The differences between co-ops and condos have nothing to do with how they look. Instead, the differences between the two are all about the legal structure of the way they are set up and how you take title. Did you know there are co-ops and condos that are townhomes and others are garden styled apartments or luxury high rises? This truly is an example of the old adage, “You can’t judge a book by its cover.” This blog is really intended for the DC metro area market where the majority of buildings are condos rather than co-ops and you have more choice about which style to choose. In a city such as New York, there are many more co-op buildings and your condo choices are more limited.
Ownership Structure is One of the Big Differences Between Co-ops and Condos
- Cooperatives: In a co-op, residents don’t own their individual units outright. Instead, they own shares in a corporation that collectively owns the entire building. The number of shares each resident holds is typically tied to the size or value of their unit. At closing you get shares of stock in the cooperative and a lease to occupy your particular unit rather than a deed. At closing, you transfer the shares of stock to the new owner.
- Condominiums: Condo owners hold title to their individual units, just like owning a house. They also co-own shared spaces like hallways, gyms, and parking lots with other unit owners in the building (undivided interests in limited common elements.) At closing you get a deed which describes your unit that you just purchased.
Decision Making and Community Participation
- Cooperatives: Co-op residents frequently have to be approved by the board, and the community often has strict rules about who can live there. Many co-ops have rules about how long an owner can rent a unit, sometimes granting exceptions for owners who work for an international organization for instance. It is not unusual to see rules in the co-op documents restricting rentals to two years out of a predetermined number of years. Decision-making is highly collaborative, with residents voting on major building matters because all the residents have a shared interest in the financial stability of the co-operative. .
- Condominiums: Condo owners have more independence. While condo associations exist to manage shared spaces and enforce regulations, individual owners often have fewer restrictions on how they use or sell their units. While some condos restrict the number of renters in the community, it is not as frequent as co-ops.
Financing
- Cooperatives: Buying into a co-op often requires approval from the board to ensure your financial stability and if you are not paying cash, financing can be trickier. (Even if you are paying cash, the board may scrutinize your application to make sure that you can pay the monthly co-op fees.) It is important to understand that not every lender can do co-op mortgages. Indeed, even if your lender can do co-op loans, that company may not have a recognition agreement with the particular co-op you are interested in. In this case, you will need to find out which lenders are approved to provide mortgages in a particular building. Some co-ops also have limits on resale prices to keep the housing affordable.
- Condominiums: Condos are typically easier to finance because you’re buying real property with a deed. Market-driven pricing applies, so there are fewer restrictions on resale. However, some condo buildings have restrictions limiting buyers to owner occupants if the number of investors is too large in the building. This limitation is intended to ensure that the building is approved for more types of financing.
Lifestyle Choices Go Along with the Differences Between Co-ops and Condos
- Cooperatives: Co-ops tend to foster a tighter-knit community because of the collective ownership model. However, rules can sometimes feel restrictive for those who value independence. In addition, if you do not see yourself living in the building for a long period of time, you should probably avoid the co-op structure. Real estate markets go up and real estate markets go down. If you plan to move in a few years, you may find that you are selling in a down market and that you can’t rent your unit and wait for market conditions to improve.
- Condominiums: Condos are more suitable for those who prefer personal autonomy and minimal community obligations, though some might find the sense of community less pronounced. Condos are easier to sell so if you plan to be there for a shorter period of time, a condo might be preferable.
Famous Co-op Buildings
Chances are that you are more familiar with cooperatives buildings than you realize. For instance, did you know that the Watergate in Washington DC is a co-operative? The Dakota, located in New York City, is famous for its architecture and notable residents, like John Lennon and Yoko Ono. If you are into trivia, you might know that the Dakota was featured in Rosemary’s Baby with Mia Farrow. The Belnord i s another famous co-op in New York featured in Only Murders in the Building, and known for its grand courtyard and elegant design.
There are other cooperatives around the country such as the Gramercy Park Cooperative in Minnesota, which offers affordable housing for seniors and the Berkeley Cooperative based in California, providing housing with a focus on community living.
In Washington, DC, other favorite co-ops include the Westchester, the Broadmoor, Shoreham West and the Mendota. If you would like more information about some of the iconic co-ops in DC, just click here.
Real estate cooperatives vary widely in style, purpose, and location, offering options for different lifestyles and needs. Are you looking for a specific type of co-op or exploring the concept further?
DC Cooperative Housing Coalition
The D.C. Cooperative Housing Coalition is an organization which promotes the common interests of cooperative housing associations in DC. Membership in the Coalition is open to all market-rate District housing cooperatives, regardless of size.
One of the Coalition’s most important accomplishments was its work toward the passage of the 1988 law mandating a specific procedure for cooperative real property tax assessments (D.C. Law 7-205), which provides for an equitable formula for assessing the value of real property owned by cooperatives. Up to that time, the District did not have a prescribed method to estimate the fair market value of a cooperative’s property, and as a result the assessments often were arbitrary, unrealistic, and unpredictable.
The Coalition also successfully opposed a move to charge each cooperative association $3.00 per unit to fund a new government agency to oversee cooperatives and condominiums.
At the heart of these efforts was the representation of cooperatives’ interests before the Council, to emphasize the importance of maintaining parity between cooperative homeowners and single-family/condominium homeowners, and to ensure that cooperatives were not treated as commercial rental apartment complexes.
If you want to know which buildings in the DC metro area are co-ops and which are condos, then let’s talk. I can help you sort out which buildings would be the best fit for your wants and needs. Believe me, there are lots of options in the DC area from historic pre-war buildings to contemporary luxury high rises with wine cellars and virtual driving ranges. To hear more, you can reach me at 240-401-5577 or lise@lisehowe.com.