Cooperatives and Condominiums
New York is a city comprised mainly of cooperative and condominium apartments with a smaller selection of private homes, called townhouses or brownstones. Most important is understanding the differences between the two types of apartments you will find:
Structure of a Cooperative (Co-op)
Cooperatives are not a new concept, although they seem to be a type of ownership that is more common in New York City than elsewhere in the United States. In New York City, 85% of our apartments available for purchase are in cooperative buildings, while 15% are in condominiums. This means two very simple things to potential buyers in New York City. There is more inventory to choose from if the buyer includes co-ops into the mix of properties, and prices are, in general, more attractive for cooperatives – simple supply and demand.
Cooperative Ownership
An apartment corporation owns cooperatives. Individual tenants do not actually own their apartments as they would in the case of real property. One owns shares in the corporation, which entitles them to a long-term proprietary lease. The corporation pays the total amount of the building’s mortgage. Importantly, a cooperative may have an underlying mortgage on the entire building, whereas a condominium must be owned outright. The corporation also pays real estate taxes, employee salaries and other expenses for the upkeep of the building. The tenant-owner, in turn, pays a share of these expenses as determined by the number of shares the tenant owns in the corporation. Share amounts are dictated by apartment size and floor level.
Considerations when Buying a Co-op
The tenant-owners have the right to approve or disapprove of any potential owner. The Board of Directors, which is elected by all of the tenant owners of the co-op, interviews all prospective owners. They have the responsibility of protecting the interests of their fellow tenant-owners by selecting well-qualified candidates. The Board of Directors of the cooperative must approve subleasing a co-op. Each corporation has its own rules, and they should be examined if a potential owner intends to sublet.
The quality of services and the security of the building are kept at high standards.
Portions of the monthly maintenance are tax deductible. Each building has its own tax structure, but all co-ops offer a tax advantage. Tenants can deduct their portion of the building’s real estate taxes, as well as the interest on the building’s mortgage.
The amount of money that may be financed is determined by each cooperative. Some buildings require substantial down payments. Generally speaking, in Manhattan prospective purchasers should be prepared to put down at least 20 to 25% of the purchase price. Importantly, this could be considerably higher in some of the more exclusive buildings.
Ownership
Many of the most famous rock stars and politicians have them. What are they? Housing cooperatives, known as co-ops for short, are highly common in places like New York City, but few people understand how they operate.
With the surge in condominium ownership, many people have become familiar with how condo associations function. Co-ops share some of the same qualities: They contain multiple units of housing, are governed by bylaws and operated by elected officers and directors, and require occupants to share in the cost of maintenance and utilities in the form of monthly fees. But there are distinct differences, mostly pertaining to the nature of ownership.
When you acquire a home in a housing co-op, you don’t actually buy real estate — you buy shares in a corporation, whose only asset is the property. This corporation owns the home you live in; you own no greater part of it than any other member. You gain the right to occupy it through what’s called a proprietary lease or occupancy agreement.
When you move, you sell your stock in the co-op. In some co-ops, you may have to sell it back to the corporation at the original purchase price, with all the stockholders sharing collectively in whatever profit is made when the shares (unit) are resold. In others, you get to keep the profits
