Condominiums (“condos”) and housing co-operative (“co-ops”) seem very similar. Generally, both are apartments within a multi-unit building. The major difference lies in the ownership structure. When you buy a condo, you receive a deed and own an individual unit along with undivided interest in the common elements. Co-op owners are granted a proprietary lease and receive shares in the nonprofit corporation that owns every part of the building.
Things to Consider When Buying a Condo
As a condo owner you own the interior of the unit. The condo association owns the common area. This can be very convenient since the association handles all common area maintenance, such as repairs, management, maintenance, snow plowing and general upkeep. Of course, it comes at a price. Condo owners pay a monthly maintenance fee in exchange for the services. Condo fees vary depending on the size of the unit and type of common elements. Sometimes condo associations impose an additional “assessment fee” for services not covered in the regular monthly fees. An assessment fee is usually applied when the association does not have sufficient reserve funds to cover emergency repairs. Your real estate attorney will perform due diligence, examine recent engineer reports and board minutes, to determine if any special assessments are anticipated. Condo associations are run by an elected board of directors that establish rules each unit owner must follow. When buying a condo, it is important to familiarize yourself with these bylaws. What if a condo association limits the number of pets you can have or prohibits subleasing?
Things to Consider When Buying a Co-op
A co-op buyer does not receive a piece of real estate but is granted a proprietary lease and is issued shares in the corporation. The number of shares the buyer receives depends on the size of the particular unit. Generally, the larger the unit, the more shares you receive. Co-ops boards are elected volunteers responsible for collecting fees, enforcing bylaws and maintaining the common areas. Yet, all shareholders have a right to take part in the co-op’s decision-making process by voting at regular shareholders’ meetings. The co-op property taxes and maintenance fees are split between the co-op residents. Any prospective shareholder or occupant must be approved by the board. A co-op purchase contract is always subject to the co-op board’s approval. Prospective shareholders submit an application, provide personal financials and go through a rigorous interview. Like condos, co-op shareholders establish their own unique rules, which are important to know before moving in.
Whether to buy a condo or co-op is a matter of personal choice, finances and the housing market. The majority of New York City apartments are co-ops. Condos offer more flexibility when it comes to renovations and purchase financing is often easier to obtain. Co-ops are often less expensive to purchase but have higher monthly fees. In cities like New York, the decision often comes down to availability and whether an applicant is able to pass the co-op vetting process. An experienced real estate closing attorney will perform the necessary due diligence and help you decide if a particular apartment or townhouse is the right fit for you.