On a day-to-day basis, living in a Co-op is quite similar to living in a Condo .
However buying or selling a Co-op is quite different
Cooperatives were in existence and common before condominium ownership was fully developed . They were especially common in the Northeast U.S
In a cooperative the building containing the residential units or apartments is owned by a 'cooperative housing corporation.'
In a condominium, each unit owner owns an individual apartment . In addition, the buyer owns an undivided interest in the common elements ."
Condo and co-op owners pay monthly fees which vary depending on what they cover
There are pros and cons with both condo and co-op living. The good part for both is that most of the outside work is done under a contract let by the board of directors. Each unit pays a monthly fee for these services and many associations provide all outside maintenance, including painting, and sometimes water and sewer and cable or satellite . Insurance to cover damage to the buildings , but not the contents of each unit ,is also standard.
The downside is that the individual cannot cut back on these expenses in difficult times . Those on a fixed income may find these monthly fees burdensome. .
Form of ownership: is a key difference between a condo and a co-op. A condominium owner actually owns the apartment , like any other homeowner, and owns an undivided interest in the common areas .
In a cooperative apartment one doesn't actually own real estate; one owns shares in a not-for-profit corporation. As a shareholder you have the right to lease space in the building. The corporation owns the common areas. The effects of this are varied. Real property, for example, normally descends to your heirs while the co-op's tenant-stockholder's shares may be subject to securities regulations. Generally, a condo is considered real property and a cooperative is considered intangible personal property.
Property taxes: Because condos are owned individually, they appear in the property tax rolls as separate entities and, accordingly, individual owners are taxed separately.
The entire co-op is owned by the corporation, so it appears on the tax rolls as a single piece of property. The corporation pays the property taxes and passes along the cost , usually as part of the monthly maintenance fee.
Property taxes are sometimes lower in co-ops than in condos due to the form of ownership. When condos are resold as separate entities, the higher sales prices are recorded individually. This has the effect of producing higher assessed values and consequently, higher property taxes. Co-ops -- as sales of stock -- are not recorded,therefore, the rising value of the property usually lags in terms of assessed value and corresponding tax bills.
Financing: There are two main issues re financing of cooperatives. First, there is the blanket mortgage that funded the original construction or the conversion of rental apartments to a co-op . Payments on that mortgage are paid by the corporation and then passed along in the monthly maintenance fee to the tenant-shareholders. Second, there is the matter of whether one has enough cash to buy into the building or if one has to borrow the money.
Since there is no actual ownership of the unit, it is difficult to obtain financing because the security for the loan is not Real Esate but "shares". Many lenders will not lend money on a co-op at all or will require 50% downpayment. Some co-ops have "approved" lenders but this means that the lenders have a stake in the building and may demand a voice in how the co-op is run. These lenders also generally offer fewer options, normally require large down payments and may charge high interest rates.
Other important points: Most co-op owners cannot get a home equity loan or line of credit and in a co-op each individual is dependent on the solvency of the entire project. If the corporation were to go bankrupt, all shareholders would be affected whereas condo owners are responsible only for their own mortgages and taxes .
Monthly fees: Maintenance fees generally are significantly higher in a co-op because the corporation is collecting financing and property tax payments from each shareholder in addition to the maintenance and insurance costs.
Co-ops do have an advantage when it comes to costly repairs or mprovement projects, because they can borrow funds, adding to the amount of the blanket mortgage. The shareholders then pay off the cost of the project in their monthly fees. Condos cannot borrow money as an entity and therefore unit owners may face large special assessments.
Ownership Transfer: When the lease rights to a unit in a co-op change hands (because a seller sold his stock shares to a buyer) again it is a transfer of shares and not real estate. This affects both Land Transfer tax and Capital gains exemption.
Powers of the board: Although some condo associations contend that they are empowered to either approve or disapprove the transfer of ownership, the reality is that they have almost no power at all. Co-ops, on the other hand have the right to approve or deny the sale of shares on the basis of the buyer's perceived inability to make the payments. They can also block the sale to celebrities who they feel may disturb the peace and quiet of other shareholders. Co-ops cannot discriminate adue to race, religion, sex, nationality, etc., but they can choose people based on financial resources and criminal background, whereas condos cannot exercise that type of control
