cooperative share.

In practice, however, it happens that the decision on the acquisition of the inheritance results in more than one person (typically the children of the deceased) becoming the heirs of the cooperative share, i.e. the legal succession in the housing cooperative is not resolved directly in the inheritance proceedings. However, an agreement on who will become the sole owner of the condominium share is still necessary at a later date, and the other heirs should settle. If this simply cannot happen because of incompatible views, then the situation must be resolved outside the framework of the succession proceedings by an action brought before the court. This will determine who will continue to be a member of the housing association.