Some differences between condos and coops.

Ownership - The main difference between condos and coops is the actual form of ownership. A condominium is real property and ownership is evidenced by a deed allowing the owner to occupy the space as each owner sees fit. A coop is personal property and ownership is evidenced by shares of stock in a corporation in combination with a proprietary lease which allows each shareholder the right to occupy space under specific restrictions. Condominiums have a condominium association and coops have a board of directors, each committee serves a similar purpose of making decisions on behalf of the owners and shareholders, respectively. For tax purposes, both generally filed as a non profit corporation.

Occupancy Restrictions - Another major difference between coop and condo is the set of restrictions placed upon the shareholders of a coop in use of occupancy which contained in the proprietary lease. The proprietary lease may restrict the amount of financing one can obtain using the shares as collateral, it may restrict a shareholder from subletting their space, or from having a specified number of occupants, or from having pets, or whatever else the "board" deems to be appropriate. The proprietary lease also gives the board of directors the right to refuse any prospective buyers or sublets for any reason, or no reason. Most coops have a very formal application and interview process before the board reaches their decision. Condominiums on the other hand have virtually one restriction which is their "right of first refusal." The right of first refusal gives the condominium association first opportunity to buy an apartment from a selling owner at the same terms under contract with a prospective buyer. Condo associations rarely exercise this option.

Feeling of Neighborhood - Because of the lack of controls in place, condominiums may become less homogenous in nature and may have somewhat of a more transient feeling. Cooperative apartment corporations on the other hand tend to be highly homogenous and more stable in terms of neighborhood.

Purchase Prices - As a broad rule of thumb, coops tend to have lower purchase prices than condos.

Common Elements and Services - As broad rule of thumb, condos generally may be slightly less expensive to maintain over time. Owners of condominiums pay for the common elements (ie: management, staff, doormen, plumbing, roofing, common walls, etc.) in the form of common charges, and they pay their taxes separately. Most condo owners are generally responsible for paying their own utility usage. Coops on the other hand pay for the common elements in the form of maintenance charges which generally include everything to upkeep the building, including taxes and most often utility usage. Another component of the maintenance fee that generally does not exist with a condominium is the cost associated with an underlying mortgage (introduced in the history section). Some coops and condos offer recreation, parking, storage and other facilities as a part of the common charges or maintenance, others require additional payments. To be able to compare an apple with an apple, it is very important to understand what costs are included in the common charges or maintenance, and what services are offered in return.

Mortgage Vs. Assess - coops have no restrictions other than that imposed by the lender in terms of size of underlying mortgage. Underlying mortgages on condos have restrictions. In the event the building needs money, coops may be in a more flexible position not to assess each owner.

Settlement Costs - The closing costs to obtain a mortgage for a condominium are very expensive in relation to settlement costs to finance coops. The major differences are the inclusion of mortgage recording tax, title insurance and tax escrow when obtaining a mortgage for a condo, as these items are not required to close on a cooperative apartment loan.

Availability - In Manhattan, it does not take long to figure out that there are very few condos, and that most buildings, particularly "prewar" buildings are coops.

Which is better? - Answering this question is like trying to determine if an apple tastes better than an orange. Both are excellent forms of ownership, condos may not be for everyone, coops may not be for everyone; It is up to each individual to become an informed consumer, to identify their personal preferences, physically look at the spaces, analyze the cost and benefits of each, and make an informed decision.

1) Coops have stricter requirements on who can live in the development. Usually they require a strict income verification. Coops in urban areas can be generally more stable than condos, but are more bureaucratic.

2) The cost of living in a condo vs coop is roughly the same no matter what you see in a real estate listing. Here is why. Part of the coop homeowner’s fee is the shared mortgage; another part is utilities and maintenance; and the last is property taxes. For a condo you pay all of it separately – a maintenance fee, utilities and property taxes. At the end of the day the amount is equivalent because neither condos nor coops are allowed to take a profit on homeowner’s fees.

