Condominiums and Cooperatives

"Condos" and "co-ops" are forms of "common interest ownership" in real estate.

Owners' Associations

Condos and co-ops are usually part of what is called an "owners' association." All owners must be members of this association and subject to rules the association imposes. These rules are usually in governing documents that may include bylaws, as well as separate covenants, conditions and restrictions ("CC&R's").

The owners elect a board of directors that oversees the affairs of the association. You're not always going to agree with the board's decisions, but you'll probably be stuck with them as the board has a great deal of power under the bylaws and CC&R's.

Condos

With a condo, you usually hold title to your own unit. (Sometimes, your own unit will be defined simply as the "airspace" of your unit, and not the unit itself.)

In addition, you will have rights to the use and enjoyment of the common areas with the other unit owners. These areas may include amenities such as parking, hallways, walk ways, road ways, recreational facilities and so forth.

Condos exist in both residential and commercial real estate settings. They may include units in high-rise buildings, as well as townhouses.

Each state has laws that cover enforcement of condo rights and duties, and each condo association has its own rules as well.

Cooperatives

The cooperative form of shared ownership is much like a condominium, except that residents typically don't actually own their particular units. Instead, a cooperative entity (usually a corporation) holds title to the land and building. In turn, the residents will hold ownership interests (such as stock) in the cooperative. Each resident shareholder will also have the right to:

• Elect the directors who oversee building operations
• Lease a particular apartment unit on a long-term basis, with an option to renew.

Tips for Buyers

If you're thinking about buying a condo or a cooperative, you should consider hiring your own real estate agent. (Why not? It probably won't cost you anything.)

Have your agent carefully research:

• What are the maintenance fees for repairs and upkeep?
  • How much of a reserve does the owners association currently have?
  • What have maintenance fees averaged in the past few years?
  • Is the building old and in need of repairs? The homeowners association should be able to tell you what repairs are scheduled for the next couple of years and show you a budget.
  • Does the current owner of your unit owe fees to the association?
• Are there association rules (e.g., association bylaws or the CC&R's) that may unduly restrict you? Can you live with these restrictions anyway?
• Do the association's financial statements and budget show a reserve or is it scraping by each month?
• Are there any lawsuits pending or anticipated by the association?
• Are there any liens against your unit because of failure to pay homeowners fees or other issues?
• What is the ratio of live-in owners to tenants? The larger the number of tenants, the more likely you'll have maintenance issues and difficulty getting needed repairs.
• Are there architectural guidelines that restrict your ability to remodel? Can you live with these restrictions?
• Does the association carry adequate insurance to cover natural disasters peculiar to your local area, such as hurricanes, tornadoes and earthquakes? Your mortgage company may insist on this before approving your mortgage.
• If it's a new development, or not yet finished, how many units are vacant or haven't yet been sold? You don't want to be left holding the financial bag for a developer who goes under.
• What is the policy on use of the common areas and recreational amenities such as pools, party rooms, gym and so forth? It's better to know now than be disappointed later.

It would also be a wise move to have your real estate agent talk to neighbors and to members of the board of directors of the owners' association.

In short, do everything you can to find out about any underlying problems that may exist with the association or with the owners' association itself - before you commit yourself.

If possible, check the place out at different times of the day and night, so you'll know if the neighborhood can be noisy or congested.

Also ask about privacy issues- such as noisy neighborhoods, thin walls, creaky flooring.

If you don't have a real estate agent, you need to do this research yourself.

Lender Requirements

If you decide to purchase a condo or cooperative unit, you may need to give your mortgage company:

• An "estoppel certificate" that shows no association fees are currently owed on the unit ("estoppel" is a legal term that means someone is stopped from later claiming the opposite from what he or she is currently saying is true)
• A "certificate of insurance" showing how much insurance the association has purchased to cover damages to the common areas and any general insurance for your unit
• A "certificate of title" that shows clear title to your unit
• Copies of the association bylaws and CC&R's.