There are two basic forms of apartment ownership in New York: Condominiums and Cooperatives.  However, even given these 2 categories, each condominium and cooperative corporation is different.  Part of our legal due diligence is to research the different legal aspects of each, provide you with an educated understanding the unit you are potentially purchasing/selling, ande discuss the different aspects of each.  Below are general rules for both.

 

CONDOMINIUMS

 

A Condominium is a combination of Units registered as a Condominium under the Condominium Act. Each Unit is owned individually and transferred via a Deed. There are also "Common Elements" owned by all Unit owners.  When a buyer purchases a Condo, the buyer is purchasing the individual unit as well as the right to use the Common Elements.  Common Elements can include storage, parking, recreational rooms, gym, lobbies, hallways, elevators, etc.

 

Legally, a Condo is considered real property (i.e. real estate) and as such, it differs significantly from a Co-op. When a buyer obtains a mortgage for real property, he/she must pay a "mortgage tax" in to New York State and New York City, if applicable. The mortgage tax is generally the largest portion of a purchaser's closing costs. The mortgage tax differs by county and is based on the mortgage amount:

 

In addition to the mortgage tax, a purchaser of a Condo should obtain title insurance and pay recording fees for recording the Deed, Mortgage and Power of Attorney to the Condo Board. A co-op does not require title insurance and the only charges are basic search fees against owner and purchaser and recording charge is a UCC filing fee.  Condos and Co-ops used a primary residence and above $1 million are also subject to Mansion tax.

 

When purchasing a Condo, the Purchaser, generally, does not need to get board approval, although the seller must get what's called a "waiver of the right of first refusal." Under the structure of a Condominium, the Condo Board has the right to purchase the unit at the same price that the unit is being sold to somebody else. The Condo Board rarely exercises this right. A Condominium also has no flip tax, although it may charge the Seller for issuing the waiver of the right of first refusal. Subleasing is almost always permitted without consent from board and repairs do not require Condo Board approval, unless they affect the structure of the building or neighboring units whereby buildings department permits and approvals are also generally required.

 

Although there is an elected Board of Directors for a Condominium, the power of the directors is limited. Generally, the Condo Board has the power to collect and disburse common charges, sign contracts for maintenance and repairs, issue or exercise the right of first refusal and foreclose on units that do not pay their common charges.

Individual Condo owners pay his/her own real estate property taxes and are usually responsible for paying for electricity and gas. The common charges are not tax deductible, although the property taxes are.

 

 

 

 

Cooperative Apartment is a term used to describe the ownership as percentage of a corporation that owns or leases the building where the apartment is located. In exchange for such ownership, the stockholder is issued a proprietary lease to live in the Co-op apartment. When purchasing a Co-op, the buyer obtains a package consisting of (1) actual shares in the Corporation allocated to the unit AND (2) a lease allow' the buyer to live in the specific unit.

 

A Co-op is considered personal property and not real estate. As such, a buyer who obtains a "mortgage" for a co-op does not pay a mortgage tax. The buyer also does not have to obtain title insurance or pay 1. record a deed or mortgage. With a Coop, there is no deed; ownership is determined by stock certificate and a proprietary lease. Neither document is recorded in public records.  The "mortgage" is called a "security agreement" and is also not recorded in public records. The only document that gets recorded is a UCC -1 financing statement. The UCC 1 financing statements provides that the coop unit is being used as collateral for a loan.  From a legal persepctive, condos follows New York State foreclosure rules just as 1-4 Family homes. Co-ops do not and are treated like contracts and have much shorter litigation periods.

 

Please note that the closing costs for a Co-op are significantly lower than for a Condo.  Generally, every buyer must get approved by the Coop Board. There are almost no limitations as to the reasons a Co-op Board may deny an applicant. As long as the denial is not "discriminatory," the Board may deny the buyer for any reason or no reason whatsoever. The Co-op Board yields immense power; it can issue subleasing guidelines, pet policies, rental policies, set house rules, increase maintenance and can borrow money. Usually the utilities are included. It can collect, disburse contracts for repairs and maintenance Taxes are included in the maintenance. The real estate tax portion of the maintenance is tax deductible.