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CO-OP
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CONDO
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| 1. Individual “owners” own shares in the corporation and lease their
apartments from the corporation (the proprietary lease). The co-op
corporation owns the building, including the apartments, and (usually)
the land. |
1. The buyer purchases the actual apartment as
well as “undivided interest” in the common areas of the building (lobby,
hallways, driveways). The corporation does not own property. |
| 2. Co-ops are governed by a Board of Directors which is required to
follow the by-laws outlined in the offering plan. These by-laws set
forth procedures and restrictions for issues such as subletting, selling
and making alterations. |
2. Condos are governed by a Board of Managers. The board follows
the by-laws outlined in the offering plan. Condos typically do not
restrict subletting but have some say in selling or making alterations
to an apartment. |
| 3. Corporation may have an “underlying mortgage”
on the building. Each purchaser may have a separate mortgage on his
apartment. |
3. A condominium corporation does not own real property and will almost
never have an underlying mortgage. Each purchaser may have a separate
mortgage on his apartment. |
| 4. The owner pays monthly maintenance charges
that include the proportionate share of the corporation’s real estate taxes,
payments on the building’s mortgage, and general maintenance on the building
(i.e. staff salaries, fuel, real estate taxes, water, etc.) |
4. The owner pays “common charges” for his unit’s proportionate share
of the cost of upkeep of the building and common areas. This includes
staff salaries, fuel, taxes, water, etc. It does not include real estate
taxes or mortgage interest for the building, so no portion of the common
charge is tax deductible. |
| 5. That portion of the maintenance charge designated for the corporation’s
real estate taxes and mortgage interest is tax deductible for the individual
owner. |
5. Real estate taxes are assessed against each
unit by the City and paid individually. These payments are tax deductible. |
| 6. Apartment sales—i.e., transfers of ownership
of shares--are subject to approval (except for sponsor-owned units) by
the Board of Directors of the corporation and require a Purchase Application
from the buyer. [go to What do Boards Want] |
6. Some condo governing boards now require applications to purchase
similar to those used by co-op boards. Condo boards have “the right
of first refusal”; that is, they must be offered the property at the same
purchase price as the potential buyer is prepared to pay. They
must legally waive this right for a sale to proceed. [go to What
do Boards Want] |
| 7. Co-ops have the right to limit subletting;
restrictions vary by building. |
7. Closing costs are higher because sales involve a transfer of real
property, so the applicable taxes and filing charges apply. [see closing
costs section]. |
| 8. Closing costs are lower than on a house or condo [see closing
costs section]. A co-op sale is a simpler transfer of shares, which
are considered personal property. |
8. Condos usually allow sublets, but most have
restrictions disallowing
short leases. |
| 9. If a co-op needs a capital improvement, it
has the option of tapping a reserve fund, levying an assessment on shareholders
or increasing (or taking out) a mortgage. |
9. Because a condominium corporation does
not own real property, it
usually must either use its reserve fund or levy an assessment on the
owners to finance capital improvements. Mortgages are not generally
available to condo corporations. |
| 10. Many co-ops levy a transfer or “flip” tax on a seller. This
may be based on either the number of shares owned, the net or the gross
profit on the sale. (Details are available in the offering plan.) |
10. A condominium may levy transfer taxes on
sales. |
| 11. Co-op boards usually limit the percentage of the asking price that
you may finance. Most Upper West Side buildings, for example, allow
75-80% financing. |
11. Condos do not regulate the amount of financing
allowed. You can finance 100% if a bank will agree. |
