California Real Estate Practice Exam

An owner of a cooperative apartment project makes monthly payments which include principal, interest, taxes, and insurance. Which of the following statements is NOT correct?

1. Assessment bond costs will be divided among the owners

2. If other owners fail to make payments, all owners could lose their equities, for a foreclosure action could be taken against the (single) blanket type loan, unless delinquencies were brought current

3. Owner may deduct the amount of property taxes paid on his income tax return

4. Tax collector will render a separate tax bill to each owner

The correct answer is: Assessment bond costs will be divided among the owners

The statement that assessment bond costs will be divided among the owners is not correct because in a cooperative apartment project, assessment costs associated with bonds or other improvements are typically assessed to the entire cooperative entity rather than on an individual basis. While it is true that cooperative owners must pay their share of common expenses, the way in which bonds and assessments are allocated can vary, and the separate billing of these costs to individual owners is not the usual practice in cooperatives. In a cooperative structure, the owners do not own their apartments outright; instead, they own shares in the cooperative, which entitles them to occupy a unit. Their monthly payments typically cover shared expenses, including maintenance, mortgage payments, property taxes, and insurance. The cooperative collects these funds and manages the payments for the entire project, including the handling of any assessments or bonds. The legal implications of a blanket loan mean that if one owner defaults, the risk extends to all owners since they collectively guarantee the loan. Therefore, if one member fails to make payments, it can jeopardize the interests of all members within the cooperative. Furthermore, property tax deductibility is indeed a benefit that individual cooperative owners may claim on their income tax returns, reflective of the cooperative's underlying financial structure and its treatment