Buying a co-op apartment in a newly built co-op building

Keep the following in mind 

• When you purchase a newly built co-op apartment, the co-op association is your contractual partner and counterparty in the event of a dispute arising. This means that you cannot make any financial claims against the company that constructed the building.  

• A reservation agreement can be used to find out how much interest there is in buying newly built co-op apartments. It usually is not binding on the buyer. 

• A presale agreement is an agreement between you and the co-op association to sell the co-op apartment to you in the future. You sign the presale agreement before the co-op apartment building is built. This presale agreement is legally binding. 

The Housing Cooperatives Act is applicable 

A newly built co-op apartment is an apartment that is being sold for the first time. You purchase a share in the co-op association with an associated right to occupy one of the apartments, for which you will sign a Contractual Tenancy Agreement. The Housing Cooperatives Act applies, which means that the co-op association is your contractual partner and therefore also your counterparty. People commonly assume that the construction company is their contractual counterparty, however in fact this is not the reality. 

Obtain a loan commitment 

When you are thinking about buying a co-op apartment, it is advisable to get a loan commitment. This means that you receive a promise from a bank to lend you a certain amount of money. Even if you have a loan commitment, the bank may later deny you the loan if it finds that the assessed value of the property you want to purchase does not justify the amount of the loan you are seeking. The loan commitment is valid for a certain period of time; the actual duration varies from bank to bank. The loan commitment is based on your income and living expenses. When you purchase a newly built co-op apartment, there can be a long time between the purchase and the moving in. Quite a lot can happen to your finances in the meantime. 

Further information about mortgages on the website of the Swedish Consumers’ Banking and Finance Bureau 

Submit a letter of intent 

You can submit a letter of intent, or expression of interest, for the co-op apartment you are interested in. However, this does not guarantee that you will eventually be able to buy the co-op apartment. 

When and how you can submit your letter of intent to purchase differs from one housing developer to another. Sometimes you can submit your letter of intent and also sign the reservation agreement at the start of the sales process. In other cases, you can submit your letter of intent, either in person or by e-mail, up to a certain date. The estate agent will then contact all those who have submitted a letter of intent in the order of priority determined by the property developer of the co-op housing. 

Reservation agreements are not legally binding 

A reservation agreement can be used by a developer to assess the level of interest in buying newly built co-op apartments. The reservation agreement is not governed by the Housing Cooperatives Act and usually is not legally binding, but nevertheless it is advisable that you read carefully what you are signing. There are variants on the market where you risk large sums of money if you choose to walk away from the deal. 

Presale agreements are legally binding 

A presale agreement is an agreement between you and the co-op association to sell the co-op apartment to you in the future. The presale agreement must also state whether you will have access to land, for example a patio or parking space.

You sign the presale agreement before the co-op apartment building is built. The presale agreement must be in writing and is signed with the co-op association, even if the construction company is providing the contract. 

Before you accept the presale agreement offer, you have a waiting period for reflection for at least 7 days.

The presale agreement is legally binding and it may be costly for you to terminate it. 

A cost of homeownership estimate must be provided 

If a presale agreement is to be signed, an estimated cost of homeownership calculation must be provided. The primary purpose of the calculation is to provide you with information about the details and calculations that form the basis of their financial commitment before you commit to the future purchase of the co-op apartment. 

Membership is assessed at the time of signing the presale agreement 

When you sign a presale agreement, your eligibility for membership in the co-op association is also assessed and evaluated. Once you have signed the contract, you are entitled to membership in the co-op association. The co-op association cannot withdraw the decision afterwards. 

Prohibition on transferring a presale agreement 

It is not possible to transfer or assign a presale agreement to another party, with the exception of your spouse/partner. If you want to sell or assign the co-op apartment, you must first finalise the transfer of ownership under the contract and then resell the co-op apartment. 

Cancelling a presale agreement 

Sometimes you may want to withdraw from the presale agreement for some reason. This might involve some significant costs, due to that the presale agreement contract you have signed is legally binding. 

But there are three exceptions where occasionally a buyer can withdraw from the presale agreement without it costing them anything: 

• If the ownership of the single family house, semi-detached house, townhouse, or apartment you contracted for is not transferred to you at the latest at the scheduled date for moving in. 

