Co-op v. Condo - What's Right For You?
It is a fact that approximately 80% of all new housing built in the United States is built within some form of community association, whether it be a condominium, cooperative or homeowners association. In 2005 alone, over 9,000 condominium units were approved for sale by the New York State Attorney General’s office. Furthermore, for the second year in a row, condominiums in Manhattan have outsold cooperatives. Those in the market for a new home should consider the various differences between a condominium, cooperative, or homeowners association.
Living in a cooperative or condominium offers homeowners a whole new system of benefits and costs to be weighed. Whereas ownership of condominiums provide the benefit of easy resale and mortgage refinancing, a homeowner has little to no control over who his or her neighbor may be. On the other hand, co-ops provide the distinct ability for the cooperative to take on a unique identity and sense of community over time. In general, condominium association boards do not have the ability to approve the resale of a unit. Whereas, in Manhattan, cooperative boards have significantly more discretion when it comes to accepting or rejecting applicant owners or tenants. It should also be noted that the powers of co-op boards differ between New York and New Jersey. Another notable difference is that many New York cooperatives have a transfer fee “flip tax” that must be paid at the time of the sale of a unit.
Furthermore, a basic difference between condominiums and cooperatives is the very nature of the interest possessed. No matter whether the condo is in a basement or a penthouse, the interest being owned is an actual piece of real property. However, in a cooperative, the resident owns shares of stock in the cooperative cooperation.
One should consider the significant differences between obtaining financing for the purchase of a co-op unit or condominium unit. To purchase a condominium unit, the only restrictions are those imposed by the lender or mortgage company. However, financing the purchase of shares in a co-op may include annual income restrictions and down-payment minimums. Additionally, both your finances and personal history can come under scrutiny by a cooperative board. All these issues and more should be taken into account by those seeking their new home.
Stark & Stark has represented condominium and cooperatives for over 16 years. Furthermore, Stark & Stark is equipped to assist your cooperative or condominium board with its legal planning, operations, financing, and conversion options. If you have questions or comments regarding any of the issues raised, please contact Richard Linderman or David Byrne in Stark & Stark’s Community Associations group.
Is there a federal organization that oversees the Co-op Board of Directors, Co-op Management?
Good morning, Maureen.
The Community Associations Institute, commonly known as CAI, is a national organization with regional chapters. The national website is www.caionline.org . CAI provides educational seminars and conferences to assist cooperatives and condominium association members, management and Boards. CAI also has a very helpful library of publications. I hope you find this helpful.
Thank you for your prompt response.