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Condo or Co-op? The Difference Has Real Consequences

By: Aldene Fredenburg
Submitted: 2007-01-17 16:16:13
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Condominiums and cooperatives are both, for the most part, apartment complexes where the residents have an ownership interest. Both generally share in the cost of maintenance, both have amenities in common, for instance tennis courts, swimming pools, or on-site gyms, and both have sets of rules that residents need to follow. But there’s a big difference in the form of ownership between condo and co-op, and that difference can have a real impact on your life within the complex and on your ability to sell, should you decide to move on.

The resident who buys a condo actually owns the physical space he inhabits within the complex, and has the right to sell that space whenever he wishes. Condo fees are generally paid separately, and cover maintenance and other expenses associated with running the complex. A co-op, on the other hand, is owned in its entirety by the residents as a group. If you decide to move on, you are not selling the space you live in, but your ownership interest in the entire complex. The other members of a co-op ordinarily have veto power over any buyer you find for your share, so selling out may not be as easy as selling a condo.

Real estate taxes are also a consideration. Generally condo owners pay real estate taxes on their own condominium, while co-op owners are responsible as a group for the taxes on the entire complex. If for some reason a cooperative building is less than fully occupied, or if one or more residents reneges, the whole group could get hit with a big tax bill.

If you are looking to buy into an apartment complex, it’s important to know the distinction between condos and co-ops. Make sure you ask; and if you discover that the building that interests you is a co-op, be ready with some questions—for instance, if the building is pretty much fully occupied, if there’s a big turnover in residents, and so on. Make sure you find out who manages the co-op, and do some research to check out the management (your local Better Business Bureau and your state Real Estate Commission are good places to start). Get and read the financial statements of the co-op and its management, or hire someone with expertise in real estate finance, to advise you.

Checking out the management and financial viability of a condo complex is important as well, and also bears some research. But with a cooperative, the stakes are much higher. If you really love the place you find, and it turns out to be a co-op, be prepared to do some serious homework before you buy.

Aldene Fredenburg is a freelance writer living in southwestern New Hampshire. She has written numerous articles for local and regional newspapers and for a number of Internet websites, including Tips and Topics. She expresses her opinions periodically on her blog, http://beyondagendas.blogspot.com

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