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An association or corporation established for the purpose of providing services on a nonprofit basis to its shareholders or members who own and control it.

The nature and functions of cooperatives differ considerably—such as purchasing cooperatives, consumer cooperatives, and marketing cooperatives.

In the context of agriculture, a farmers' cooperative refers to an organization of farmers residing in the same locale that is established for their mutual benefit in regard to the cultivation and harvest of their products, the purchase of farm equipment and supplies at the lowest possible cost, and the sale of their products at the maximum possible price.

The term cooperative also signifies the ownership of an apartment building by a nonprofit corporation that holds title to it and the property upon which it is situated. Stock in the corporation is allotted among the apartment units on the basis of their relative value or size. The right of occupancy to a particular apartment is granted to each cooperative member, who purchases the shares assigned to the desired unit. The member subsequently receives a long-term proprietary lease to that unit. The rent payable pursuant to the lease is that member's proportionate share of the expenses the corporation incurs in operating the cooperative—such as insurance, taxes, maintenance, management, and debt service. The cooperative concept evolved in New York City during the early 1900s as a mode of accommodating the public's desire for home ownership; it subsequently expanded to other large urban centers.

In order to finance the purchase or construction of the cooperative building, the cooperative places a blanket mortgage on the property, which is pledged to support the given debt. Lenders usually are hesitant to accept an individual member's stock and proprietary lease as security for a long-term loan. The members' lien (a claim on property to satisfy a debt) on the lease would be subordinate to the blanket mortgage on the property. The purchaser of a cooperative apartment usually must have sufficient cash available to pay for the stock allotted to the unit he or she wishes to obtain. The initial price of the stock generally does not exceed the amount required for a down payment on a single-family residence. As cooperative members accumulate Equity (the value of property exceeding the total debts on it) in their stock, subsequent purchasers must either have a substantial amount of cash available or locate a seller who is willing to recoup the equity in installments over several years.

Cooperative members are also financially dependent on each other. The existence of a single blanket mortgage paid by rent receipts means that if several members default in their rent payments, the corporation might not have sufficient funds to pay a mortgage loan installment. Foreclosure will ensue in regard to the entire membership unless it acts to satisfy the default. Although special reserves and assessments are generally employed to cover such a contingency, the available funds might be inadequate to prevent default.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.


n. an association of individual businesses, farmers, ranchers, or manufacturers with similar interests, intending to cooperate in marketing, shipping and related activities (sometimes under a single brand name) to sell their products efficiently, and then share the profits based on the production, capital or effort of each. "Sunkist" oranges is an example of a large cooperative. Cooperatives include dairy milk producers, cotton gins, and thousands of other enterprises of all sizes. There are also cooperatives in which consumers form retail outlets like grocery stores and share the profits based on the amount of patronage of each member, but they have found it difficult to compete with the giant supermarket chains.

Copyright © 1981-2005 by Gerald N. Hill and Kathleen T. Hill. All Right reserved.
References in periodicals archive ?
distribution, each of the cooperative's three members will authorize its grower-shareholders to sell produce to the cooperative at an arm's-length price.
Suburban cooperative nursery schools provide one case for studying these issues.
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" "Such recommendation was made without even giving due process to the electric cooperatives," Philreca said.
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'At present, it has not been determined which ministry will be responsible for Angkasa and the Cooperative Commission of Malaysia (SKM),' he told reporters at the closing of the 29th AGM of Kuala Langat Development Cooperative (KPD) here today.
Hasan Askari has said that best results can be achieved by benefitting from the fruits of cooperatives movement.
Zulfiqar Ali said that Joint Registrar Cooperatives are being appointed at district level with an aim to resolve the complaints at local level and to streamline the department's affairs.
'We take our hats off to these cooperatives for the wonderful jobs that they do and for all their efforts in helping reduce poverty in our country, particularly in the countryside,' Sen.
Congress passed the 1978 Bank Act, creating the first-ever bank for consumer cooperatives. Ed Jaenke, former governor of the Farm Credit Administration, called it Dreyer's "most historic and greatest contribution to the cooperative idea."

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