Wisconsin Real Estate Sales Practice Exam

In a cooperative housing arrangement, what do buyers receive?

1. A deed to the unit

2. A proprietary lease

3. A rental agreement

4. A mortgage

The correct answer is: A proprietary lease

In a cooperative housing arrangement, buyers typically receive a proprietary lease. This type of lease grants them the right to occupy a specific unit within the cooperative and involves ownership in the form of shares in the corporation that owns the entire property. Instead of owning real estate directly, residents purchase shares which entitle them to lease their apartment. This distinct structure differentiates cooperatives from condominiums, where individual units are owned via deeds. The proprietary lease details the terms of occupancy, including rights and responsibilities, but it doesn’t incur the same legal ownership implications as a traditional deed. This is essential to understanding how cooperatives operate, as the cooperative itself handles maintenance and management, with the residents collectively participating in the governance and financial responsibilities. In contrast, the other choices do not accurately reflect the nature of ownership in a cooperative housing arrangement. A deed refers to traditional real estate ownership, a rental agreement commonly outlines terms for rental properties without ownership stakes, and a mortgage pertains to borrowing against owned property to finance the purchase of real estate. Hence, the proprietary lease is the defining document for occupants in a cooperative setting.