What’s the Difference Between a Condo and a Co-op?

Condominiums and co-operatives (commonly referred to as condos and co-ops) are becoming an increasingly more important source of housing for Americans. Demographic trends are seeing more individuals favoring location and convenience over large homes or properties in less convenient areas. In order to meet this demand, the density of living must increase. As part of this trend, first-time homebuyers, young professionals and many families are seeking to buy a condo or buy into a co-op. Similarly, many retirees are attracted to condos or co-ops as they are convenient, involve less maintenance and are found in better locations. 

Differences Between Condos and Co-ops

Although condos and co-ops may appear similar, they are distinctly different. The most important difference is in ownership structure, which results in several key differences ranging from fees to financing. The basic distinction between the condo and co-op ownership structure is that in a condo development, the individual units are legally distinct properties where owners are free to buy and sell as they wish. If you own Unit 223 in a condo development, you hold title to the unit itself and are responsible for everything within its four walls (barring agreements to the contrary). However, individual co-op units are not legally distinct with regard to ownership. In a co-op, the co-op association owns the entire building and contracts/leases the units to shareholders in the association. Thus, if you buy into a co-op, you do not hold legal title to a specific unit; rather, you hold shares in the co-op association that entitle you to reside in a specific unit. 

The distinct ownership structures mean transferability, up-front costs, financing, and fees are not the same for condos and co-ops. One major difference is that while you are generally free to buy and sell a condo unit, any new purchaser in a co-op will need to be approved by the co-op association. This is because the association is a private entity and existing shareholders retain the right to control who acquires shares. As a result, buying into a co-op often involves an application and interview process before any possibility of buying into the co-op. Similarly, if you plan to sell, your buyer must be approved by the Association and thus this needs to be considered when evaluating potential buyers.

As a result of the different ownership structures, co-ops tend to be less expensive than a comparable condo. However, these savings come with the potential difficulty of financing your purchase. As there is no property to secure the loan, some banks are reticent to lend for co-ops. Our attorneys have extensive experience in financing the purchase of shares in a co-op association and are ready to help you through this process.

Finally, monthly or annual fees in a co-op tend to be more than those in a condo. This is because the fees in a co-op cover the building’s underlying mortgage, property taxes, amenities, maintenance, utilities and security.

Condo and Co-op Lawyer in Rhode Island, Massachusetts and Connecticut

At PALUMBO LAW, we represent individuals and developers in all matters relating to condos and co-ops. If you have questions relating to condos or co-ops in Rhode Island, Massachusetts or Connecticut, please contact our office to schedule a consultation.