Co-ops vs Condos. What’s the difference?

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Buying an Apartment

In the urban environment of New York City, the housing market expands far beyond the picket fence. From modern high rise towers to classic pre-war buildings; many prospective homeowners in NYC opt to purchase apartments rather than houses. Those who own an apartment can enjoy home ownership without the burdens of repairs, maintenance and shoveling which is covered in a monthly fee paid to the building. Purchasing an apartment provides an affordable alternative that still allows for homeowner benefits such as renting to a tenant and long term equity. Many buildings and complexes include amenities such as a doorman, gym and pool areas, balconies, views and more. When purchasing an apartment in New York City, the two options available are cooperatives, “co-ops” and condominiums, “condos”. Although often similar in appearance, both are quite different.

Cooperatives

Co-ops are a distinct form of home ownership that has many characteristics that differ from other residential arrangements such as condominiums and houses. The co-op building or complex is owned by a homeowners corporation. Each of the apartment owners are shareholders in this corporation. When one purchases a co-op, they are not purchasing the property itself. Rather, they are purchasing shares to the co-op corporation. These shares come with a proprietary lease which ends when the owner sells their shares of the unit. The larger the apartment, the more shares the owner is given. Since shareholders are considered tenants of the co-op, they have the protections of the New York City Landlord-Tenant Law that condominium owners do not have. Each of the shareholders pay a monthly maintenance fee to the co-op which covers general upkeep real estate taxes, heat, hot water, staff salaries, amenities and mortgage debt of the building. Each co-operative has an elected board of directors who screen and select applicants requesting to purchase in the complex. Purchasers are required to fill out an application listing their information, assets, debts, income, employment and references.

Applicants must also provide financial documents such as bank statements, tax returns and pay-stubs which are reviewed by the board with the application. The board will also interview the applicant, often asking the applicant questions about the co-op policies previously provided to them. The board may approve or deny applicants as they choose. Co-op owners may sublet their unit to a tenant. However, prospective tenants must often undergo a similar board approval process that the owner went through. For buyers getting a mortgage, most co-ops will require a minimum down payment of either 10% or 20%. Your Realtor will come in handy in helping complete the co-op application. Co-ops are priced lower than most condominiums and are often the most affordable option for home ownership in New York City.


Condominiums

Condos are apartments where the purchaser owns the real property itself. They are given an actual deed to the property and a separate tax bill from the city. Condo owners pay a monthly common charge, similar to the monthly maintenance in a co-op. However, this fee is usually lower than co-ops since the taxes are paid separately and there is no underlying mortgage for the building. Condominiums do not require board approval and owners may sublet their unit at will. Many condominium buildings may contain similar amenities to those in co-ops. The flexibility of condominiums make them a top choice for investors, foreign buyers and parents purchasing for their children. In addition to apartments, there are many condo townhouses. These townhouses offer the space and lifestyle of a single family home with the convenience of maintenance and amenities. Certaincondominiums even as allow for as low as 3.5% down payment.

The Bottom Line

Condos and co-ops each provide different costs and benefits to consumers. In New York City, approximately 75% of apartments for sale are co-ops and 25% are condos. However, many new construction complexes and buildings are condominiums. 90% of apartments for sale in pre-war buildings in New York City are co-ops. Most condominiums sell for about 40% higher than co-ops due to less restrictions and more flexibility. Both co-ops and condos each have units varying from affordable apartment complexes to luxury high rise buildings and gated townhouse communities.