Unless you’re in the market for a townhouse, you’ll have two choices as a home buyer in New York City: a cooperative apartment (co-op) or a condominium (condo). Broadly speaking, apartments in most buildings built before the 1980s will be co-ops, while those afterward and new construction will be condos. Each has its advantages and disadvantages. The Comitini Team helps buyers navigate the sometimes complex rules and regulations of these forms of property ownership. After learning about your specific needs in a buyer’s consultation, we can advise as to which to consider. Here are some of our thoughts about them.
Cooperative Apartment: In NYC the cooperative housing model still dominates the city’s real estate marketplace. They make up a whopping 70% of Manhattan’s inventory, and the place where you’ll find the best bag for the buck.
While most co-ops are found in older buildings you many have been updated nicely or you may bring value to it by renovation. They are intended for your enjoyment as a primary residence only. They are not appropriate as investment properties where you will be renting the unit out, as this practice is widely restricted. Owners of co-ops are really proprietary tenants in the building and referred to as “Shareholders”. Co-op apartments are owned by a corporation, and when you buy a co-op, you’re actually buying shares in that corporation which entitle you to a proprietary lease for a particular apartment. This is referred to by attorney’s and lenders as the “Stock & Lease”.
One Northside Piers, Williamsburg
Your property rights are subject to the approval of the Co-op Board which has power to grant or restrict what you can do with it, from renovations to sublets. They are a form of ownership that has higher financial requirements for the down payment and liquidity of purchasers, creating a barrier to entry which helps assure the financial stability of owners and the corporation. That can be a big plus as a hedge against problems that might arise due to mechanical issues, or market-wide financial corrections. Coops often are able to weather the storm because of their higher owner equity and reserve funds as mandated by their Boards.
You’ll usually be required to have at least 20% or more of the purchase price as a down payment as most Boards will not permit greater than 80% financing, but it varies. More conservative Boards may only permit 75%, 50%, or no financing at all. Shareholders pay a monthly “Maintenance fee” to cover building expenses and real estate taxes. Shareholders receive a tax deduction for a portion of it.
Approval to purchase and sell is granted by a co-op’s Board of Directors, and it’s detailed required disclosures of a buyer’s financial position may be regarded by some buyers as intrusive. All prospective buyers must submit a Purchase Application (Board package) that includes detailed financial and personal information, including references, tax returns, and bank statements. The Board requires an interview with prospective purchasers, and dictates policies on pets, renovations, use as a pied-a-terre, and future sales. They will most often have restrictive subletting policies limiting them to 2 years or not at all. Foreign buyers without substantial assets in the US are unlikely to be approved, even on all cash purchases. Boards have a fiduciary responsibility to protect the health of the co-op corporation, not necessarily to approve a purchase. Co-ops offer great value if you are looking for a primary residence and your plans are to stay in town for a while.
One York Street, Tribeca
Condop: Strictly speaking, condops are mixed-use buildings with retail stores or commercial spaces, and may be broken-up into ownership as two separate condominiums. One is a commercial condo often retained by the original sponsor, and another as a residential multi-family condo, where the individual units are leased to shareholders cooperatively. More commonly it is a slang term used in the industry for buildings whose legal ownership is like a co-op (Stock & Lease) but with more relaxed rules like a Condo. These are much less common. These may allow unlimited subletting from day one of ownership, or after a specified period of personal use. The application process is usually simplified and often there is no Board interview required.
Condominium: Condos tend to be the newer housing stock of the city built over the past 50 years or so. Only about 30% of the housing stock in NYC are condominiums and they are in high demand because of the ability to buy them as an investment without Co-op Board sub-letting or sale restrictions. That dynamic of supply and demand also means you’ll pay a bit more for one. When you buy in a condo building, you’re purchasing fee simple real property, just like a house. You will be given a deed at closing, not stock and lease as with a co-op. Besides owning the apartment, you also own a small percentage of the building’s common elements, such as the halls, stairwells, etc… Each individual apartment gets a separate tax bill from the city. There is also a monthly common charge for building expenses. Financing and subletting terms are much more flexible in a condo than in a co-op. There’s no interview required to move into a condo building and, while your purchase price per square foot may be higher than in a co-op, there can be less money required as a down payment.