Condos vs. Co-ops

Ownership:

A condominium owner holds a fee simple title to a unit and also a percentage of a building's common elements. A cooperative owner owns personal property, which are shares in a corporation. A co-op owner hasa leasehold interest, which is generally accepted by lenders as collateral. The corporation holds the title to the land and the building.

Common Elements and Common Charges:

In both situations, owners share the use of common elements, such as lawns, pool, playground, tennis courts, roof, etc. Monthly maintenance fees on a condominium cover the maintenance and management of the common elements and insurance. Monthly maintenance fees in a cooperative include taxes, mortgage principal and interest on the building, operating and maintenance expenses.

Taxes:

Ina condominium, real estate taxes are assessed and collected on each unit owner. With a cooperative, though building taxes are assessed against the corporation and included in the shareholders' monthly maintenance fee.

Government:

A condominium is administered by an association of unit owners according to by-laws set forth in the declaration. Owners are bound by the by-laws and a Board of Directors may govern the association.

As stockholders, the tenants of a cooperative experiences control over the administration of the building. Barring discrimination, the Board may approve or disapprove prospective tenants or purchasers of apartment leases.

Qualifications:

A condominium has no requirements other than the borrower's ability to secure a mortgage, if applicable. A cooperative will generally require a 3-to-1 or 4-to-1 income-to-debt ratio. This means the prospective purchaser must show documented earnings of 3 or 4 times their monthly carrying costs, including mortgage, maintenance, and all revolving monthly debt, i.e. car loans, alimony, child support, credit card debt.

Financing:

Financing a condominium would be the same as a single-family house. The owner can mortgage his or her interest in the condo.

Fora cooperative, finincing is arranged by borrowing against the stock.Lending institutions often have different criteria for co-op loans. Theoriginal, underlying mortgage on the entire co-op is signed by thecorporation creating a lien on the entire parcel of real estate.