Real estate Q&A: What are the pros and cons of a co-op?
Q: We are interested in purchasing a condo that is a co-op. Could you please explain the pros and cons of co-op vs. condo ownership? — Theresa
A: You cannot purchase a “condo” in a “co-op” because each is a form of owning property, not a physical type of property.
People often speak of their condo, but what they are speaking of is their apartment in a condominium. Because a condominium is a form of ownership, the property format is not limited to apartment buildings. Townhomes are often in condominiums, and I once represented two next-door neighbors that owned detached two-story homes in their own condominium.
Condominiums are created by statutory law that sets out detailed rules about their operation and management. Condominium ownership can comprise multiple residential and commercial property units where each unit’s owners also own an undivided share of the community’s common elements. For example, if a condominium is made of 10 units, a parking lot, and a pool, each unit owner owns their unit and one-tenth of the common area of the parking lot and pool.
A condominium will also have community documents, including the declaration, by-laws, and community rules, and are governed by a board of unit representatives responsible for the administration of the community.
Cooperative is a form of ownership of property where the legal title is held by a corporation, and each co-op unit owner is also a shareholder in the corporation who has a perpetual lease to their apartment. The corporation is, in effect, the landlord, and the unit owners are both tenants and shareholders of the landlord.
Besides the statutory law that allows their creation, co-ops are controlled by the corporation’s by-laws and community rules, along with various leases. As in a condominium, the administration of the community rest with a board of directors elected by the shareholders.
Living in a condo or co-op is much the same, with only minor differences. Co-ops tend to be easier going with community rules, while it is easier to get a mortgage loan if you live in a condo. While not always the case, co-ops are smaller than condos which sometimes have thousands of units.
Wherever you decide to live, thoroughly review the community’s rules to ensure it is a good fit for your lifestyle.
