Cooperatives or Condominiums – Which Are NYC’s Most Acclaimed Properties?

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Real estate brokers and attorneys continue to vie for the hottest properties in New York City. These professionals make substantial fees by closing out transactions for sellers and buyers in the city’s increasing competitive market for condominiums and cooperative sales. Although seventy-five percent of city properties are co-ops, there appears to be more condominiums than co-ops in New York’s existing market. As more consumers continue to fight for this prized real estate, decisions have to be made as to the pros and cons of these transactions.

What should I buy in New York City, a co-op or a condo?

The rental apartment market remains hot in New York. Battles continue between Baby Boomers who want to live in a stable community and yuppies who want their independence. To start, co-ops and condos both offer buyers apartment style amenities like a doorman and superintendent, but condominiums generally offer larger dwellings at a substantially higher cost than coops. Nevertheless, they remain the most desired form of real estate in the city.

Which is generally more expensive to buy, a co-op or a condo?

Condominiums are generally more expensive to buy than co-ops. This is because the closing costs are much higher to buy a condo and maintenance fees are generally not deemed to be tax deductible. However, condominiums carry 9% higher value worth over co-ops, on average, and are generally easier to sell.

According to the Quarterly Elliman report, prices for both condo and co-ops are going up. However, condos are much more expensive to buy, with the median price for condos at just under two million dollars, while the median price for co-ops is 1.58 million dollars. Three-bedroom units showed the biggest difference in price, with a condo listing for 4.65 million and co-ops listing for just under three million.

What is the basic difference between a condominium and a co-op?

A buyer who purchases a condo is buying a parcel or real property and the common areas associated with that property. On the other hand, the buyer of a co-op is purchasing an interest in personal property. They are buying an interest or a fixed number of shares in a corporation.

In a co-op, the corporation owns the building and land where the apartment is located. This means that a co-op is an interest in personal property that involves a corporation owning stock that can be traced to each co-op renter. In a co-op, each of the occupants have to enter into a proprietary lease agreement.

What is a proprietary lease agreement?

It is an agreement signed between the buyer and corporation wherein the buyer agrees to own a percentage of shares in the corporation. The corporation therefore leases the building and its common areas back to the buyer. In return, the occupant of a condo has to pay monthly maintenance fees.

Where are co-ops generally located in the NYC?

Most are in older established areas of the City such as in the Upper East Side, where many of the building are historic and pre-war buildings.

Where are condominiums located?

Most condominiums are in newer areas on the east and west sides of the city where land is being developed. Many condos are being built up near the water in Brooklyn and Queens and on bordering areas in Manhattan. Many condos are also located in the Williamsburg area.

Who generally lives in condos?

Younger people who don’t want to have the inconvenience of dealing with a corporation and being screened by a corporate board tend to prefer condos.

Who generally lives in coops?

Older Americans and European immigrants who want to live in a long-term established apartment community and want to ensure long-term relationships.

What is the major difference in ownership between a co-op and a condo?

In a condo, you get a deed or interest in real property while in a co-op you get a proprietary lease with a corporation or an interest in personal property.

What are some common features of both condos and co-ops?

They are both typically apartment buildings that give their owners an equity interest in the properties. In other words, if either the co-op or condo goes up in value, their owners get the benefit of their appreciation in value to the extent that it exceeds the original price that they paid. The original price is often called the cost basis of these apartments for tax purposes.

What are some other common benefits relative to both co-op and condo ownership?

Both occupants of condominiums and co-ops receive similar tax benefits. Condominium owners use personal mortgage interest and real estate tax deductions. Co-op owners similarly can deduct personal loan interest and real estate taxes. Both can use these deductions on their state and or federal tax returns.

Is it harder to finance a co-op or a condo?

You can secure primary or secondary mortgage loans for either type of apartment arrangement. However, buyers should be aware that when they contract for a co-op, their down-payment has to be between 20 to 50 percent of the building’s purchase price. In contrast, buyers of a condominium only generally have to put down a ten percent down-payment or ten percent of their purchase price.

What can I expect to pay in closing costs if I am looking to enter into a condo or co-op arrangement?

You are going to have to pay substantially higher closing costs when you purchase a condo rather than a co-op. For example, if you purchase a one-million-dollar condo, you are going to have to pay $32,720, while when you purchase a one-million-dollar co-op, you are only going to have to pay a $10,000 New York Mansion Tax. The $32,720 closing costs would break down as follows for a one-million-dollar condo with an $800,000 mortgage:

Buyer Title Insurance                         $4,500

Lender Insurance                                $1,000

Title Search                                           $700

NYS Mansion Tax                                $10,000

NYS Mortgage Recording Tax          $15, 370

What are some negatives to co-op ownership?

Owners of co-ops have to pay monthly maintenance fees to cover the corporation that owns the co-op for the building and land and for building repairs. Unfortunately, these maintenance fees are typically higher than common charges owed by condo occupants and are not tax deductible.

What are some negatives of condo ownership?

You have to pay far more in closing costs for condos due to the expense of obtaining title insurance and paying for mortgage recording taxes since condos owners are considered to be owners of real property.

What about the ability to rent out my apartment?

Co-ops have strict co-op boards that invariably forbid the subleasing of their apartment units. Conversely, in condos, since there is no corporate board intervention or approval process, there are generally no sublease prohibitions and a friendlier pet environment.

What’s the bottom line?

If you want to be able to stay in a secure apartment environment with no short-term visitors that are in six-month subleases and play loud music, choose a coop. On the other hand, if you want more personal freedoms and want to make some money renting your place out when you travel, chose a condo as you don’t have to work with a co-op board who imposes strict regulations on who they want to let in. Generally, condos are more expensive to buy than co-ops – almost one and a half million dollars more for three bedroom units.


Taso PardilisTaso Pardalis is a founding partner of the Law Offices of Pardalis and Nohavicka, a leading full- service NYC law firm with offices in Manhattan, Queens and WeWork. Taso may be a well-known attorney with many cases making headlines in major media outlets, but at heart, he is a true entrepreneur that believes in supporting the small business community. His areas of concentration are: Intellectual Property, Trademarks, Corporate, Business Law and Real Estate Law.

Jacqueline Weiss is a third-year law student at Albany Law School. Ms. Weiss has completed New York State Basic Mediation Training for Community Mediation. She is currently an extern at the New York State Office of The Attorney General in its Litigation Bureau. During her first year of law school she was a judicial intern to Justice Pineda-Kirwan at the New York State Supreme Court of Queens County. She is interested in civil and commercial litigation.

Eliza Theiss

Eliza Theiss

Eliza Theiss is a senior writer reporting real estate trends in the US. Her work has been cited by CBS News, Curbed, The Los Angeles Times, and Forbes among others. With an academic background in journalism, Eliza has been covering real estate since 2012. Before joining PropertyShark, Eliza was an associate editor at Multi-Housing News and Commercial Property Executive. Eliza writes for both PropertyShark and CommercialEdge. Reach her at [email protected]