The Financing of Cooperatives and Condominiums: A Retrospective

In real estate it is rare indeed to witness an entire area of specialized practice evolve from embryonic stage through maturation.Yet, with respect to American condominium law, many of us have had that opportunity.Although some commentators trace the concept of the condominium to ancient Rome, 1 it is more generally accepted that the concept was introduced in Europe during the twelfth century. 2 One of the earliest identifiable statutory recognitions of the condominium is found in the Napoleonic Code of 1804.'The "Mr.Kane is a partner in the firm of Thelen Reid & Priest LLP, where he is the Chairman of the Real Estate and Real Estate Finance Department.Mr. Kane has served as the Chairman of more than 30 two-day educational programs on real estate sponsored or co-sponsored by the Practicing Law Institute, the New York State Bar Association, The World Research Group, Continuing Education of the Bar (California), the Illinois Institute for Continuing Legal Education, the Institute for International Research, and the New York University Real Estate Institute.He also produced and chaired the Practicing Law Institute Television and Cassette Series on Real Estate and Real Estate Finance.For several years, Mr. Kane was a member of the faculty of New York University, teaching seminars in the structuring of real estate transactions.Mr. Kane has delivered well over 200 lectures on real estate subjects and has written numerous articles on real estate and real estate-related matters.Mr. Kane served as the Regional President of Phi Delta Phi International Legal Fraternity for ten years, as President of New York Civil Court Arbitrators Association, and as a member of the New York Judicial Screening Committee for two years.He is a member of the Advisory Board of First American Title Insurance Company. 1 See Condominium Workshop, 48 ST.JOHN'S L. REV.677, 716 (1974) (setting forth remarks of William H. Parry discussing several theories on the origin of the condominium concept, including Rome, England, and Germany); Curtis J. Berger, Condominium: Shelter on a Statutory Foundation, 63 COLUM.L. REV.987, 987 n.5 (1963) (citing theories on the time and place of condominium origin).2 See John E. Cribbet, Condominium-Home Ownership for Megalopolis?, 61 MICH.L. REV.1207, 1210 (1963) (discussing the recorded history of the condominium in twelfth century German cities and during the Middle Ages in France and Switzerland).: "Article 664 of the Napoleonic Code, which dates from 1804, refers to the repair and reconstruction of a building whose different floors belong to various proprietors."Berger, supra note 1, at 988 n.5.Article 664 specified the maintenance 'See 7 POWELL, supra note 5, § 632.2[3], at 54-35.'See PATRICK J. ROHAN, REAL PROPERTY § 9.01, at 9-1 (1981).First becoming important after World War I, cooperatives are a relatively new type of housing.Still, co-ops have a longer history than condominiums, which were widely created[73:101 THE FINANCING OF CO-OPS AND CONDOSStates in the second half of the nineteenth century."0 It has been suggested that the cooperative concept is Finnish in origin."The cooperative form gained popularity in response to the housing shortage that followed World War I and in response to the rent control statutes that followed World War II.Early cooperatives were also popular because that form of ownership allowed wealthy apartment dwellers to decide who lived in their buildings.The first examples of cooperative ownership were found in New York City.'Notwithstanding the earlier start that the cooperative concept enjoyed in the United States, that form of ownership never developed the widespread appeal that the condominium form of ownership was able to generate.Today, the cooperative form of ownership remains most prevalent in New York and Chicago.3 Cooperatives are also found, albeit with less frequency, in Los Angeles and San Francisco, and parts of Florida, 4 however, the only in 1962.See id.Thus, when compared to condominiums, more accurate predictions as to the future of cooperatives are possible.See id.The use of cooperatives in this country actually dates back further, to the late nineteenth century.See 15A AM.JUR.2D Condominiums and Cooperative Apartments § 61 (1976).10 The earliest reported American case involving a cooperative apartment arose in 1886, Barrington Apartment Ass'n v. Watson, 38 Hun 545 (N.Y. 1886).There, plaintiff corporation constructed apartments to be owned and occupied by its original projectors and stockholders.Defendant lessee sought to sublet, notwithstanding a lease provision prohibiting such subleasing without written consent.The court granted plaintiffs injunction, prohibiting an unapproved sublease.See 15A AM.JUR.2D § 61, at 891 n.85." See Edward M. Ross, Condominiums in California-The Verge of an Era, 36 S. CAL.L. REV.351, 352 (1963) (stating that today's prevalent form of corporate ownership, which utilizes corporate stock and long-term leases, is of Finnish origin); see also Chester C. McCullough, Jr., Co-operative Apartments in Illinois, 26 CHI.-KENTL. REV.303, 304 (1948) (discussing the history of the general cooperative housing concept).12 See Berger, supra note 1, at 991-92 n. 25; McCullough, supra note 11, at 305; Ross, supra note 11, at 352 (noting the success of the cooperative during the 1920s and the post-W.W.ll era).13 New York City has the largest market for cooperative apartments due to the co-op's right of self-governance.See Rosemarie Maldonado & Robert D. Rose, The Application of Civil Rights Laws to Housing Cooperatives: Are Co-ops Bastions of Discriminatory Exclusion or Self-Selecting Models of Community-Based Living?, 23 FORDHA2I URB.L.J. 1245, 1245 (1996).In 1984, there were 211,000 co-op apartments in New York City.That figure rose to 416,000 in 1995.See N.R. Kleinfield with Tracie Rozhon, In Flat Market, Co-op Life Has Steep Ups and Downs, N.Y.TIMES, Oct. 30, 1995, at Al. Cooperative ownership is relatively rare outside New York City.

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