New York is one of the few U.S. cities that has co-ops, so it’s no surprise that many people know nothing of them. So what is a co-op? And why is it so unique? And is it better than a condo?
Let’s start with a definition of a co-op. In New York, when you buy an apartment in a co-op you own shares of the building — just like the stock market. This, however, comes with a few rules and regulations. You’ll need to be comfortable with the co-op board as they need to approve you before you can buy your co-op.
For instance, I had customers that wanted to buy in a highly selective Fifth Avenue co-op. I put their offer in, and the owner accepted the offer. It took us two months to get all the papers together for the board package, which was the thickest I’ve ever seen. Among other laws from this board included in the package was a rule prohibiting guests staying over for more than a week and a rule requiring the owners to hire their own doorman when having 10 people or more over for dinner. None of this mattered as the board rejected the packages (sans interview), and we never found out why because boards don’t have to stipulate the reasons for their rejection.
Even when you sell your unit, the new buyer has to go in front a co-op board to be approved (just like you did when you bought the place). If the co-op board decides that the buyer is not right for the building, the board will reject them, and they will not be able to purchase the apartment. And that’s not all: In most New York City co-ops you cannot rent your unit. For those co-ops that do allow you to rent out your unit, it is usually for a maximum of two years.
Any major changes you want to make to the apartment have to get the approval of the co-op board, and in cases of construction, there’s often a time limit to updates.
When you buy a condo, on the other hand, you own your apartment. This means that you can rent it and sell it without having to go through a board. When I first arrived in New York back in 2001, only 10 percent of the properties for sale were condos. However, with more new construction, more and more condos are up for sale and rent. As result, 25 percent of properties for sale today are condos.
Buying or selling a condo is so much easier. The owners of the condo cannot refuse the buyer of an apartment. If they do refuse, the condo owners have to buy the apartment in question from the seller, also known as the “condo has the right of first refusal.”
Bottom line: It is usually cheaper to buy a co-op, but it comes with that pesky aside that you don’t really “own” your apartment.
Although you have more properties to choose from if you buy a co-op and they’re often cheaper, there is still nothing better than freedom of a condo.
Vanessa Gad is the CEO and a broker at Gad Realty NYC, which handles residential real estate sales, purchases and rentals and caters to an international clientele. She speaks five languages fluently.