Co-Ops Versus Condos

Co-Ops Versus Condos in New
York

Condominiums and co-ops operate under a highly-regulated set of New York State by laws but do vary case by case. The information on this page can help you better understand the principles governing the ways in which condominiums and co-ops function, but should not be used in your personal transaction as concrete evidence or legal proof.

The first step, though, in a well-informed purchase is learning the major differences between a co-op and a condominium. Below, you’ll find all the major differences between the two and how they affect the buying and closing processes involved.

CONDOMINIUMS

Any specified and individually taxed section of a larger piece of real estate, registered under the Condominium Act, is considered to be a condominium, also known as a condo. Each unit is individually owned, and ownership is transferred via deed. Owners of these individual units, or apartments, often share communal spaces (e.g. heating systems, elevators, hallways) known as “common areas.”

Since a condo is considered “real property,” it is subject to a state-imposed mortgage tax if the buyer obtains a mortgage. Mortgage taxes represent a portion of the purchasing price and differ by county.

There is a bracket system in place to dictate mortgage tax rates, varying by mortgage amount and location:

Mortgage < $500,000
(Location & Mortgage Tax Rate)
New York City – 1.8% minus $30
Long Island – 0.80% minus $30
Westchester – 1.05% minus $30
Yonkers – 1.55% minus $30
Mortgage > $500,000
(Location & Mortgage Tax Rate)
New York City – 1.925% minus $30
Long Island – 0.80% minus $30
Westchester – 1.05% minus $30
Yonkers – 1.55% minus $30

When buying a condominium, there are steps a purchaser must take, namely:

Obtaining a title insurance

Paying recording fees to the board for the following:
The Deed
The Mortgage
Power of Attorney

A co-op, unlike a condominium, is not considered “real estate” and also does not require a title insurance. A co-op also requires that the purchaser receives board approval, a step not required in the purchase of a condominium.
While condominiums do elect and employ Condo Boards, their job requirements do not entail approving or denying incoming purchasers. The purpose of a condo board is more a function of utility. They can arrange for petitions, enlist help for repairs, collect and disburse communal charges and adjudicate community problems. In these administrative capacities, a condo board proves quite useful. You’re unlikely to find the equivalent of this functioning body in a co-op situation.

Your responsibilities as an inhabitant of a condominium often include paying for your personal gas and electric consumption. Sometimes these costs are built-in to the agreed upon price of the condominium, but those situations are rare. You will review and agree upon these terms before your sale goes to closing, however. Also, upkeep of your personal domicile is oftentimes required- though repairs that affect the building’s exterior, or the building on a whole, are usually not permitted without approval. Your ability to sublease your apartment varies by condominium.

CO-OPS

Cooperative units, referred to more commonly as “co-ops,” are apartments owned by a cooperative corporation. Unlike more basic rental agreements, those who buy into a cooperative unit receive a proprietary lease, or owner’s lease, which entitles them to a stock certificate. As long as they retain ownership of their unit, and by extension, this stock certificate, they’re liable to earn a return on the shares they hold. Buyers are also, obviously,
entitled to live in the apartment unit. This can be seen as an advantage over comparable condominium arrangements- those who live in co-ops have a financial stake in the building enterprise as a whole.

When it comes to co-ops, the buyer needs not obtain title insurance nor must they pay to record a deed or mortgage. Another dissimilarity between co-ops and condos is that the “mortgage” (as it would be referred to as when dealing with condominiums) is referred to as a “security agreement” when dealing with co-ops. In lieu of a deed, stock certificates and proprietary leases are issued. Unlike deeds and mortgages, stock certificates and proprietary leases are not a matter of public record. A co- op does make public record of the UCC 1 form, a financial statement disclosing the nature of the co-op as collateral for a loan.

The most salient difference between co-ops and condominiums is that those buying into a co-op must submit an application to the co-op board. A co-op board reviews one’s application and decides upon the fate of the purchaser. Poor finances, bad credit, lackluster job history, a seeming lack of stability- these are just some reasons a co-op board may use to deny a purchaser. The truth is, any number of issues can affect a co-op board’s decision.
Even possession of pets can become a deciding factor. As long as the board isn’t seen as discriminatory, they have almost universal power in denying claims. An attorney can help improve the chances of having your application approved.