Co-ops vs. Condos in NYC: Which is Right for You?

You’d never be able to tell the difference between a co-op or a condo by just walking in – it’s the behind the scenes aspects that make them different. From taxes, privacy, subletting policies, and pricing to ease of transfer and ease of use, there are certainly things to know before purchasing either property type. In this episode, John and Jonathan give you a glimpse into the explanation they would give to a new buyer who is looking to purchase in the city.

Nearly all residential real estate transactions in Manhattan involve one of two types of apartments: a co-op or a condo – but the buying process varies quite a bit between the two because of the differences between the building’s governance structures.

Buying NYC Co-ops VS Condos

Housing cooperatives (co-ops for short) became incredibly popular in NYC in the 1970s & 1980s. Most pre-war buildings in the city are cooperatives.

In a co-op, the building is owned by a corporation that is comprised of tenants/shareholders. Instead of owning deeded property, purchasers of these apartments own shares in the cooperative. Those shares entitle the holder to a proprietary lease and use of a specific apartment within the building. Monthly maintenance fees cover the shareholder’s portion of the building expenses, including real estate taxes. The board of directors handles the approval and interview process for all purchases made in the building.

Condos (or condominiums) became much more popular from the 1990s on, so almost all conversions and new construction buildings since that time have tended to be condominiums.

When you buy an apartment in a condominium building, you own the property outright and receive a deed. Condo owners also own a portion of the common areas of the building, such as the lobby, elevators, stairwells, halls, and amenities, which is referred to as percent of common interest.  The monthly fees for the general upkeep of these common areas, any capital improvements, as well as the staff of the building, are referred to as common charges. Each apartment in a condominium is assigned a separate real estate tax block and lot number, hence each owner receives their own real estate tax bill.

Purchasing a condo in NYC is nearly identical to purchasing a condo in the rest of the USA. Co-op ownership is quite different since you’re buying shares in a corporation and leasing your apartment from the cooperative.

If condos sound right for you, consider reading this step-by-step guide to purchasing in one.

Digging Into the Nuances

Choosing between a cooperative or a condominium usually comes down to three main points for our buyers: Building Oversight, Intended Use, and Cost.

Building Oversight

We often say that joining a cooperative is a lot like joining a country club. Potential buyers of an apartment must submit a detailed board package including financial and personal information, business and personal reference letters, complete tax returns, and asset statements.

After that, prospective buyers will attend an interview with the designated board members (here’s a list of do’s and don’ts for board interviews, as well as a guide on how to ace the interview itself). The board then decides whether or not to approve the purchase. It is important to note that while all co-op boards are subject to fair housing laws, they are not required to provide a reason for rejecting a buyer’s application.

While prospective buyers in condominiums do submit board packages, they are not required to attend an interview. Condo boards do retain the right of first refusal, and they can deny a proposed transaction IF they purchase the apartment themselves at the already agreed-upon terms/conditions. This almost never happens though, and it mainly exists to prevent owners in the building from selling their apartments significantly below market value.

Intended Use

Co-op boards impose more restrictions when it comes to how tenant shareholders use their spaces. They dictate building policy on a wide variety of things, including how you take ownership, the ability to purchase as a pied-a-terre/secondary residence, pets, renovations, and if/when you can sublet, etc. Living in a cooperative means living in a curated environment where people want to get to know and work with their neighbors. It can provide a much more intimate experience – which can be amazing if you find the right fit.

Condominiums are typically much more open to whatever purchase or residence arrangements you desire. They will allow you to purchase in the name of an entity (LLC, Trust, Corporation, etc), allow subletting, pied-a-terre/secondary/investor ownership, international buyers, etc. Intended renovations are still subject to approval, but condo boards can be less opinionated about your plans. They are mainly concerned with potential damage to the structural integrity or utilities within the building.

Cost

	Co-ops	Condos
Purchase Price	Usually less expensive than condos, but purchase requires board approval.	Usually more expensive than a co-op of the same size due to the added flexibility in ownership and use.
Amenities	While co-ops do tend to be older buildings and therefore may not offer amenities that are only possible to be added during initial construction (like an elevator to the roof), many have renovated in the last few decades to offer the same amenities found in condos.	These buildings often feature tons of amenities—things like on-site gyms, garages and swimming pools.
Down Payment	Typically, 20%+ of the purchase price, though some high-end buildings don’t allow financing at all and you must pay all cash. Boards will require 12-24 months of post-closing liquidity on average, but some park adjacent co-ops can require many multiples of the purchase price in post-closing liquidity.	Most New York City condos don’t have financing minimums; the down payment is agreed upon by the buyer, seller, and if financing, the mortgage lender, starting at 20%+ of the purchase price.
Monthly Fees	Known as a maintenance fee, this fee covers building expenses & real estate taxes.	Known as common charges, these fees pay for building upkeep and staff.
Closing Cost Differences	Because the city doesn’t recognize a co-op apartment as real property, one does avoid mortgage recording tax and title insurance, but it has become very common for a co-op to impose a flip tax, which is a fee paid to the co-op in order to sell the shares. Learn more here.	All regular closing costs, plus condo-specific closing costs. Learn more here.

For some buyers, the premium you pay for a condominium is worth it for the amount of control and independence you retain regarding how you use your apartment. For other buyers, the board approval process is worth it in order to save money on the purchase, especially if the flexibility offered in a condo is not needed.

With decades of combined experience in New York City real estate in both condos and co-ops, we would be happy to help you determine which property type is right for you and your unique circumstances. Please feel free to write us an email or give us a call to see how we can help!

Resources Mentioned In This Episode:

• Our collection of resources for buyers and sellers
• John’s Page
• Jonathan’s Page
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• Watch Us On Our YouTube

Why We Host This Podcast:

We have been in this business long enough to know that knowledge is power. That’s why we conduct an in-depth analysis of the Manhattan real estate market every month, quarter, and year and provide an easy-to-understand synopsis of the full report in several different formats – all so you can stay informed.

Our team of experienced real estate professionals closely monitors market trends and provides our clients with the latest and most relevant information available. With this information, our clients are able to make informed decisions about buying and selling properties in Manhattan, which helps them stay ahead of the curve and make the most of their real estate investments.

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