Could someone explain the differences between a co-op and a condominium purchase?

Q: Could someone explain the differences between a co-op and a condominium purchase?

A: A shareholder in a co-op does not own real estate, but a share of the legal entity that does own real estate. Co-operative ownership is quite distinct from condominiums where people “own” individual units and have little say in who moves into the other units. Because of this, most jurisdictions have developed separate legislation, similar to laws that regulate companies, to regulate how co-ops are operated and the rights and obligations of shareholders.

Now in regards to other differences, a coop has a board, this board can deny the prospective buyer from actually BUYING an apartment within their building for any reason. Legally they don’t even need to supply one. This board also dictates and approves any and all matters in the building related to improvements, the color of the hallways, the doorman, the super, etc. In short, coops have LOADS of rules, guidelines, regulations and generally a higher maintenance cost. You’re shares are just that, shares, so if the building has poor financials – you lose out. Sadly NYC’s real estate market is largely composed of coops, especially in the Upper East/West sides. If you can buy a condo – buy one.

co-op Boards make it difficult to sublet the apartment. Co-ops may also have “flip taxes” which imposes a fee on sellers on transfers of the shares (not so with condos). They may be calculated in various ways–price per share, % of net or even gross profit. Also, while a buyer pays a mortgage recording tax on the mortgage to purchase a condo, they do not pay this transfer fee when they purchase a co-op. Co-ops are almost exclusively owner occupied while condos may not be. Co-op policy also changes from Board regime to Board regime. Finally, when considering to purchase a co-op have your attorney examine the co-op corporation minutes to determine what is happening in the building which may affect your future maintenance charges. The last 3 years financial statements may not reveal upcoming expenses.

This entry was posted on Thursday, November 29th, 2007 at 10:27 am and is filed under RE Questions. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.