In our last post we talked about some similarities and differences between co-ops and condos as it relates to lifestyle. This week we'll get into some of the ‘legal' issues and examine some of most often asked questions.
Difference Between Co-ops and Condos: Legalities
In our last post we talked about some similarities and differences between co-ops (cooperative housing project) and condos (condominiums) as it relates to lifestyle. This week we'll get into some of the ‘legal' issues and examine some of most often asked questions.
Difference Between Co-ops and Condos: Form of Ownership
To recap from last week, a condo is an apartment in fee simple with interest in common areas like parking lots, recreation areas, lobbies, etc. By comparison, in a cooperative complex you don't actually own any real estate, but rather shares in a not-for-profit corporation. That means being a ‘shareholder' entitles you the right to lease space in the building. And unlike the condo, in a co-op it's the corporation that owns the common areas.
Now when it comes to ownership rights with real property (like a condo), heirs retain possession of the location upon death. Conversely, intangible personal property (like a co-op) means the co-op's tenant-stockholder's shares are pass to your personal representative and could be subject to securities regulations (since they are shares and not real estate).
Difference Between Co-ops and Condos: Property Taxes
Condos appear in the property tax rolls as separate entities and individual owners are taxed separately as they would if they owned a single-family house. The corporation, however, owns a co-op, so it appears on the tax rolls as a single piece of property. The corporation pays the property taxes and passes along the cost to you, the tenant-shareholder, as part of your monthly maintenance fee.
Difference Between Co-ops and Condos: Federal Tax Deductions
In the condo, each individual can to deduct payments made for mortgage interest and property taxes if he resides in the unit. Plus, further deductions for such things as depreciation and maintenance can be declared if the condo is used as a rental property. With a co-op, you can only deduct your proportionate share of the property taxes and interest on the underlying mortgage.
Difference Between Co-ops and Condos: Ownership Transfer
When a co-op changes hands there are few settlement costs. Unlike a condo or single-family home, there is no appraisal, survey or title work to be done. People, like celebrities who want to remain anonymous, can keep their address and purchase price hidden from the public by buying a co-op. The reason is it's a transfer of shares, and not real estate, so it's not in the public record.
Stay tuned for our next blog where we'll discuss topics like financing, monthly fees and powers of the board.
**Although this article references ‘legal' issues, the writer is NOT licensed to practice law in New York. Please consult an attorney for legal advice.
