Condos versus Co-ops

The following will contrast key points in the purchase and ownership between co-operatives (co-ops) and condominiums (condos):

Form of Ownership

In a co-op, the corporation holds title, and has shares in the building. As an owner, you are a shareholder with a Proprietary Lease on a specific unit that establishes occupancy terms. No recording of a deed or central recording of sale information.

Condos have a deed that is recorded at the county clerk. Each unit can be sold, assessed, taxed, mortgaged, or transferred independently. Each owner owns a percentage of the common areas.

Governance

Co-op board decides if the buyer is acceptable or not.

Condo association has no say in whom can purchase or not.

Sale

Certain co-ops have a transfer fee/flip tax that each coop seller must pay back to the coop upon sale of the unit.

Condos have no restrictions & costs, except for the resale package.

Board Approval

Co-op residents, mostly owners, will have the right to accept or reject applicant owners or tenants. Not appealable. Board may or may not charge an application fee. Typical is $200-$500 which is nonrefundable.

In 99% of condos, there is no need for approval.

Maintenance Fee

Co-ops make each leaseholder responsible for the interior of your own unit, the monthly unit payment, as well as monthly utilities, if not included in the fee, and any extra costs assessed resulting in any unit payment defaults by other shareholders. This fee generally includes real estate taxes and payment of the underlying co-op loan. Part of this payment is tax deductible.

Condo owners pay a monthly fee to maintain the common areas to the elected condominium association, which is responsible for upholding the conditions, covenants and restrictions (CC&Rs). Under the CC&Rs, the association can assess extra fees for special improvements or repairs to the common areas. This fee is generally not tax deductible.

Property Tax

Co-ops are Included in the monthly payment. Some buildings have abatements that do run out and thus increase taxes later on.

In condos, each individual owner pays their own on each unit.

Prospectus (no difference)

Co-ops outline the terms of the original offering and amendments update along with rules of the building.

Condos outline the terms of the original offering and amendments update along with rules of the building.

Financials (no difference)

Co-ops are prepared yearly by outside accountant to determine financial status and profitability.

Condos are prepared yearly by outside accountant to determine financial status and profitability.

Management Company (no difference)

Co-ops are normally run by an outside company that collects maintenance, operates the building, maintains records. Smaller building may be "self managed by the occupants/owners.

Condos are normally run by an outside company that collects maintenance, operates the building, maintains records. Smaller building may be "self managed by the occupants/owners.

Settlement Agent

A co-op attorney is responsible for the preparation of closing and transfer documents and legal matters for the coop. Attorney to be used is generally selected by the Coop.

Condos, by law, will have the buyer select the attorney with which they want to close the sale.

Financing

Co-ops have financing restrictions (down payment minimums, income minimums, etc.). When financing a co-op property, there are usually a list of approved companies/loan officers that can provide financing.

Condos only restrictions are those imposed by the lender. The majority of lenders will allow condo financing.

Loan products

Co-ops can only use conventional financing at certain lenders, which are normally serviced by a designated co-op loan officer.

Condos can use conventional, and if approved by each, can also be financed with a VA or an FHA loan. If not approved by FHA, normally obtaining that approval is done in a few weeks.

Down payment

Co-op requirements may affect minimum down payment required. Many require at least 10% down payment.

Condos can be as little as 3% if first time home buyer, 5% if repeat buyer, or 0% if purchasing with VA loan.

Sublet/Renting

Coops generally require board approval. Certain boards do not allow subletting or place limit on the sublet (2 year maximum, 1 year minimum, etc.).

Condo restrictions will be detailed in the association documents. Many condos are no longer allowing short term renting (e.g., AirBnb).

Liability

In co-ops, liability is shared by all shareholders.

In condos, either by the association or the individual condo owner responsible for the occurrence, not shared equally.