Buy your piece of a hi-rise.
Find out exactly what ownership means in
Condo or Co-op?
Decisions, decisions...a condo or co-op apartment may be
attractive to the first-time home buyer seeking to make the
transition from renting to owning. But what makes a condo different
from a co-op? Make sure you know what you're getting into before
In a cooperative, residents don't actually own their apartments.
The co-op member instead holds a lease or contract enabling him
or her to occupy the unit. Each also has an interest in the
entire building. In a condominium, the condo owner owns the
entire apartment along with a percentage of the common areas.
The key difference between buying a condo or co-op is that most
cooperatives require the purchaser to be approved by a membership
committee. Don't worry, it's probably not the Spanish
Inquisition. The only two reasons you can be turned down are: a)
if you lack the financial wherewithal to live there, or b) if you
refuse or show an unwillingness to abide by the cooperative
association's rules and regulations. No applicant can be
rejected because of age, sex, race, sexual preference or
Cooperative associations manage the property collectively as do
condominium associations. But condo associations do not
typically approve new purchasers who want to buy into the building.
The co-op association is typically a corporation that owns both the
building and individual units, made up of all the unit owners.
Each unit owner has shares in the association. Decisions are
made by vote of the co-op association members or the association's
board of directors, depending on the by-laws, on matters
including financial management, rules of occupancy, building
maintenance, and so on.
Apart from that, there are a few differences from a tax
perspective. Cooperative residents get to deduct their
proportionate share of the interest on the loan for the entire
cooperative. Plus they can deduct interest they pay on their own
loan. And they can deduct their proportionate share of real
estate taxes, under most scenarios.