The real estate market in New York City is known for its diversity; not only in its neighborhoods, but in the types of properties available to potential buyers. While many are familiar with the general process of a real estate closing, the specifics can vary depending on whether you are buying or selling a condominium (condo) or a cooperative (co-op) apartment. These two property types involve distinct processes that impact both buyers and sellers.
Ownership Structure
Condominium
When you buy a condo, you are buying an individual unit within a building, and you have a right to use common areas with other owners and residents (such as hallways, elevators, and other amenities). Similar to owning a house, you have full ownership rights to the interior of your unit, giving you the rights to sell, transfer ownership, or take a loan against your property without approval of other residents or a Board of Directors.
Cooperative (Co-op)
When you buy a coop, you are not buying an apartment in the traditional sense. Instead, you purchase shares of stock in a corporation that owns the building and sign a lease (also known as a proprietary lease) which entitles you to live in the apartment. Technically, you do not own the apartment outright.
Financing
Condominium
For condominium purchases, buyers in New York City typically secure a mortgage or loan to purchase the property in the same way as they would with any real property. Lenders similarly assess your creditworthiness, income, and debt-to-income ratio to ensure financial stability and ability to repay the loan. While condominiums in New York City may have a higher price tag, you may be able to negotiate a smaller down payment on a condominium.
Cooperative (Co-op)
Co-op Boards may have strict guidelines for approving loans, since the buyer is purchasing shares of stock in a corporation and not real estate. Many lenders and co-op Boards may even require a higher down payment compared to one for a condominium purchase.
Board Approval Process
Condominium
One of the biggest advantages of purchasing a condo is the lack of a stringent board approval process. While the condo board may have their own rules and regulations that the new owner must follow, and they may have some form of an approval process for a new buyer, the transaction is typically more straightforward.
Cooperative (Co-op)
Buying a co-op in New York City often involves a more rigorous approval process. Buyers submit information about themselves, including financial information, to a Board of Directors; the Board of Directors would then review that application and may conduct an interview. The Board of Directors has discretion to approve or reject a sale based on a potential buyer’s financial stability or overall suitability as a shareholder. This process tends to be lengthy, and sometimes, a Board’s rejection of a potential buyer can result in a deal falling through.
Closing Process
Condominium
The buyer and seller of a condominium apartment will meet to sign necessary paperwork, including mortgage documents, affidavits, and the deed. Since a condo is considered real property, the transfer of title from the seller to the buyer takes place and the transaction is complete.
Cooperative (Co-op)
Once the buyer’s financing is fully approved by the lender and the co-op Board, the co-op corporation will issue a stock certificate reflecting the transfer of shares and issue the buyer a proprietary lease for the corresponding unit.
Both condominiums and cooperatives offer attractive living options in New York City; however, their ownership comes with significantly different legal structures, financial implications, and processes. As a New York real estate attorney, I want to be sure my clients thoroughly understand these distinctions before buying or selling their condo or co-op. If you’re considering buying or selling in New York, don’t hesitate to contact us for legal advice and representation throughout the process.