5. COOPERATIVES & CONDONIMUMS
What Is The Difference Between Cooperative And Condominium Ownership?
Although the buildings may look the same, there are some significant distinctions between cooperative and condominium ownership. A condominium is real property with the owner actually having a deed for his or her unit. A unit owner is generally free to sell his or her unit or to rent his or her unit without the consent of the governing body of the condominium (Board of Managers), but often subject to a right of first refusal of the Board of Managers to match the terms in the sales contract or lease.
A unit owner can mortgage his or her unit and generally can do so without restrictions imposed by the Board of Managers as to amount. In addition to owning the unit, a condominium unit owner also has a tenant in common interest in the common elements of the condominium building (i.e. hallways, elevators, sundecks, storerooms, etc.). A unit owner is allocated a percentage common interest in the condominium that is generally based upon the size and location of the unit owned. This common interest percentage is used to determine the unit owner’s share of the common charges established by the Board of Managers to pay the expenses of operating the condominium. In a condominium, real estate taxes are paid directly by the unit owner. Since the condominium itself does not actually own any portion of the building, there can be no blanket mortgage on the property. The direct payment of real estate taxes by unit owners and the lack of a building mortgage generally accounts for the lower common charges in a condominium when compared with maintenance for a cooperative. There is an ability for Boards of Managers to borrow funds from a lending institution for capital improvements, secured by an assignment of the common charges payable by unit owners, as well as rents of commercial tenants. For larger capital projects, it is generally necessary to assess unit owners based upon their percentage of common interest owned.
In a cooperative, an “owner” does not actually own an apartment, but rather own shares in the cooperative apartment corporation that owns the building. With the share ownership comes the right to be issued a proprietary lease allocated to the apartment for which the shares have been issued. Maintenance charges, as well as assessments, are established on a per share basis. Since the corporation actually owns the property, there is the ability to mortgage the property and a greater ability to cover expenses for capital improvements without the need to assess shareholders. In a cooperative, real estate taxes for the property are built into the maintenance charges. Generally, the Board of Directors of a cooperative (as compared with the Board of Managers of a Condominium) has greater control over sales, rentals, and financing by individual shareholders.
The appeal to some of less control in a condominium is often found by others to be unattractive in vertical living. However since there is less control in a condominium and since the condominium cannot have a blanket mortgage, sales prices for condominium units typically are more expensive than for comparable cooperative apartments.