The Difference Between A Coop And A Condo

There are distinct differences between condominiums, also known as condos and cooperatives, known as coops. These differences manifest themselves in 4 main areas:

  1. The way they are owned
  2. The way they are purchased
  3. The fees associated with an apartment or unit
  4. Limitations on their ownership

What follows is an explanation of how coops and condos differ in each of the areas listed above.

Ownership: Coops vs. Condos

First of all, when you buy a coop apartment, you are only buying shares in a corporation which owns the building in which the apartment or unit is located. You receive a stock certificate which is associated with a lease for the unit or apartment. The square footage of your apartment or unit defines how many shares in the corporation you own.

However, when you buy a condo, you acquire ownership of a particular apartment or unit of space in a building. In other words, you actually purchase real estate and receive a deed of ownership, which makes it easy to get a mortgage at almost any bank.

Banks also give coop loans, which are technically the same as a mortgage but somewhat different. However, many lenders won’t lend money for the purchase of a coop unless it is in a building where many units have already been sold.

Lastly, while owning a coop is overall less expensive than buying a condo, it is riskier. This is because if the corporation goes under, you can lose everything––the apartment and the money you have invested. Even worse, after losing the coop, you may still be held responsible for paying off your coop loan.

Purchasing: Coops vs. Condos

Another difference between a coop and condo lies in the what you have to go through to purchase an apartment. For a coop, you must fill out an application then be interviewed and approved by the coop’s board of directors. This board is made up of others who own shares in the corporation and who may approve or reject your application for any lawful reason whatsoever. So, whether or not you or approve to purchase a coop will depend on if you are the type of person they are looking for to join their corporation.

Condos also have applications that have to be filled out for the condominium association’s approve. However, being approved for a condo is not nearly as difficult as for a coop. In fact, you don’t often see people being turned down by a condo association.

Typically, the only way you won’t get through a condo board is if the condo association exercises its “right of first refusal” and purchases the apartment instead of allowing you to buy it, which doesn’t happen very often.

Fees: Coops vs. Condos

Another major difference between a coop and a condo is in the expenses you have to pay. The owners of both condos and coops must pay monthly fees. In the case of condos, this fee is called a common charge, and for coops, it is referred to as a maintenance fee.

A condo’s common charge is primarily made up of a portion of the total cost of maintenance and upkeep of the building. Mortgages or taxes are handled privately by the owner.

On the other hand, most coops carry a mortgage, which is paid by the owners (or shareholders) proportionately. Likewise, real estate taxes are paid proportionately by the owners of the coop. Thus, in addition to a portion of the expense for maintenance and upkeep of the building, the maintenance fee for a coop includes the owner’s share of the building’s mortgage and taxes.

Furthermore, depending on the age of the building, utilities such as gas, water and central heating may also be included in the coop’s maintenance fee. Because of this, the maintenance fee paid to a coop for a particular unit is usually more than the common charge paid to a condo association for a unit of comparable size.

In addition, both coops and condos are subject to an additional charge referred to as an “assessment”, which is used to pay extras expenses incurred for the building’s upkeep. Similarly, a unit’s maintenance fee or common charge may be increased if there is an increase in the cost of operating the building.

The Limitations on Ownership: Coops vs. Condos

Both coops and condos have boards of members/owners who oversee the rules by which the unit or apartment owners must abide.

Since a condo is real property which you own outright, you can reasonably do with it whatever you want. Meaning that you can refinance it and (for the most part) you can rent or sell it to anyone you want, even indefinitely.

However, a coop is subject to much stricter rules. Typically, if you want to sell a coop, the board of directors, have a right to say yes or no to your buyer, for any reason whatsoever. So, your right to rent or sell your coop to others may be severely restricted.

So, whether a coop or condo is a good purchase for you, will largely depend on what you want to use your property for. If you want to live there for a long time, surrounded by a lot of owners who live there as well, a coop is the way to go. However, if you intend to rent the unit out and hold on to it as an investment property, a condo is a better way to go. Speak with our real estate lawyers Las Vegas at Pintar Albiston for more information.