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Glossary of Terms

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z #

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- A -

Amortization The way a bank figures out monthly payments on a loan.

Annual Meeting A meeting legally required of all cooperatives for the members of the cooperative. At the meeting, members may elect representatives to the co-op's Board, hear financial reports, amend the co-op's rules, or attend to other business.

Appraisal An official estimation of the value of a property.

Assets Resources, properties and property rights owned by an individual or business enterprise.

Articles of Association, or Articles of Incorporation A document filed with the state describing how a corporation is to be organized. A co-op's Articles of Association will also state the cooperative's limited equity formula.
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- B -

Balance Sheet A financial "snapshot" of a corporation showing what it owns and what it owes.

Blanket Mortgage A loan taken out by a cooperative that covers all the building's debt.

Board of Directors Elected by a co-op's membership, the co-op Board of Directors oversees the co-op's operations and finances.

Bylaws The rules of the cooperative. Bylaws cover such topics as voting, responsibilities of the co-op's officers, and other usually "governance" issues.
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- C -

Capital Assets which will be put to long-term use. Major improvements or maintenance, buying property, and major appliance purchases are called capital expenses. Borrowed money for these expenses are called capital loans.

Carrying Charge A carrying charge is like rent.

Closing The time when a "deal" is closed or legally completed. For housing co-ops, closing is the time when the co-op legally receives its property and commits for its loans.

Collateral A piece of property used to guarantee a loan. If the borrower defaults on the loan, the bank may seize this property.

A way to own your own apartment in a apartment building or townhouse complex. In a condominium, residents actually "own" their own apartments, but a separate corporation owns the whole building.

Conversion The process of converting a building from rental housing to co-op housing.

Cooperative A corporation jointly owned and governed either by its workers (a worker cooperative) or its customers (a consumer cooperative). A housing cooperative is a kind of consumer cooperative.

Cooperative Interest Sometimes called a share, a cooperative interest is a sum of money individuals pay into a cooperative in order to become members. (Like a down-payment.)

Covenants Agreements, usually part of legal documents.

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- D -

Debt Service The amount of money paid to a lender for a loan, usually including both interest and repayment of the loan itself.

Default Not honoring a legal commitment is known as a default. One common type of default is not paying back a loan.

Depreciation The amount of "wear and tear" on a piece of equipment or a building. Usually, this amount is spread out equally over a fixed time span. Buildings usually depreciate equally over 27.5 years; furnaces over 15 years; carpeting over 7; that is, each year the building is worth 1/27.5 less; the furnace 1/15 less and the carpeting 1/7 less. The IRS lets you deduct these amounts each year from the co-op's earned income. (Note: Land does not depreciate.)

Development Budget A projection of how much it will cost to start up a cooperative.

Dissolution When a company decides or is forced to go out of business.

Dividend An amount paid to shareholders in a corporation out of the corporation's profit or surplus.
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- E -

Equity (1) The total amount of shares or cooperative interests is called member's equity. (2) In accounting, equity is the value of a business determined by subtracting liabilities from assets.

Eviction The legal process of forcing a tenant or co-op member to leave a building.

Expenses The costs of operating the co-op. The main expenses usually fall into five main areas: loan payments, taxes, insurance, utilities, and maintenance.
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- F -

Financial Statement (Sometimes called an Income Statement.) A report on all the income and expenses for a corporation.

Fiscal Year A twelve month period used for the purposes of a corporation's accounting.

Foreclosure The process a lender goes through to recover its money after a borrower has defaulted on a loan.
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- H -

House Rules Rules developed by a co-op's members for the operation of a cooperative. House rules covers such issues as parking, garbage, maintenance, noise and resolving conflicts.

Housing & Urban Development Administration (HUD) An agency of the federal government which sponsors a variety of programs including rental assistance, loans for rehabilitation, and loans for the construction of cooperatives.

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- I -

Improvements (1) Any renovations, additions, or physical improvements to an existing building. (2) Accountants sometimes refer to buildings themselves as "improvements" to a piece of land. (3) From the tax point of view, an improvement must be a new feature, or add a use or extend the life of an existing feature.

Income Cash, services, or other transfers of assets to a corporation.

Incorporation The process of receiving recognition from a state as a legal entity.

Indemnification To agree not to blame or sue and to protect someone from lawsuits arising from your relationship with him/her.
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- L -

Lease An agreement between a renter and a property-owner for use of the property. Leases should outline the rights and responsibilities of both the lessee (renter) and the lessor (property-owner).

Leasehold Co-op A cooperative which leases its building instead of owning it.

Lien A claim on real estate, equipment or other possessions for payment of some debt or court ordered obligation. Liens are recorded in a city or town's land records to inform everyone that the property or possession cannot be sold until the lien is paid off.

Limited Equity Cooperative A cooperative which limits the rate of appreciation of member equity.

