From Units to Shares: Key Distinctions Between Condos and Co-ops in NYC

If it walks like a duck and quacks like a duck, it is probably a duck. But what about condominiums and cooperatives?

At first glance, they might look similar on the surface.? Both are buildings occupied by people.? Both have board members and building rules and regulations governing residents. But are they cut from the same cloth?

These two forms of property ownership are unique, and understanding their differences is crucial for anyone looking to invest in NYC’s dynamic real estate market. In this article, we will discuss some key differences between condos and co-ops.

?? Ownership Structure: Real Property vs. Shares in a Corporation

Buying a condo? You are stepping into the realm of real property ownership. ?? You get the deed, the right to sell, and the freedom to mortgage your unit—just like a traditional home. When you purchase a condo, you are known as a “unit owner,” which reflects the tangible aspect of your ownership.

Opting for a co-op? You are purchasing shares in the corporate entity that owns the building. ?? The shares you purchase are tied to a specific apartment, with the size of your shares reflecting the size of your apartment. When you purchase a co-op, you are known as a “shareholder.” You are part of something bigger, but this comes with a unique set of rules and implications for financing and selling.

?? Usage Restrictions: Shareholder vs. Unit Owner

As a shareholder in a cooperative, you will likely face more restrictions regarding the use of your apartment compared to a condo unit owner. For example, co-ops often have stringent subletting restrictions, which can limit your flexibility in generating rental income or having guests stay over for extended periods.???♂?

?? Control and Approval Processes

The co-op board wields significant control over who can live in the building. Prospective purchasers are subject to a comprehensive board approval process, which can be quite lengthy. This process typically includes detailed background and financial checks to ensure the candidate meets the cooperative’s standards. The co-op board has a broad power to reject a sale so long as the board does not engage in discrimination prohibited by applicable laws. ??

On the other hand, while a condominium board may require prospective purchasers to submit an application, its power to reject a buyer is more limited. Condo boards can only reject a prospective purchaser if the board exercises its right of first refusal, meaning the board must be willing to purchase the unit on behalf of the condominium to reject the prospective buyer. ??

These are only a few key legal distinctions between condos and co-ops in NYC.? Looking to learn more? Email me at [email protected] or call me at 212-624-4185.

Attorney Advertisement.?This article and the contents herein may be considered attorney advertising under the rules of certain jurisdictions. Prior results do not guarantee a similar outcome. The information and materials contained herein are for general informational purposes only, do not constitute and should not be considered to be legal advice. Parties seeking advice should consult with legal counsel familiar with their particular circumstances.