Although there are some differences between the two, condominiums ("condos") and cooperatives ("co-ops") are both ownership interests in real property that relieve the owner from hassles such as maintaining a home: cutting and watering the lawn, painting the exterior, and shoveling snow, for example. So, they're appealing to all sorts of individuals, like young professionals with busy work schedules and seniors who no longer need or want a big house.
In many cities, there's usually a good market for condos and co-ops. But, whether you're buying or selling a condo or co-op, there are some things that you'll have to think about, research and ask about that you normally wouldn't have to if you were buying or selling a house.
Condo vs. Co-op
Generally, in both condos and co-ops, you live in your own separate space, usually called a "unit," and you share the use of "common" areas, such as hallways, parking lots and recreational facilities. The major differences between the two lie in what you actually "own" and how they are managed.
In a condo, you actually own the space inside your unit. You are free to do just about anything you like to it: paint, renovate, even tear down walls. You're responsible for maintenance inside the unit. So, if your furnace fails, it's your responsibility. You usually can't do anything to the outside of the unit, such paint or even landscape.
Condos are managed by a "homeowners'" association. They collect a monthly fee from you and use the funds to maintain the property.
In a co-op, you don't "own" your unit. You own shares of stock in the cooperative, which allow you to lease an apartment or unit for as long as you own the stock. You're very limited on what you can do to the interior of your unit, but you don't have to worry about maintenance. Typically, if the heat goes out, the co-op's maintenance crew will fix the problem.
Co-ops are run by a board of directors. It not only collects monthly maintenance fees and uses it to maintain the property, but it also decides who can live in the co-op by deciding who can by stock.
Tips on Buying & Selling
If you're thinking about buying or selling a condo or co-op, there are literally dozens of things you need to research, ask about, or be ready to explain about the property, such as:
- How much are the maintenance fees for repairs and upkeep? Remember, these fees are in addition to your mortgage payment, so make sure you can actually afford the unit.
- How much are property taxes? A condo's property taxes are based on the unit, while a co-op's taxes are based upon the entire complex. So, there can be huge differences in the amount you'll be able to afford.
- Is the co-op at or near full capacity, or are there a lot of vacancies? If there are vacancies, no one's paying a share of the taxes for those units, and so your property taxes might be higher to make-up the difference.
- Is the building old and in need of repairs? If so, a co-op's maintenance fees might be high, and increased over time, to make the repairs. If it's a condo, the homeowners association might charge you extra fees ("special assessments") to make the repairs.
- Are there any outstanding fees owed by the seller? Condo homeowners' associations and co-op boards of directors can usually take a lien against the unit for failing to pay monthly maintenance fees or special assessments, and so either the seller or buyer will have to pay the fees before any sale can take place.
- What kind of property insurance does the condo or co-op carry? Usually, their insurance covers only the building and common areas, so you'll probably have to buy extra insurance to cover your personal property inside the unit, like your clothes and furniture.
- Are you in an area where natural disasters are common, such as hurricanes or tornados? Check to see if the condo association or cooperative's insurance covers them, and if not, look into buying that insurance yourself.
- Are there any rules, which usually come in the form of "bylaws" or "covenants, conditions, and restrictions ("CC&Rs"), that limit or restrict how a buyer can use the premises, like "no pets," or "no remodeling without approval?" If so, and you're the buyer, make sure you can live with the restrictions, If you're the seller, be prepared for negative reactions from buyers.
- If you're selling a co-op, are there any restrictions on if, when, and to whom you can sell your shares in the cooperative? You might not be able to sell to your potential buyer. If you're the buyer, are there restrictions on your ability to rent your co-op to someone else ("sublet" or "sublease").
- How are you going to finance the purchase? Buying a condo is like buying a house, because you're actually dealing with an interest in real property that is deeded to the buyer, so conventional mortgages are possible, making it easier for buyers and sellers alike. Co-ops, on the other hand, aren't interests in real property (there's no deed), and so mortgages are not available. Rather, a buyer takes out a loan to pay for the co-op stock, and the lender holds the stock as security for repayment on the loan. Such transactions can make the deal more difficult for both parties.
Questions for Your Attorney
- If someone is injured on common property of my condo or co-op complex, and the injured person sues the complex, can I be held liable in any way?
- If sell my condo or co-op, do I have to leave the appliances, like refrigerator and washer and dryer, even I paid for them after I moved in?
- I am allowed to sell my shares in a co-op, but the board of directors is trying set my selling price, and it's so high that I can't sell it to the person I want to (my brother)? Can the board do that?
Related Resources on lawyers.comsm
- The Basics of Condos & Co-ops
- Find a Real Estate Law Lawyer
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- Home Purchase Agreements
- State Real Property Codes & Statutes
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