What Are The Main Differences Between Buying Into A Co-Op And Buying A Condominium?
From a legal perspective, a co-op unit is technically not real estate. With a co-op, a purchaser buys shares of stock in a corporation and the corporation provides the purchaser with a share certificate and a proprietary lease, which gives the purchaser exclusive possession of the unit during the ownership period. The purchase of a condominium is very different than the purchase of a co-op. A condominium is considered real property, similar to a house. If you buy a condominium, you actually own the unit. You also own a percentage of the common elements of the condominium, such as the gymnasium, pool, or outdoor area. In New York, title to a condominium unit is transferred via a deed that is filed with the county clerk or the New York City Register.
Both condominiums and co-ops have boards that make decisions affecting all unit owners and residents. They make and enforce the rules and govern the building. However, in co-ops, the boards tend to be stricter and have more power, including deciding who can purchase a unit within the building. The co-op board can reject a potential buyer without providing a reason to the applicant and seller. Condominium boards are more flexible usually do not conduct a diligent background check before approving a potential buyer to buy a condominium.
In addition, the coop boards are often more restrictive when it comes to renting the unit. Whereas, condo boards are generally more flexible in permitting the unit owner to rent the unit. You should always check the rules regarding renting your coop or condo before purchasing to make sure the rules and restrictions are acceptable to you.
Another major difference between condos and co-ops is the monthly expense. The monthly fee in a coop is called “maintenance” and the monthly fee for condominiums is termed “common charges”. Usually, even though co-ops cost less than condominiums for a comparable apartment, the monthly maintenance expense for a coop is higher than the common charges for a condo. A condominium may cost more than a coop for a similar apartment unit, but the monthly cost is usually going to be lower and the owner will have more freedom and independence verses a coop.
What Are Some Factors To Consider Before Deciding To Buy Into A Co-op Or Condominium?
It is important to review the financial documents and analyze the financial circumstances of the co-op or condo before you purchase. In order to do that, the co-op or condo will provide you with the last two or three years of financial statements. With a co-op, it is critically important that you ascertain the financial health of the corporation because you are really buying shares of stock in a corporation. It is also important with a condominium because you want to make sure that the condominium is financially healthy. As part of your purchase, you are also buying a percentage of the common areas and the building itself. Therefore, it is very important to review the financials and make sure you are buying into a financially sound co-op or condo. We also suggest to clients that you employ an accountant or a financial expert to help you review the recent annual financial statements and give you a professional opinion.
In addition, it is very important to carefully review the bylaws and all rules and regulations. You will be expected to follow the rules of the co-op or condo and you should be prepared to do so before you purchase. If you fail to comply with the rules, this can result in fines or you may be forced to sell your unit. If you wish to rent your unit now or in the future, you should find out what the rules are regarding renting out the unit. Usually, condominiums are more flexible when it comes to renting the unit now or in the future. Contrastingly, oftentimes, co-ops have strict requirements and they may even prohibit you from renting your unit.
Finally, you may want to have a home inspector conduct an inspection of the building and the unit before signing the purchase contract of sale. They may be able to identify an issue with the plumbing, the electrical, or the heating and cooling systems, which you would otherwise not know about.
For more information on Buying A Co-Op Vs. Buying A Condo In NY, a consultation is your next best step. Get the information and legal answers you are seeking by calling (800) 619-3570 today.
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