What Are Co-op’s and Condo’s?

Cooperative Apartments
Cooperative apartments (co-ops) are by far the most common type of ownership available in New York City.  In Manhattan, approximately 80% of the apartments available for purchase are in cooperative buildings, while 20% are in condominiums.  When you buy co-op you aren’t actually purchasing “real” property, rather you are buying shares in an apartment corporation.  The shares that you own entitle you to a long-term “proprietary lease” of the apartment.  Each tenant-owner (shareholder) pays a monthly fee that covers the costs of maintenance, employee salaries, utilities, insurance, real estate taxes and the mortgage indebtedness of the building (contrast a condominium building, which must be owned outright).

Because a co-op may have an underlying mortgage, co-ops offer a tax advantage over condominiums.  Shareholders can deduct their portion of the building's real estate taxes, as well as their proportionate share of the interest on the building's mortgage and a portion of the monthly maintenance tax.

If you plan to purchase a co-op, you should be prepared to "put down" at least 20 to 50% of the purchase price (depending on the building).  The amount of money that may be financed is determined by the apartment corporation.

Every co-op has a Board of Directors that is responsible for protecting the interests of all shareholders.  Each co-op has its own rules, which can sometimes, be quite onerous. The Board interviews all prospective tenant-owners and has the right to “approve” or "reject" any applicant.

Renting in Co-op’s can really be worth the extra fuss. Co-ops often have very competitive rents in order to compete with rentals that do not require Board approval. Since Co-op sublets must be approved by the Board of Directors, a renter has to complete a Board Package and usually there is an interview required with the Board of Directors. There are additional fees required as well and the whole process can take up to 30 days. In a typical Co-op, the term is restricted to a one or two year lease.

Condominiums
Condominiums are less common in New York City than elsewhere in the country.

The ownership format has two defining characteristics.  Condominiums are real property; the owner gets a deed and pays separate real estate taxes just as if he or she had bought a house.  Condominiums cannot have an underlying mortgage.

Condominium owners pay monthly common charges similar to the monthly maintenance fees charged by coops, except as they relate to taxes, mortgage, and interest.

Condominiums are considered “easier” to purchase than co-ops. 
Since the Board of Directors does not determine the portion of the purchase price that a buyer can finance, the terms are often much more flexible.  The buyer can often finance up to 90% of the purchase price.  Condominium buildings usually require an application which may be similar, though often less rigorous, than required by a co-op Board.   Interviews are rarely required.  Approval time varies but is usually shorter than with a co-op Board.  Other advantages include greater flexibility in sub-leasing your apartment. This makes condominiums the better choice if you are looking for investment property.
They are also a more likely choice for anyone whose assets are held outside of the United States because co-op Boards seldom approve buyers who do not hold sufficient assets in the U.S.

Condominiums are often more expensive than co-ops for three reasons.  They are “easier” to buy than co-ops.  The monthly common charges are typically less than the comparable co-op maintenance fee.  And there are fewer of them available.

Renting in a Condominium is less restrictive than in a Co-op building. The Board approval process is still required in most cases, but a waiver of the right of first refusal is typically granted within one to two weeks. The lease term is more flexible and is not normally restricted to any particular length of time. Board interviews are not required.

A renter should expect additional fees in Condominium buildings. Condominiums are very attractive for renters because they are normally of very high quality as far as renovations and services.