House & Apartment

A housing cooperative, often called a co-op, is a type of shared housing where residents own shares in a cooperative corporation that owns the entire property. These shares give them the right to live in a specific unit and participate in managing the building. However, shareholders of the co-op do not usually hold title to their individual units. Instead, they sign a proprietary lease or occupancy agreement with the co-op. Shareholders typically pay a monthly carrying charge (maintenance fee) that covers their proportionate share of the property taxes, mortgage, utilities, and repairs.

Co-ops also typically have house rules that can govern property-related decisions like renovations, noise levels, pet ownership,  smoking or vaping, and guest stays. Breaking these rules could result in fines or, in extreme cases, eviction. Before joining a co-op, speak with an attorney experienced in Illinois cooperative housing law who can help evaluate the legal obligations and shareholder expectations for the specific property.

In Illinois, housing cooperatives are typically organized under one of the following statutes:

The General Not-For-Profit Corporation Act of 1986 (805 ILCS 105):

• Most housing co-ops use this statute because it allows the co-op to be member-owned and democratically controlled without operating for profit.
• The co-op cannot distribute profits to members. Any surplus must be reinvested in the property (repairs, improvements, reserves) or used for the co-op’s purposes.
• Provides a legal framework for governance, member rights, and property management.

The Illinois Co-operative Act (805 ILCS 310):

• Allows groups of people to jointly own and manage property in a cooperative structure.
• Co-ops can operate on a for-profit basis and distribute net earnings to members.
• In housing co-ops, this for-profit option is less common because they are typically designed to maintain affordability rather than generate income for members.

There are three main types of housing cooperatives. These include: 

• Market-rate housing cooperatives: Shareholders buy or sell their membership at whatever price the market allows. The purchase prices and equity growth are very similar to owning a condo or single-family home.
• Limited-equity housing cooperatives (LECs): These cooperatives limit how much members can earn when selling their shares. These limits help keep housing affordable because the co-op often benefits from below-market loans, grants, or tax breaks. The rules are usually found in the co-op’s bylaws, and there may be income limits for new members to ensure the housing helps those who need it most.
• Leasing cooperatives (zero-equity cooperatives): These co-ops lease the property from an outside owner, often a nonprofit. Since the co-op doesn’t own the property, members don’t build equity like homeowners. Sometimes, members can receive a share of the cash reserves the co-op built while they lived there. Leasing co-ops may also have the option to buy the property later and convert to a market-rate or limited-equity co-op.

The content of the corporate bylaws will specify the corporate structure of the cooperative. Generally, the bylaws will provide that the shareholder-tenants select a board of directors. The board of directors will either directly manage or hire an agent to manage the cooperative. Bylaws may also grant powers to the board to set annual maintenance, set house rules, and amend bylaws with the approval of the stockholders.

Co-ops are governed by a board of directors and member committees. Many follow a democratic voting structure where each member gets one vote, regardless of their share in the property. Major decisions such as amending bylaws, approving new members, or adopting new rules may require approval by the full membership.

A proprietary lease is a special type of lease that defines the relationship between a shareholder and a cooperative (co-op) housing corporation. It grants the leaseholder the right to occupy a specific unit in the building, and outlines the duties of shareholders and the board of directors. Unlike a traditional lease, a proprietary lease is connected to the shareholder's ownership interest in the cooperative as a whole.

In a housing co-op, members own shares in the entire building and hold a proprietary lease that gives them the right to occupy a specific unit. Members often seek a strong sense of community and are committed to collectively making policy decisions, approving new members, and choosing whether to hire staff. Co-ops can have monthly carrying charges (or maintenance fees) covering building expenses like property taxes, maintenance, and utilities.

By comparison, the individual buyer directly owns a condominium, and only common areas have shared ownership. The condo owner has a deed for their unit. The condo association can still set rules that owners must follow, but the owner purchases the unit itself, not a share in a corporation. In many condo associations, some unit owners never serve on the board of directors and don't get involved actively with policy decisions or choosing whether to hire staff. Condo associations can also have monthly association fees and special assessments that owners must pay to cover building expenses.

In a rental, the tenant doesn't have any ownership rights. The tenant has a spoken or written agreement with the owner or property manager to use the property for a certain amount of time. A tenant pays rent for the use of the property. The property owner and manager can put restrictions in the lease that control how the tenant can use the property. The lease also determines if the tenant must pay any monthly charges for building expenses.

No. When people buy into a co-op, they're not buying real property. They are buying shares in a corporation that owns the building. Because of this, instead of a traditional mortgage, co-op purchasers typically get a share loan from a lender.

A share loan works much like a mortgage, but doesn't have the same legal protections as a traditional mortgage. The lender provides the funds to buy shares, and the purchaser makes monthly payments on the loan to the lender. The shareholder may also have to pay monthly carrying charges for building upkeep directly to the co-op.

Not all lenders offer share loans, so it’s important to find lenders experienced with co-op financing. An attorney experienced in Illinois cooperative housing law can also help evaluate financing options.

In Illinois co-ops, monthly carrying charges (also called maintenance fees) typically cover the member's share of the costs to operate and maintain the entire property. They often include:

• Property taxes for the whole building (apportioned to each shareholder),
• Mortgage payments if the co-op still has an underlying building loan,
• Utilities for common areas, and sometimes certain in-unit utilities like heat, water, or gas,
• Building insurance (covers the structure, not personal belongings),
• Repairs and maintenance for common areas and building systems (roof, elevators, plumbing, etc.),
• Staff salaries (doormen, maintenance, management), and
• Reserves for future repairs or capital improvements.

These vary by co-op, so it’s important to review the proprietary lease or occupancy agreement to determine what is covered.

According to the National Association of Housing Cooperatives, here are key questions to ask before buying shares in a co-op:

• What is the share price?
• How much are the monthly carrying charges?
• What is the underlying mortgage?
• What is the pet policy?
• What is the subletting or rental policy?
• What is the policy for making alterations or renovations to my unit?
• What is the financial health of the co-op–does it have enough reserves for repairs and emergencies?

If you have legal questions about co-ops, consult an attorney.

Maybe. A shareholder can sell their shares, but co-ops often have restrictions. Usually, the co-op board must approve the buyer (even if it’s a family member), and some co-ops limit the sale price. Getting board approval can be time-consuming and sometimes difficult.

Most proprietary leases require the lease to transfer with the sale of shares, meaning only approved members can live in the unit. The board must approve a buyer to gain membership and the legal right to occupy the unit. If a shareholder's membership ends, their right to live there may also end.

Most co-ops also have a right of first refusal, which means the co-op can buy back shares—often at the original price—before a member sells to someone else. Courts have upheld these rules as reasonable to protect the co-op’s stability.

It depends. Some co-ops allow subletting, but many have strict policies to maintain long-term, resident ownership. Check the bylaws and house rules before buying.

The bylaws specify the distribution of responsibilities. The co-op is usually responsible for building-wide maintenance (roof, plumbing, elevators), while shareholders are responsible for repairs inside their units.