Advantages of Condos and Co-Ops

Housing co-operatives (co-ops) and condominiums (condos) are alternative paths to traditional homeownership, but they have differences between them. Co-ops involve buying shares in a corporation that owns the building, typically offering lower purchase prices but potentially more stringent approval processes and financing challenges. Condos allow homebuyers to own their units as real property, providing greater flexibility in refinancing and selling, but usually at a higher cost. Renters who wish to build equity in their homes but do not want the responsibilities of upkeep may choose condominium or co-op ownership because it provides many of the same maintenance services as a rental unit.

This condo vs. co-op article discusses shared responsibilities for maintenance and community management in both housing options. Our goal is to help you understand which option might better suit your lifestyle and financial goals.

Understanding Housing Co-operatives and Condominiums

Housing co-operatives and condominiums are two distinctive types of homeownership, with equally distinctive rules of ownership. Condos and co-ops have a few things in common. First and foremost, they are typically cheaper to buy than a traditional house. Second, they require less maintenance than a house. You won’t have to mow a lawn or shovel snow. Finally, you will likely have other owners sharing walls, ceilings, and floors with you.

Differences in Ownership

Housing Co-operatives

Housing co-operatives function like a corporation. Instead of owning your property, you buy shares in the co-op. By contrast, condos are real property, so condo owners own their residences. 

Cost is one of the most attractive features of a housing co-operative. Housing co-ops are usually less expensive per square foot than physical homes or condos. Many housing co-operatives require a down payment. In exchange, they offer proprietary leases that continue until you sell your shares. Since you do not own your unit outright, you may experience difficulty obtaining a mortgage loan. Consider this factor when choosing between these types of housing.

Condominiums

Condominiums are usually more expensive than housing co-operatives. You own your unit when you purchase a condominium. It is real property and can be your primary residence or an investment property. You can sell or refinance your unit. 

In many ways buying a condominium is similar to buying a house. You can likely sublet your unit, subject to the condo association’s occupancy rules.

If you cannot afford to pay for your unit upfront, you can seek a mortgage loan and go through the loan approval process. Since your purchase is a real estate transaction similar to buying a physical home, you will likely incur the following costs:

• Real estate agent fees or commissions
• Title insurance
• Closing costs

If the purchasing or selling process becomes overwhelming, consider speaking with a real estate attorney for legal advice.

Management and Maintenance

Housing Co-operatives

Like many condominiums, housing co-operatives feature multiunit buildings, managed by a board of directors comprised of residents elected by shareholders. Co-op owners typically purchase shares in the corporation that actually owns the building. In some cases, prospective residents need co-op board approval before they can complete the transaction and move in to a unit.

Condominiums

Condominiums are real property, so those who buy them own their units outright. Because condos are usually more expensive than co-op housing, many condo owners need to secure a mortgage to pay for their homes. Unlike co-op housing, where a board of directors sets rules and policies, a homeowners association (HOA) often manages the property.

Costs

Co-op shareholders own the building based on their respective co-op shares. They also share responsibility for the costs of upkeeping the co-op building. In a housing co-op, you can expect to share the following:

• Maintenance fees (including repairs, heat, water, electricity)
• Property taxes
• Property management fees

Although condominiums do not typically have boards of directors, many feature a condo association similar to a homeowners association. You may own your unit in a condominium, but unlike a housing co-op, you do not have a share in common areas. Instead, you own the common areas jointly with other owners. 

Condo owners share ownership of common areas as tenants-in-common with other unit owners. Co-op shareholders do not technically own any portion of the property, but their shares entitle them to occupy a specific unit and participate in management. Condo owners typically pay condo fees to the condo association or maintain these common areas.

Condo Living vs. Co-op Living: Which Is Best for You?

Your daily experiences may differ depending on which housing option you prefer. One of the features of a housing co-op is the sense of community between co-op shareholders. Co-op shareholders help manage the co-op. They can vote on significant decisions based on their shares, and they can run for seats on the board of directors. 

By contrast, condo owners typically do not manage their buildings. That is usually the responsibility of the condo association.

Housing co-operatives and condominiums offer stability in the housing market. Although they vary in terms of ownership, both options offer renters security compared to renting their primary residence.

Questions About Co-Ops and Condos? Speak With an Attorney

Although condominiums and housing co-ops offer stability and security, these housing options are not synonymous. A qualified real estate attorney can help you understand the nuances between both options. Purchasing any dwelling is a big deal, and not a transaction you want to have problems with.