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WHAT'S THE DIFFERENCE BETWEEN A COOP AND A CONDO?


 

The difference between a COOP (cooperative apartments) and condominium is the type of ownership and purely legal. There is no way to differentiate a condominium from COOP simply by looking at or visiting the building.

In a COOP you own shares of the building corporation and the size or type of apartment you have is based on the number of shares you own. COOP owners pay monthly maintenance to the building corporation for items such as the expenses of maintaining and operating the building property, property taxes and the underlying mortgage on the building (if any).

COOPS are governed by a board elected by the shareholder residents. They have a set of rules about qualifications of purchase and about occupancy. COOP purchases are not final until the board has approved them. Generally, they require anywhere from 20% to 50% down payment and they examine a prospective shareholder’s finances before a purchase can go through. Many boards have a rule that a prospective shareholder’s monthly income must be anywhere from two to four times the cost of the mortgage and maintenance, and some include other debt in that ratio as well. COOPs need to assure that shareholders can afford the monthly maintenance because they must maintain cash reserves for major repairs and upgrades, pay the underlying mortgage on the building (if any) and pay property taxes. Because maintenance includes property taxes and may also underlying mortgage on the building, a portion of the maintenance in a COOP is usually tax deductible.

A condominium is technically a collection of individual home units and common areas along with the land upon which they sit. The condo building is divided into individual condos and a common area. When you buy a condo, you buy an individual parcel of real property, like a house or townhouse. A condo owner owns his/her apartment and an undivided interest in the common area and is responsible to pay his/her own real estate taxes and his/her share of the common charges for the expenses to maintain and operate the common areas. Unlike a coop building, there is no underlying mortgage on a condo building. Condominiums have conditions, covenants, and restrictions, and often additional rules that govern how the individual unit owners are to share the space. A homeowners association (HOA), whose members are the unit owners, manages the condominium through a board of directors elected by the membership. Among other things, the HOA assesses unit owners for the costs of maintaining the common areas, etc. That is, the HOA decides how much each owner should pay and has the legal power to collect that. Maintenance in condos is for the common areas and is usually not tax deductible, as it does not cover an underlying mortgage on the building and your tax assessment is separate.

In both situations, you pay a monthly maintenance fee for the common upkeep of the building. Depending on how the building is physically structured, this may or may not include utilities. Both types of ownership also come with occupancy agreements. The occupancy agreement defines what modifications you can make, such as painting, kitchen upgrades, knocking out walls etc. It also sets limits on when construction can be done, policies about pets, types of appliances that can be run in the building and general rules.

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