Understanding Cooperative Terminology

Phil Kenkel

Bill Fitzwater Cooperative Chair

Oklahoma State University

Terms Describing Structure

Centralized Associations: A regional cooperative where the producers are direct members.  Members in a centralized cooperative do business with a local branch which is controlled by the headquarters.

Closed Membership: A structure in which members can join only during the initial membership drive or by purchasing equity from another member.  In closed cooperative equity is often associated with a usage right which requires members to maintain ownership in …

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.…

Internal Revenue Code Section 216

The section of the U.S. federal tax law that permits individual cooperative members to deduct mortgage interest and property tax on their income tax returns just like other homeowners do. Section 216 allows cooperative housing corporations to pass-through the mortgage interest and real property tax deductions to their stockholders on a pro rata basis.…

Allocated Equity (for cooperatives)

Equity that is assigned by amounts to individuals or organizations, typically in the form of retained patronage refunds and/or per-unit capital retains; investments by patrons for which they have received notification of the allocation. The share of net margin (savings) from member businesses that has been allocated to individual member-patrons based on their patronage but retained by the cooperative for operating purposes. There is an obligation to redeem this equity to members or past members at some point in the …

Occupancy Agreement (or Proprietary Lease)

The contract between the cooperative corporation and the member that sets the conditions for the right to occupy a particular unit. It sets forth the rights and obligations of the member and the cooperative to each other. Legally, it is viewed as a lease by the member with the housing cooperative.…