Here is an example that we are experiencing that demonstrates point (2) . Right now we live in a cooperative and we are paying $420/month which includes gas, water, heat, maintenance, shared mortgage and property taxes. We are moving into a larger condo nearby and we’ll be paying $150/month for maintenance, $300+/month in property taxes, $80+/month for gas and water, and the condo mortgage is higher. So as you can see the amount you pay every month is equivalent, albeit itemized.

Co-op/Condominium:Cooperative or "Co-op" A cooperative is a building or development that is owned by its shareholders and is organized as a corporation It may also be called a stock cooperative or co-op. Ownership of shares in the corporation entitle each shareholder to hold the lease for one or more apartments/houses.
The number of shares you own often correlates to the size of your unit; for example, the owner of a 500 square foot coop will usually own fewer shares than the owner of a 1000 or 1500 square foot unit. Shareholders share responsibility for the use and maintenance of public spaces in the building, such as the lobby, laundry room and hallways. Shareholders also have some control over who is allowed to buy into the building; to review their financial solvency, decide whether pets will be allowed, decide whether and when certain improvements will be made building wide, whether subletting will be allowed, etc.

Coops are governed by a committee of shareholders called a "board". The Board is comprised either of a small group of individuals elected by all the shareholders, or of every shareholder (in smaller buildings). Boards may or may not choose to hire a managing agent to administer the building. Coop owners pay a monthly fee called "maintenance"which includes property, water and sewer taxes; payments toward any underlying building mortgage, the salaries of building staff such as a super or porter, fees to a managing agent, etc. The portion of the maintenance which covers property taxes and interest towards the building's mortgage (if any) is deductible. Coops may maintain a "reserve fund" to pay for shared building maintenance costs such as elevator or roof repair. Depending on the size of the reserve fund, coops may bill or "assess" owners as necessary for large expenditures, such as new windows building-wide, or a new roof.

When you consider buying into a cooperative, you will want to look at- among other issues- the building's annual financial statements, the initial offering prospectus, how many of the units are owner-occupied vs. still owned by the sponsor of the building or renters (banks like to see a high proportion of owner-occupants when considering making a loan), its maintenance and assessments history, notes of board meetings, the size of the reserve fund, and the age of the elevator and the electrical, boiler, furnace and plumbing systems.

Large and small coops offer different experiences

Another issue to consider when choosing a coop is that large and small coops offer different experiences. If you live in a large coop of 50, 100 or 300 units you will be able -if you choose not to run for the board - to leave most decision making to a managing agent or the elected coop board. You are likely to have a managing agent, doormen, porters, a maintenance staff, and you will have virtually no building-wide responsibilities. If you choose to live in a coop with few units you will have more responsibility to the building and your fellow coop owners: someone has to stay home to let in the furnace repairman, you may have to serve on the board, it may be your turn to move the garbage and recyclables to the curb!

Condominiums or "Condos"

A condominium is a building or development with individually owned apartments or houses. The owner has his/her own deed to the unit. The owner also holds a common or joint ownership in all common areas or facilities that serve the project - land, roof, entrance elevators, hallways, etc. The condo association elects a board of managers to administer the maintenance of the common property. Condo owners pay their own property taxes on their units, and they pay monthly -usually low- common charges for operating expenses and taxes on the shared areas of the property. Until recently, condos could not get property loans to go towards repairs, etc. Now some condos are able to get such loans. Condo associations may also build up a reserve fund, which can be used for repairs and improvements of the common areas.

Do I want a condo or a coop?

Condos generally do not have use restrictions like coops can and they don't have the same rights to refuse purchasers. You may have more freedom in a condo than in a coop - to sublet, say, or have a dog - but you may also have fewer recourses if you have trouble with your neighbor. Because condos have no board to approve prospective buyers, and thus are easier to buy and sell, the purchase price of a condo can be more expensive than a comparable coop. Conversely, monthly charges in a condo are usually smaller than in a coop because the charge does not include any underlying building mortgage costs. Mortgage rates on coops are more expensive than for condos as it is easier for a bank to resell a condo -no coop board involvement- should it have to foreclose on the property.