Cooperatives AKA Co-ops

Condominiums and cooperatives are both forms of real estate ownership, however they differ in the way in which they are created and in the way they are owned.

• Condo owners purchase their own units in the same manner as they would a single-family home. Additionally condo unit owners share the ownership of the common areas and each pays a monthly fee for the maintenance of the areas owned in common.
• In a co-op, the occupants do not purchase their own units. They buy shares in the cooperative association (an entity whose principal asset is the building) which grants them a proprietary long-term lease of one of the apartments.

Co-op Owner's Monthly Expenses: Co-op owners pay a monthly fee, which includes maintenance, real estate taxes, insurance and principal and interest on the co-op mortgage. Co-op owner's share of the mortgage interest and taxes can be taken as a tax deduction.

Potential Disadvantages of Co-op Ownership

• The co-op has a single mortgage and there is one tax assessment for the entire property. If a tenant-owner doesn't pay their share of the property taxes or mortgage, the corporation/trust can face foreclosure unless the others make up the difference.
• Under cooperative bylaws, any equity built up due to property appreciation may accrue to the co-op and the continuing tenant owners. Thus, a tenant owner, upon deciding to leave the co-op may only recover the initial equity investment plus the equity built up due to mortgage amortization during the period of ownership.

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