Single Family Home v. Condo v. Co-op: Which is ‘right’ for you?
House or apartment? Own or “Rent”? The real estate market can be confusing, especially for first time home buyer. In this article, we’ll give you an overview of three different forms of property ownership: the single family home, the condo, and the coop.
Buying a single family home is a real estate transaction. The purchaser will own, subject to certain restrictions due to zoning or easements, a dwelling and the land it sits upon. There are some “downsides” to this: The purchaser will be responsible for paying NYS Transfer Tax at closing and real estate taxes going forward. He/She will be in charge of the maintenance on the home and property – snow? Get a shovel! Frozen pipe? Call the plumber. You get the idea. But it’s not all bad! While the purchaser has all the responsibility when you own a single family home, he/she is also the sole decision maker as to the home’s decor, and more importantly, its occupants. The home owner gets to choose the home’s color (again, subject to zoning), plantings, and outdoor furniture. The homeowner is the “queen” or “king” of the single home purchased.
Similar to purchasing a single family home, when you buy a condominium, you are buying real property. Like owners of single-family homes, condominium owners own their property outright—but their owned property encompasses only what is within the dividing walls of their units. All other parts of the property, whether in a high-rise, mid-rise, or townhouse setting, is owned and maintained by the condominium association, of which the unit owner is a member. The association will have rules that the condominium owner must follow– but in return, the association will maintain the building and outside areas (one less thing for the individual owner to worry about!). A condo owner usually owns some fractional percentage of the common area, but he or she does not “control” it as he/she would in a single-family home. For example, the condo owner probably (unless the rules state otherwise) can’t paint the front door’s exterior or likely can’t put posters on the terrace. The condominium owner is for the most part free to sell—or even rent out—the unit without the interference or approval of the condominium association.
Co-op ownership is quite different from single-family or condo ownership in that, when you “purchase” a co-op, you are actually buying stock in a corporation. Along with that stock, you will acquire a proprietary lease that gives you the right to occupy the Unit that is appurtenant to that stock. In a co-op purchase, therefore, you are not buying real property. You do not “own” the common areas of the building – the co-op does. The co-op maintains the building and common areas (snow removal, parking lots, lawns, landscaping, pools) and will create rules that the shareholder must follow. The co-op will pay the real estate taxes, which are part of the co-op shareholder’s monthly “maintenance” a/k/a rent. The co-ops offering plan, by-laws, and house rules govern what the shareholder can do with his/her unit – the rules will determine whether the shareholder can have pets, long-term guests, etc. A co-op shareholder can sell his/her shares and transfer the lease applicable to the associated apartment—but only to an approved buyer. That approval is given (or withheld) by the co-op’s board of directors—and most boards flatly forbid renting or subletting units, though there are some exceptions. The board’s approval of shareholders is a benefit to the community: it will do its best to only approve shareholders who show they can afford to live in the community and will abide by the community’s rules. This provides a certain level of confidence to shareholders that they will have “good neighbors” who want to live in the community.
Seward & Seward has vast experience with real estate and cooperative transactions. Contact us today to discuss your needs!
516-766-1415