Co-op or Condo?

What works better for you, a Condo or a Coop?

NYC apartments come in two flavors: Co-op (short for “cooperative”) and condominium. Older buildings (pre-1980s) tend to be co-ops, while pretty much everything built from the 1980s onward is condo. Beyond that distinction, your personal or financial circumstances, along with your lifestyle preferences and past experience, might guide you toward one or another.

Or, like many people, you may simply decide to look for the best apartment you can afford in a financially sound building, be it co-op or condo.

Here’s a quick overview of the key differences and considerations.

Ownership structure

CO-OP: While co-ops are common in NYC, most people in other parts of the country are unfamiliar with their unique ownership structure.

In a co-op, the entire building is owned by a single corporation. Instead of a deed, buyers get shares (stock certificates) in the corporation, and a proprietary lease that allows buyers to occupy a specific unit and lays down the rules and rights much like a lease in a rental building. (In fact, technically speaking, buyers of co-op apartments are referred to as “tenants” or “shareholders,” not “owners.” )

CONDO: Buying a condo is very much like buying a single-family house. You get a deed to the apartment that gives you ownership of the interior of your unit and the surface of its walls, as well as an undivided interest in the building’s common elements. This is the type of ownership almost everyone has in mind when they think about buying a home, and almost all newer buildings are condos.

After you buy your apartment, you will largely find that the legal ownership structure has little impact on your use of it. However there are a number of quirks related to each that will be discussed further below.

Co-op and condo boards

CO-OP: Shareholders elect a volunteer co-op board that–except in some very small buildings that choose to save money by self-managing–works with a property management company to oversee the care and maintenance of the building. The board also creates and enforces rules about everything from renovation inside units, to what’s allowed to transpire on the roof deck, to whether you can speak on your cell phone in the lobby, or whether dogs will be allowed in the building. The board can levy fines against rule-breakers and, unlike condo boards, can even evict an extremely disruptive shareholder and force them to sell their apartment. Overreaching, power-hungry co-op boards are the stuff of legend here, and many of the stories are true. At least as many co-op boards are made up of volunteers with full-time jobs and families who try to make the best of what is a demanding and time-consuming role if done right.

CONDO: Condo owners also elect a board of directors that perform many of the same functions as a co-op board. Generally speaking, though, most condo boards tend to be more hands-off when it comes to rulemaking.

That slightly more laissez-faire approach is partly due to philosophical underpinnings (more on that below) and partly because condo boards wield less enforcement muscle: They can fine owners only for the expense related to any rule infraction (or get an injunction to stop it from happening again). But because a condo owner actually owns his or her unit, a condo board, unlike a co-op board, can’t evict an owner from an apartment.

Note: In both co-op and condos, your voting power increases with the size of your apartment.

Monthly charges and assessments

CO-OP: Co-op shareholders pay a monthly maintenance fee. Part of the fee goes toward the expense of operating the building. The other part is the amount of property taxes apportioned to each shareholder based on the number of shares assigned to each apartment. Particularly these days, when property taxes and fuel costs are rising sharply, maintenance fees are frequently adjusted upward each year (3%-7% annual increases are quite common).

In addition, co-op boards can require shareholders to pony up extra cash from time to time to boost the reserve fund or pay for a specific project. In a 40-unit building, for example, an assessment to replace an elevator might run $8,000-$15,000 per unit, depending on how many shares you own. Typically, shareholders can spread their payments out over a period of time such as 6-18 months.

CONDO: The monthly charges in a condo building are referred to as common charges. Property taxes are not included; individual owners are billed directly by the government. This is an importance nuance to keep in mind when comparing carrying costs of co-ops to condos, because at first glance, condos may look cheaper on a monthly basis.

Like co-op boards, condo boards also levy assessments when necessary.

Monthly charges in both co-ops and condos tend to increase with the expansiveness of amenities and staff. However, larger buildings have economies of scale when it comes staffing and operation that are often reflected in lower common charges.