Differences Between Condominiums and Co-Ops

Property Ownership

A condo is considered real estate property. A co-op, on the other hand, is thought of as intangible personal property. In a co-op situation, the entire building containing individual housing units is owned by a cooperative housing corporation. So rather than owning actual real estate, you own a share in the corporation. In a condo building, each property owner owns his individual unit, including an undivided exterior portion of the building. That means you also own part of the building's roof and walls, even if your unit is not on a top floor or has an exterior wall. In both co-ops and condos, you have an interest in all the common areas.

Cooperative housing corporations pay the taxes on the entire property and then the shareholders must pay their share to the corporation. This is usually billed as a monthly fee. Condo owners, on the other hand, pay taxes directly to the local government, since units are listed in tax records as separate real estate entities owned by individuals rather than one giant property owned by a corporation. Condo owners typically get a bill from their local property tax office that must be paid to that office.

In a co-op, the corporation pays the master mortgage on the entire property, and the shareholders pay their portion of that back to the corporation in monthly installments. Because you're buying shares in a corporation and not real estate property per se, finding financing for a co-op can be difficult. Typically, co-ops have a list of a few finance companies that will lend to individuals seeking to buy into the co-op, however. On the other hand, securing financing for a condo is like securing financing for any other piece of residential real estate.

Condos can be passed on to your heirs like any other piece of real estate. A co-op, on the other hand, passes to heirs as shares. As such, the transaction is subject to securities rules that apply to other share transfers. When a co-op owner sells his unit, there are less taxes to pay because no appraisal is needed, nor are a survey or title search. That's because the property being sold is not considered real estate property. Transfers of co-op ownership also don't get recorded in public documents.