Sometimes known as an owner’s lease, a proprietary lease is a type of lease agreement that is commonly utilized as part of a stock cooperative. The model is often utilized when a household chooses to purchase an apartment or condominium that is owned by a cooperative. As part of their purchase, they receive stock in the cooperative and earn a return from that stock as long as they own the residence.
Proprietary leases are common in many metropolitan areas. This type of arrangement makes it possible for the investors who hold shares in the cooperative, or co-op, to secure and live in residential units owned by that business enterprise. Typically, investors who wish to enter into a proprietary lease undergo comprehensive background checks and may be reviewed by a resident board that is composed of other tenants. The idea is to make sure the investor is likely to comply with the terms and conditions associated with the lease, and also to remain a stockholder and a resident for an extended period of time.
As the name implies, a proprietary lease provides the resident with the exclusive right to dwell in one of the units in the building that is owned by the cooperative. For the duration of the lease, the resident enjoys tenant benefits that are usually above and beyond those of leasing arrangements that are offered by businesses other then cooperatives. This may include additional amenities that are provided on the property, such as the ability to utilize a banquet room without the need to pay an additional fee. Any amenities offered to tenants are included in the terms and conditions of the proprietary lease, along with guidelines for making use of those additional benefits or facilities.
Depending on laws that apply in the country where the cooperative is located, the holder of a proprietary lease normally must obtain board approval before selling the unit to a new buyer. This often involves discussing prospective buyers with a resident board and possibly representatives of the cooperative before the living space is actually shown to any prospective buyer. At other times, the prospective buyer must meet with the representative board before being approved to tour the living space. More commonly, an interested buyer must file an application along with any other legal documents required, and then undergo an interview with the board before his or her application will be accepted for consideration.
The process for transferring the shares held will also vary based on local laws. In some situations, the former tenant transfers his or her shares to the new tenant. At other times, the shares are transferred back to the cooperative and are reassigned to the new tenant, based on criteria established by the cooperative.