Advice & Planning


Co-ops Vs Condos: Know the difference

In New York City, co-ops and condos are among some of the most popular kinds of real estate available to potential homebuyers. While there may not seem to be much of a difference between these types of properties, key differences could make a big difference in your experience as both a homebuyer and homeowner. Check them out here!

1. Ownership

While co-ops are typically more affordable than condos, there is a difference in the type ownership between the two. Legally, condos are considered to be real property and co-ops are personal property.

This is because when you purchase a co-op, you’re purchasing stock in a privately-held corporation that owns the building. As a stockholder, you are given a proprietary lease for a specific apartment. The shares give you the right to live in the apartment, provided you following the by-laws of the building.

A condo, on the other hand, is a straight forward form of ownership like owning a house.

2. Board Approval

Both co-ops and condos usually have boards, which are committees that help to make sure the complex runs smoothly. However, co-op boards are notoriously strict and have a greater say in what tenants can and cannot do.

In a co-op, the board can come up with rules regarding how you renovate your apartment, keep pets, and much more. In extreme cases, the co-op board can even evict a shareholder that it deems disruptive. The benefit from this is to protect your investment and provide a peaceful environment in the building.

When buying a co-op, you must go before the board and submit to an approval process. The board will go over your finances and credit, and review your debt-to-income ratio. This is done to ensure that all potential owners of the co-op can pay for their mortgage and co-op maintenance fee. This process involves a great deal of paperwork, which may often require the assistance of an attorney to prepare.

3. Income Property

If you think you may want to use your new home as a source of income at some point, you’ll want to consider the difference in subletting policies between co-ops and condos. As mentioned before, co-op boards can be very strict in the policies they enforce for co-op owners. This includes whether or not owners can lease their units and if so, for how long. Condos, on the other hand, do not enforce leasing limitations.

4. Monthly Expenses and Taxes

Both condos and co-ops have monthly fees, which are respectively referred to as common charges and maintenance fees. These charges go towards the overall maintenance of the building and its common areas. These fees can vary with the size of the building, number of units and types of amenities offered.

The main difference between a condo’s common charges and a co-op’s maintenance fees is that the maintenance fees include charges for a percentage of the building’s property tax, which are calculated according to the number of shares you own.

If you own a condo, you are responsible for paying your unit’s property taxes directly to the government. Therefore, it might not be wise to directly compare these fees.

It is important to note that both types of properties can also charge assessment fees for building renovation projects, such as the installation of a new elevator.

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