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Co-Operative Buildings:A housing cooperative, also known as a “co-op,” is a legal entity—usually a corporation—that owns real estate, consisting of one or more residential buildings. (This is one type of housing tenure.) Each shareholder in the legal entity is granted the right to occupy one housing unit and is sometimes subject to an occupancy agreement,similar to a lease, which specifies the co-op's rules. “Cooperative” is also used to describe a non-share capital co-op model in which fee-paying members obtain the right to occupy a bedroom and share the communal resources of a house that is owned by a cooperative organization. A shareholder in a co-op does not own real estate, but, rather, a share of a legal entity that does own real estate. Cooperative ownership is distinct from that of condominiums where residents purchase and own individual units instead of shares and, as a result, have little say regarding who may occupy other units. Because of this, most jurisdictions have developed separate legislation, similar to laws that regulate companies, to regulate how co-ops are operated and the rights and obligations of shareholders.

Factors to Consider When Purchasing a Cooperative:

  1. The Board of Directors, elected by all of the tenant-owners of the co-op, is responsible for protecting the interests of all tenant-owners and has the right to approve or reject any potential owner. Therefore all prospective owners are interviewed before their purchases are approved.
  2. The quality of services and the security of the building are kept at high standards.
  3. Portions of the monthly maintenance are tax deductible. Each building has its own tax structure, but co-ops, in general, offer a tax advantage. Shareholders may deduct their portion of the building's real estate taxes, as well as their proportionate share of the interest on the building's mortgage.
  4. The amount of money that may be financed is determined by each cooperative. Some buildings require substantial down payments. Generally speaking, in Manhattan prospective buyers should be prepared to pay a deposit of at least 20 to 50% of the purchase price at closing.
  5. If planning to sublet, keep in mind that each cooperative has its own rules. Subleasing a co-op typically must be approved by the Board of Directors of the cooperative.

It is important to remember that, in Manhattan, co-ops are the norm, not the exception.However, before beginning a search for a cooperative apartment, consider about the financing limitations and the application and interview process.

Condominium Buildings:A condominium, or “condo,” is a form of housing tenure or real property where a specified part of a piece of real estate--usually of an apartment house--is individually owned, while use of and access to common facilities in the piece such as hallways, heating, elevators and exterior areas is shared under legal rights associated with the individual ownership and controlled by the association of owners that jointly represent ownership of the whole piece. The term is also used to refer to the unit itself in place of the word "apartment". In other words, a condominium is an "apartment" that is owned rather than rented by an individual.

Condominiums are attractive for a variety of reasons:

  1. Financing the purchase of a condominium apartment is governed by the financial markets not a board of directors and thereby much more flexible than in a cooperative. Generally, a buyer can finance up to 90 percent of the purchase price.
  2. An approval process is usually required and most condo boards require application packages with financial disclosure. Generally, these requirements are not as rigorous as the co-op boards and a board meeting may or may not be required. The length of time for approval varies from building to building, but it is usually not as long as a co-op approval process.
  3. There is greater flexibility in sub-leasing your apartment, making condominiums a better choice than co-ops for an investment properties.
  4. Condominiums are the ideal choice for non-U.S. citizens or for those whose assets held outside of the United States since co-ops are unlikely to approve buyers whose funds are primarily offshore.