Limited Equity Formula The formula describing how member equity may appreciate.

Liquidation The process of dissolving a corporation and selling off all its assets; usually this process is imposed on a corporation by a court.

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- M -

Management Company (or Management Service or Agent) A company which works for the cooperative to handle financial or property management for the cooperative.

Market Rate Cooperative A cooperative which does not limit the rate of appreciation in member equity.

Mechanic's Lien A lien placed against a building by contractor doing service on the building.

Member Any individual holding shares in a cooperative.

Mortgage A real estate loan in which the bank uses the property as collateral.

Mutual Housing Association A cooperative which services several different properties.

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- N -

National Association of Housing Cooperatives (NAHC) The national association of cooperatives in the United States.

Net Income (Operating Surplus) The "profit" at the end of a fiscal year. Co-ops either choose to use this money to improve the co-op or return it to members.

Notice of Conversion
(Vermont) A legal notice from a property holder that s/he intends to convert the property to cooperative ownership.

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- O -

Officers The bylaws of a cooperative usually describe several positions to be held by member in the cooperative; these positions can be President, Secretary, Vice President, Treasurer, and so on. Sometimes a legal document will require the signature of corporate officers.

Operating Income/Expense
Expenses and income associated with the day-to-day operation of the co-op.
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- P -

Par Value The starting value for shares in a cooperative. (Note: this value is meaningless except at the very start of a cooperative.)

Perpetual Existence Corporations must tell the state how long they plan to be in business. Corporations which do not anticipate going out of business declare their existence to be perpetual.

(1) The amount of an outstanding loan. (2) Payments which reduce the amount of an outstanding loan.

Pro Forma A "best guess" for various kinds of financial information. Types of pro formas: pro forma balance sheets, pro forma financial statements, pro forma development budgets.

Proprietary Lease
The lease signed by a cooperative and a co-op member.

Purchase-Sale Agreement A legal agreement that states the terms of the sale of property. Purchase-Sale Agreements usually include such things as the price of the property, how and when the money will be paid for the building, and any special conditions of the sale.
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- Q -

Quiet Enjoyment A legal term meaning that you will be left alone.

Quorum The minimum number of people who must show up before a meeting can transact business.

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- R -

Recitals Statements of various facts for the record.

Resident Agent (Vermont) Someone who agrees to receive official notices from the State of Vermont for a corporation.

Resale The process of transferring co-op shares from a member who is moving out to a member who is moving in.

Reserves Money set aside for special purposes by a cooperative (like a savings account). Common reserves for housing cooperatives are vacancy reserves, maintenance reserves, and operating reserves.

Right of First Refusal A right to buy something before anybody else has a chance to.

Rochdale (or Cooperative) Principles A set of six principles established by a cooperative in Rochdale, England which define how cooperatives ought to run. Briefly, they are: non-discrimination, non-profit management, limited return on member equity, one member one vote, continuous education, and cooperation with other cooperatives.
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- S -

Seal By law all corporations are required to have a stamp which is unique. (Most corporations do not bother to have their seal actually made into a stamp.)

Section 8 Assistance
A program which assists low income people in paying rents. Under this program, a portion of the rent for those assisted comes from the government.

A share represents a portion of the value of a corporation or cooperative. In a limited equity housing cooperative, members buy shares of the cooperative; these shares are the member equity of the cooperative.

Share Loan
A loan taken out by a member to buy shares of a cooperative.

Another word for legal.

A lease between a current tenant and another person.

The acceptance of a lower priority in payment in the event of liquidation. Also, the agreement to give up other rights and privileges to somebody else.

Subscription Agreement An agreement between a co-op and a prospective member. This agreement is signed before the member is official made a member of the co-op.

Subscription Funds
Money paid along with a subscription agreement.

Sweat Equity The contribution made to the construction or improvement of a building through labor.
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- T -

Tenant A resident leasing property from a property-owner.

The process of ending an agreement.

Title A legal document which signifies the current ownership of a piece of property. (Sometimes called a Deed.)

Transfer Value
The amount at which a member's share investment in a co-op may be sold, according to the co-op's limited equity formula.

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- U -

Unanimity Agreement by 100% of the people involved.

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- V -

Vacancies Any apartment in a building not generating revenue for the building.

Vermont Cooperative Housing Ownership Law A law passed in 1988 which allows for the incorporation of housing cooperatives in Vermont.

Vermont Housing Finance Corporation (VHFA) An agency of the State of Vermont which provides low interest home mortgage loans to qualified borrowers.

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- W -

Waiver An agreement allowing someone to ignore a previous agreement or understanding.

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Revised: January 31, 2002.
All trademarks or product names mentioned herein are the property of their respective owners.



Unless otherwise indicated, copyright 1999 ARCH. All rights reserved.
Revised: October 02, 2003.

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