Condo Versus Co-op

The rules for dinner conversation, as stated by many of Brooklyn’s esteemed successfulites are, 1) Never discuss religion; 2) Never discuss politics; and 3) Never discuss condo versus co-op. In light of this very wise counsel, I ask that you not read the following while eating your supper.

Why are co-ops held in such poor regard by some?  For starters, one does not own one’s co-op apartment.  Instead one owns stock in a corporation – a.k.a. the co-op.  The co-op in turn issues the shareholder a lease to occupy the apartment, essentially making the owner a tenant. And here’s the rub: because the co-op technically owns the apartment, it can – and does – place restrictions on how the tenant can use, occupy, and resell the apartment. This means, that in extreme cases, the co-op can force a “bad” or “disruptive” tenant to sell his or her shares and move out, i.e. evict. Furthermore, in contrast to a condo or townhouse, a co-op apartment owner may not sell his apartment until the purchaser is first approved by the co-op board. One may not even bequeath the apartment to one’s heirs without the board’s approval.  And sometimes…the board does not approve. As damning as that sounds, it’s still not the primary reason my buyers say they prefer a condo over a co-op.  It is – drum roll please – the sublet policy. Co-ops place restrictions on the amount of time and to whom you can sublet your apartment to.  Today’s buyers have plans to work in Europe, study on the west coast, and join the circus.  It’s understandable that they don’t want a “nonsensical” board approval or sublet policy to stand in their way.

So, in most buyers’ minds, the obvious advantage to purchasing a condo, is that you are not purchasing a co-op. Here are a few more check marks in the condo column:

  • ·        The carrying costs tend to be lower. In general, condo buildings are newer. Newer buildings mean less wear and tear, and less wear and tear means less expensive repairs to pay for.  Add into the mix New York City’s generous tax abatements and a condo’s monthly expenses are often very attractive.
  • ·        Apartment repairs and upgrades are easy. Want to renovate your kitchen? Split that oversized bedroom into two? Add a bay window? No problem.  Your apartment is your castle and no one can tell you what you can do with it.
  • ·        Did we mention no board approval or sublet policy?

In addition to being a non-starter for the majority of today’s buyers, a co-op’s rules and procedures can cause much rancor for a co-op board who manages its affairs poorly. However, the perceived or unperceived perils of a co-op become clear advantages when put into the hands of a well-run co-op, and luckily for all, in Brooklyn, most fall into this category.  Here’s how: 


  • ·        Co-ops tend to be occupied by owners. They don’t attract short term buyers, and more importantly, don’t attract investors who never plan on living in the building.  A co-op’s sublet policy can be a real drag, but your neighbors tend to take a real interest in the quality of the building, the co-op employees, the common areas, and the shared services.  This creates a more stable environment (and, in my humble opinion, a nicer looking lobby). 
  • ·        It’s often easier to refinance. Your apartment, in a six unit building with only one other owner occupied apartment, is not going to be approved for a mortgage. In order to obtain bank financing, more than 50% of a building’s units must be owner occupied. Again, the co-op’s disastrous sublet policy to the rescue.  Co-ops are almost always between 51% and 90% owner occupied, meaning: not only are the occupants able to re-finance, they are able to sell their apartments to someone who is getting financing.  (Condo owners often have trouble selling their apartments when less than 50% of their building’s units are owner occupied).
  • ·        With the board approval process, there is a real advantage to being able to vet (financially and otherwise) the people you are going to share walls, and expenses with. (Here’s a great NY Times article demonstrating that some condo associations also see this as an advantage: Condos Steal a Page (or 20) from Co-ops).
  • ·        Co-ops can obtain an underlying mortgage, using their building as collateral. Condo associations don’t own their buildings and can only obtain a line of credit for much less money. This gives a co-op great flexibility when managing expenses and an additional write-off for its members.
  • ·        For a small number of units, co-ops can’t be beat.  If I asked you to purchase a townhouse with three other individuals that you have never met, have no idea of their job or financial status, and who may not ever live in the building, would you do it?  Probably not, but that is a fairly accurate description of ownership in a small condo building.
  • ·        The purchasing costs (i.e. price per square foot) tend to be anywhere from 10 to 50 percent lower (e.g., as of this writing, StreetEasy lists the median price per square foot for all NYC condos as $1333, while for co-ops it is $500).
  • ·         The closing costs for a purchaser are substantially lower.  There is no mortgage tax with a co-op, and title insurance is almost non-existent.
  • ·         Did we mention the board-approval and sublet policy.


Please comment freely on this article.  I’m very interested to learn what type of purchase you prefer and why.  Co-op vs. Condo? 

Thanks for reading.

Author: Jim Winters

Hi! I love feedback and helping, so please chime in. I'll always respond to comments, emails, and shouts in my direction on the 3 train 😊. I am, among other things, a passionate Brooklynite, a family man, and a (semi-) retired real estate broker.

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