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REAL ESTATE VIEWS & NEWS
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The Difference Between A Condominium And A Co-op

By Heidi Lippacher - Sep 06, 2010

Views : 110

 
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What is a Cooperative Apartment?

A cooperative corporation owns the building that includes the individual apartments and the common areas. The corporation issues shares of its stock (the Stock Certificate) allocated to each apartment based upon its size and location within the building. As a shareholder in a corporation, you are entitled to a lease from the corporation (the Proprietary Lease) giving you the right to live in the apartment.

Most cooperative corporations have a mortgage on the entire building (the Underlying Mortgage) and each shareholder may obtain their own loan for the purchase of their apartment. The Stock Certificate and Proprietary Lease allocated to the apartment are pledged to the lender as security for the loan and a Uniform Commercial Code Financing Statement (UCC-1) is filed in the county where the apartment is located so that the lender has a lien on the Stock Certificate and Proprietary Lease.

As a coop owner, you pay a monthly maintenance fee to the coop corporation, which consists of your proportionate share of the cost of operating the building. Typically, operating costs for the building consist of property taxes, monthly payments on the Underlying Mortgage, insurance, utilities and labor costs. You are entitled to deduct a portion of your maintenance payment from your taxable income.

Your right to alter the interior of your apartment will be proscribed by rules of the coop and may be subject to the consent of the Board of Directors. When you purchase or sell a coop, you must obtain the approval of the Board.

The coop corporation is governed by an elected Board of Directors whose powers are derived from the certificate of incorporation, bylaws, rules and regulations and the Proprietary Lease. The cooperative's Board of Directors makes all decisions as to the maintenance paid by each shareholder, the upkeep of the building, the amount of the Underlying Mortgage, right of sublet, who will be approved for purchase, repairs and alterations of individual apartments and payment of all building expenses.

What is a Condominium?

The ownership of a condominium apartment is similar to the ownership of a residential home since you are purchasing real property and receive a deed to the unit. Since condos are generally found in apartment buildings, you own the interior space of your apartment outright along with an undivided portion of the building (known as the common areas or common elements) and have the right to use the common areas of the building such as the community facilities, laundry room, parking and hallways.

There are generally few restrictions on your right to alter the interior of your apartment provided that it doesn't affect the building's structure or interfere with neighboring apartments.

The condominium is governed by an elected Board of Managers whose powers are derived from a Declaration of Condominium and By-Laws. The condominium's Board of Managers makes financial decisions as to the amount of common charges needed to maintain the common areas of the building.

A condominium unit owner may mortgage the unit, similar to a residential home mortgage and pay the real estate taxes on the unit.

The condominium's Board of Managers usually does not have decision-making powers as to the sale or sublet of the unit. Purchasers and subtenants of owners must submit an application to the condo's Board of Managers. The Board reviews the application and must either approve the applicant or exercise the condo's "right of first refusal."

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