Understanding the difference between co-op, condop, and condominium (“condo”) in NYC: What A-Z every investor should know!

In  New York City, the majority of the apartments are Co-OP; it’s unlike other cities in the USA where the majority are condos.

They all require the applicant to complete a very complex financial application when signing a purchase contract. The building’s board of directors is responsible for approving every potential purchaser unless the purchase is made directly from the sponsor.

In New York City the majority of the apartment is Co-OP it’s unlike in other cities in the USA the majority are a condo.

What is a Condop? 

It’s a mix between the co-op and condo; a hybrid of co-op operating and commercial space acting as a condo.

Condo rules apply mainly to the commercial space in the building. The apartment space operates as a co-op.

Co-op – You own your units equivalent shares in a corporation. (A form of non-direct ownership) 

Condo – You own the realty property on the deed 

hen you sign a contract, you are required to put down 10%, sometimes more.

Condo – Downpayment Closing fee 

When you sign a contract, you are required to put down 10%, sometimes more.

Plan in advance on higher closing costs when you purchase a condo.

Title insurance title search recording fee in NYS mortgage. NYS transfer tax seller pays 0.4%. There is also a recording tax and NYS  mansion tax buyers need to pay.

Real estate transfer tax: transfer tax GOVNYS mansion tax is entitled to school tax relief through the NYS STAR credit which is over 1% purchaser’s transfer tax. Mansion tax NY mansion-tax GOV for a residential apartment or house is over $1 million. On 09/13/2019 primary resident may be entitled to school tax relief through the New York State STAR credit gov property star

Co-op Downpayment co-op and  closing fees

Sometimes buyers are required to put down 20-25% of the apartment cost, some buildings require as high as 30-40% of the purchase price.

The co-op has a lower closing cost. The mansion tax in a co-op is maxed at $10,000.

Real Property Tax 

What is a Real Property?

Co-Op Bylaws, House Rules, Board or associations 

The rules come in two forms: bylaws and house rules.

Bylaws concern requirements for the operation and governance of the Co-Op or condo or condop association or board for Co-Op. They govern elections and meetings.

They have the authority to act on behalf of shareholders or unit-holders to hire someone for repairs such as fixing the hallways elevator, repairing the boiler or decorating the lobby. 

Bylaws also define the relationship between shareholders in Co-Op or unit owners in a condo association. Board conflict of interest rules new rule was signed by Como 09 2017. Section 72

The  Bylaws also deals with the relationship of share in Co-Op owners or Condo unit owners communal space.

What are House Rules?

Co-Op, Condo or Condop buildings have house rules with respect to coexisting in the same communal space. It primarily deals with quality-of-life issues and are often adjusted. It is easy to amend the house rule but hard to enforce. House rules governs the communal space. Not your individual apartment space.

Whats the difference between  Co-op and Condo boards? 

Co-Op boards have the power to deny a prospective purchaser and don’t have to give reasons. If a buyer is rejected the seller needs to find a new buyer. 

Condo boards have the right of first refusal on every purchase.

When you are planning to purchase a Co-Op or Condo you should always ask to review the house rules before making an offer to purchase. 

What is the difference between BTW  Maintenance Fee Common Charges in Co-Op and Condos? 

Co-Op– the maintenance fee covers the operating expenses for the building property taxes, building mortgage, interest and some include utilities costs in the fee. 

Condo -common charges include management fees and operating expenses for a condominium building. The real estate tax is billed separately to the individual condo owners.

When Buying a Co-Op or Condo Application Process 

 Condo boards –

Typically it’s a much quicker process than a co-op application which is significantly shorter. The board will ask for supporting documents such as a mortgage commitment if the buyer is financing the purchase through a  lender. They will ask you to sign bylaws and submit personal reference letters. The condo can hold up the purchase process for financial reasons only. 

Co-Op  Application Process  

The big difference that each candidate needs to be personally interviewed by the board and approved. It can delay the closing timeline to 3 -4 months from the time you have a signed purchase contract.  The board approval takes longer. Only after submitting the required documents to the board will the board review your package and then provide you with an interview date. The application full board package usually requires tax return copies, bank references, and personal work references to be submitted. It’s a much more intense process and your real estate broker can make the process easier for you.

When I plan to Sublet my Co-Op Vs. or Rent my Condo – what do I need to know?

Co-ops Subletting

Co-op sublet rules policies can vary from building to building. They will charge apartment owners a subletting fee and often require the owner to live in his or her unit for one to two years before being permitted to sublet the unit. All sublets are subject to co-op board approval. If you are considering purchasing such a unit for investment purposes only, it’s not a good idea!  Condop is the same.

Condo Renting

Condos have more flexible ownership investment rules and are more flexible in the rental rules.  Some condos have rental rules as well as an application process for your prospective tenants with cost and fees for applications.

Co-Op vs. Condo the difference in common charges fees.

Common charges in condo fees are billed monthly to all owners in a co-op or condo building and cover necessary operating costs it is determined by the building’s board. The maintenance fee usually lowers when you pay to separate the real estate tax. Before signing a contract check the fees.

Co-op condop the fee will include real estate tax 

If you are buying for pure rental income investment, the condo is better but you will pay a higher purchase price!

Co-op condop the fee will include real estate tax 

If you are buying for pure rental income investment, the condo is better but you will pay a higher purchase price!

As sales prices are dropping, you may be getting a better bargain in purchasing a Co-Op. Recent CNBC reports state that inventory is up 9 percent.  Manhattan real estate sales report 

Inventory is up, for Codo sales as 20,000 new development coming to the already soft market. What’s Coming in New York Real Estate in 2019

In the Upper East-Side alone more than 20 new developments are coming to market   The Upper East Side’s hundreds of incoming apartments

Always  check the Bylaws and seek your lawyers advice

 Your home purchase is the most expensive one you will make. Before making a decision to purchase, consult with your accountant and a real estate lawyer to make sure it fits within your budget limits.

Don’t Dream your life, live your dreams.

Lets, Pazo Realty help your dream home became your reality.

Zahavit Paz
Residential and Commercial Real Estate Broker
646.330.0180
info@pazorealty.com

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