Real Estate

The 411 on Condominiums and Cooperatives

Home ownership is a big part of the American dream. And, when you think of a "home," the first thing that often comes to mind is a house, big or small, in a city or suburb. But that's not necessarily the ideal setup for everyone.

Young couples, retirees and others who don't want the costs and trouble of maintaining a home, for instance, often turn to condos and co-ops. They're forms of common interest ownership in real estate where you and others share ownership of land or a building.

Find out if one of these options is right for you.

Owners' Associations

Condos and co-ops are usually part of what's called an owners' association. All owners must be members of this association and must follow its rules. 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 and enforce the association's rules. 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.


With a condo, you usually hold title to your own unit. Sometimes, your unit may be defined simply as the "airspace" of your unit, and not the unit itself. Units may be in high-rise buildings, as well as townhouses.

As an owner, you 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.

Each state has laws covering enforcement of condo rights and duties, and particularly the association's financial and recordkeeping duties. But laws on selling and buying condos are common, too.


A cooperative 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 hold ownership interests (such as stock) in the cooperative.

Each resident shareholder usually has 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

Anyone thinking about buying a condo or a co-op should hire their own real estate agent. It's the best way to protect your interests, and besides, it probably won't cost you anything.

You need a lot of information in order to make the right decision. Your agent can help you here, or you can work on it yourself. Either way, here's what you need to find out:

  • What are the current maintenance feesfor repairs and upkeep?
    • What are the average maintenance fees over the past few years?
    • Is the building old and in need of repairs? The 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 association fees?
    • Do association rules restrict things that are important to you, like having pets? Can you live with the 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 unpaid condo fees or taxes, for example?
    • What's 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 restricting 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
    • For a new or unfinished development, it's important to find out how many units are vacant or unsold. You don't want to be left holding the financial bag for a developer who goes under
    • What's 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

    Be Proactive

    Even if you hired an agent, there are things you should do to make sure the unit is right for you:

    • Talk to neighbors and to members of the board of directors or owners' association
    • Check the place out at different times of the day and night to see if the neighborhood can be noisy or congested
    • Ask residents about privacy issues- such as noisy neighborhoods, thin walls, creaky flooring and so forth

    Lender Requirements

    Once you decide to buy, you may need to give your mortgage company:

    • An estoppel certificate showing that no association fees are currently owed on the unit ("estoppel" is a legal term meaning someone is held to a current statement and is stopped from later claiming the opposite 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

    Your agent, the seller's agent or the owner's association should be able to get you these and any other documents your lender may require.

    Condos and co-ops are perfect for a lot people looking to own a home. Find out everything you can about the association, your unit and the residential complex to see if it's right for you.

    Questions for Your Attorney

    • Can co-op or condo rules bar me from renting out my unit after I buy it?
    • What should I do if management won't let me or my agent see the accounting books for the condo or co-op?
    • Can I sell my shares in a co-op but still live in the unit?
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