Guide to Buying Your Manhattan Home – Co-Op or Condo?
The number of Co-ops make up about 75%. The building is owned by a one corporation. Buyers get a shares (a stock certificate) in the corporation and a proprietary lease. Buyers are referred to as shareholders or tenants of the corporation. Pre 1980 buildings tend to be co-ops however there are some exceptions.
The number of condos make up around 25% – You receive a deed to the apartment that gives you ownership to the interior of your apartment as well as undivided interest in the building’s common elements. Condos typically are buildings built post 1980
Your lifestyle and finances are key to making a choice.
Co-ops vs Condo Boards – Key Differences!
Co-op Board – shareholders elect the board members who work with the property manager of the co-op to maintain the building. The board makes and enforces all the rules from renovation to pet ownership. The board can evict a tenant if they are extremely troublesome (fail to pay their maintenance, bad behavior) and force them to sell their co-op.
Condo Board – the apartment owners elect a board of directors that perform the same duties as co-op board members. Condo boards tend to not make the kind of restrictive rules as those made by co-op boards. The reason for this is basically due to board members having more of a “freedom of ownership “mindset and philosophy. Also condo boards don’t have the power of enforcement of the rules like co-ops. Typically a condo board can impose fines but can’t evict an owner.
Co-op Fees vs Condo Fees
In a co-op the fees are referred to as maintenance fees. Part of the fee goes towards the expense of building operation, the other part is the amount of property tax based on the number of shares of your apartment. It is common for annual increases to be anywhere from 3% to 7%. In addition there can be assessments for special projects that are spread out over a period of time.
In a condo the fees are called common charges. Property taxes are not included. You will get a bill from the government. This is important to keep in mind when comparing the charges of condos & co-ops. Condo fees can appear lower than co-op fees because they don’t include the property tax. Condos also do assessments for special projects from time to time.
In general monthly charges are higher in buildings with more amenities and increased number of staff. Monthly charges tend to be lower in larger buildings where there are more owners to share the cost.
Co-op vs Condo Approval Process
In a co-op you can be turned down for any lawful reason and the reason need not be revealed. If you happen to buy a sponsor unit in a co-op then you don’t need to go through board approval. Sponsor units are those unsold apartments that haven’t sold when the building was converted to a co-op.
Resale condos now require nearly the same financial vetting However the only recourse a condo board is exercise their “ First Right of Refusal” This means that the condo board has a right to purchase the apartment and sell it. This rarely happens! The worst thing that could happen is that the condo board could use stalling tactics hoping the buyer will get impatient and drop out.