In the purchase of a condominium, an investor needs to be aware of several potential problems. Condominiums have boards designed to screen potential buyers and approve a lease by a condominium owner. They also have the function to screen potential tenants of owners. While such boards have the function of protecting the property and avoiding problems for the condominium, their power is often unchecked and can easily turn into a nightmare for an owner. By failing to approve a potential tenant, a condominium board can in effect block the rental of a unit, thereby causing financial loss to the owner.
Cooperative apartments are the closest thing to a fraud, short of breaking the law.
Here is how it usually works. The corporation then sells its shares to the existing tenants of the building or to outsiders. As was explained above, apartment buyers are not really buying an apartment but shares of the corporation which owns the building along with an agreement that gives them the right to occupy a specific unit. The prospectus is a large book which discloses all the financial transactions relating to the co-op conversion. As long as you disclose it, you can do almost anything.