Many people use the terms “condominium” and “co-op” interchangeably. While there are some similarities from a standard of living perspective, there are also distinct differences from a financial and legal standpoint.
For example, as the owner of a condominium, your unit, as well as a percentage of common areas, are yours. In comparison, with a co-op you are a shareholder, meaning that you do not actually own the unit. Because of that, you are legally considered a tenant as opposed to an owner. In other words, a co-op is a multi-unit apartment building in which you have an interest in the entire building, and to live there, you maintain a lease.
Other Important Factors
Specific to a co-op, consider some of the other key differences from a condominium.
The co-op association typically consists of all the shareholders.
The co-op association owns the entire building, including the individual units.
For the owner of a co-op, the owner has legal shares in the association. Now, if there are no shares, the owner has a proprietary lease that outlines the obligations and duties of the association, as well as the owner’s rights and responsibilities.
By voting at scheduled meetings or through an elected board of directors, financial and management decisions are made.
Generally, residents of co-ops receive the same tax treatments as other homeowners.
If the co-op association has a mortgage on the entire co-op building, shareholders have the right to receive a proportionate share of interest on the mortgage.
Prospective purchasers of a co-op are approved by the co-op association, through a membership committee comprised of current owners.
Higher Selling Price
By understanding what a co-op is, you will find it easier to see why condominiums typically sell at higher prices. Regardless if the interior and exterior of a condo and co-op are identical, there is a difference in property type, which means the condominium will sell for more money. Remember, with a co-op, the board of directors has tighter control over your homeowner rights compared to a condominium association. For that reason alone, condos fetch higher prices.
Also, because of the tighter controls governing a co-op, there are restrictions to upgrades. In comparison, as the owner of a condominium, getting approval for upgrades from the association is easier. For example, owning a condo and getting approval from the association means you could have a professional install solar panels. When the time comes for you to sell the condominium, this upgrade would help boost the asking price for a targeted market.
Obviously, there are pros and con for both condominiums and co-ops. For that reason, you need to learn as much as possible about each type of living. However, as a general rule, owning a condominium allows you to sell at a higher price than if you own a co-op.