• If the co-op association has been negligent and the transfer of ownership does not take place within a reasonable period of time from the date on which the transfer was expected to take place. 

• If the monthly fee for the co-op apartment is substantially higher than stated in the presale agreement and within three months of learning of it the buyer terminates the contract because of this. 

If you do not meet any of the requirements and nevertheless you break the agreement, you risk being obligated to pay the additional costs you caused to be incurred plus to compensate the co-op association for the damage it suffers. Examples of additional costs could be: 

• costs for advertising and showing 

• the difference in price between what the co-op association would receive from a new buyer and what they would have received from you 

• if there is unpaid fees/charges. 

Be aware that your legal liability for compensation is not limited to the deposit/amount you paid in advance when you signed the presale agreement. 

Down payment at the time of transfer of ownership  

A Contractual Tenancy Agreement to occupy a designated apartment is signed when purchasing a co-op apartment. Once the co-op association’s financials have been reviewed, approved and the financial plan has been registered with the Swedish Companies Registration Office, it is time to sign the final contract, the Contractual Tenancy Agreement. At that time, the buyer usually pays a down payment, about 10% of the purchase price, less any previous monies (e.g. purchase deposit) already paid. The co-op association does a credit check on your finances and you formally become a member of the co-op association. 

The financial plan 

Each and every co-op association is required to prepare a financial plan before the ownership of the co-op apartment units transferred for the first time. A financial plan is a technical and financial description of the co-op association’s functioning and activities. The financial plan must be reviewed and certified by two attesting parties. The financial plan and the certificate must then be registered at the Swedish Companies Registration Office. 

Difference between the financial plan and an estimated cost of homeownership calculation 

The financial plan is different from a cost homeownership calculation for a presale agreement. A cost of homeownership calculation can be described as a preliminary and more summarised financial plan. The cost of homeownership calculation must also be certified by two attesting parties but does not need to be registered with the Swedish Companies Registration Office. 

The financial plan lists the loans the co-op association has taken out 

Financial plans can be designed in any of a variety of ways. Usually the financial plan starts with a brief description of the general situation and circumstances of the co-op association and a description of the property. Further on in the plan comes the part that is actually the financial plan. This shows how the co-op association’s loans are structured, including the amounts, the term of the loans and the interest rates. The financial plan also shows the co-op association’s ongoing operating costs. It is worthwhile for you to study what is included in the ongoing operating costs. Find out which operating costs are not included in the annual homeowner fees and for which you, as co-op apartment owner, are financially responsible for. 

The financial plan will also show an estimate of the annual homeowner fees to be paid by members based on a realistic assessment of the co-op association’s costs and income in the near term and long term. 

Your obligations as an owner of a co-op apartment 

You are responsible for keeping the apartment in good condition. This means that you are responsible for repairing any damage that occurs in your apartment. This also applies if there is an accident. As a co-op apartment owner, you may make changes to the apartment in the apartment, but you will need to apply for the Co-op Board’s permission if you want to make a change to the apartment that involves an intervention in a load-bearing support structure, changing existing pipes for water, drainage, heating or gas, or any other substantial change to the apartment. As a co-op apartment owner, you are also under the obligation: 

• not to sublet without the prior consent of the Co-op Board

• not to disturb your neighbours

• pay the annual homeowners fee (a fee paid monthly) 

The boundary for responsibility is usually at the front door 

It is commonly said that the boundary for responsibility for maintenance stops at your entrance door. You are responsible for all painting and maintenance inside the apartment, while the co-op association is responsible for painting and maintenance on the exterior side of your front door and beyond. An exception is that the co-op association is responsible for repairs to the water pipes and wastewater pipes, plumbing for heating and gas, and electrical wiring up to the unit, if the co-op association has provided the utility lines to the apartment and they serve more than one apartment. The same applies to ventilation ducts. 

You can read more about your responsibilities in the co-op association’s bylaws. It also sets out the obligations that co-op apartment owners and the co-op association have to each other. You should contact the Co-op Board if you have any doubts at all about what you can or cannot do.