Q. Is there a definition of ‘owner-occupied’ in Illinois for co-ops? The issue is whether a mom and dad could purchase a unit in our co-op for their son or daughter who would be living in the unit alone. Or could a son/daughter purchase a unit for their parents who also would be living alone in the unit? Or does the language of owner-occupied mean that at least one person occupying the unit must also be on the stock certificate and proprietary lease?

                                               —Wondering

A. “In Illinois, many, if not most, co-ops are stock co-ops,” says Mark R. Rosenbaum, principal at law firm Fischel & Kahn, Ltd. in Chicago. “That is, a person owns shares in the corporation, which owns the building (the co-op), and as a result of owning those shares, the person gets the right to be a tenant under a proprietary lease for a particular apartment in the building which lease lasts as long as the person owns the shares (barring default under the lease, like for nonpayment of rent). All proprietary leases in a co-op are (or should be) identical in their terms and provisions other than the amount of rent to be paid for a given apartment.

“Unlike condominiums and common interest communities, Illinois does not have a ‘Co-op Act.’ Co-ops are the subject of very little statutory authority in Illinois, as co-ops. As corporations they are subject to Illinois corporate statutes, and at least the General Not-For-Profit Corporation Act does have some provisions that are directed to co-ops. There are other statutes that affect co-ops. But there is no overarching governing statute for co-ops.

“As a result, co-ops are almost entirely governed by their own documents: articles of incorporation, bylaws, rules, and the terms of the proprietary lease. To answer the question, you would have to look first to those documents.  

“There is no statutory definition of ‘owner-occupied’ of which I am aware in the co-op context. Possibly FNMA or FHLMC [(Fannie Mae or Freddie Mac, the leading government-sponsored mortgage providers in the U.S.)] may have such a definition, but any such definition would not be binding on the co-op itself. Technically, the term ‘owner-occupied’ doesn’t apply directly to a co-op. The ‘owner’ owns shares, not real estate. Thus, the owner cannot ‘occupy’ anything. To the extent the apartment is occupied, it is by the shareholder(s) as a tenant, not as an owner. So use of the term ‘owner-occupied’ is not a good fit for a co-op, or its documents. ‘Shareholder-occupied’ would be a more accurate term.

“Still, in the absence of anything to the contrary in the co-op documents, if a person occupying an apartment is not a shareholder in the co-op, then, under the ordinary forms of co-op documents I have seen, that person would not have the right to occupy an apartment, even if a family member. 

“That being said: 1. It may be possible for the shareholder(s) to sell or gift a few shares to the family member actually living in the apartment. Any amount of share ownership would be enough to make that person a ‘shareholder’ and thus entitled to occupy the apartment. If sale or gift of less than all the shares is prohibited by the co-op’s documents, I have seen a family member added to the existing share certificate (making that family member a shareholder), with the primary shareholders having a buy-back agreement of some sort upon the death or move-out of the family member; or 2. If the lease (or other documents) allows for subletting, the fact that the subletting family member pays little or no rent to the tenant/shareholder is not usually within the co-op’s control. But the co-op is likely entitled under its documents to either a copy of the sublease, and/or maybe even approval of the subtenant.”