Residential Real Estate Ownership:

| The Cooperative Apartment  | The Condominium Apartment  |

The Cooperative Apartment:

In a Co-op, the apartments, common areas, and entire building are owned by the cooperative corporation.  When you buy a cooperative apartment, you are actually purchasing shares in a Coporation.  The Corporation issues shares of its stock allocated to each apartment based upon the size of the apartment.  The larger your apartment, the more shares within the corporation you will own.  As a shareholder, you are entitled to a "proprietary lease".  A proprietary lease is similar to a rental lease but much more detailed.

Most corporations posses a commercial mortgage on the entire building called an "underlying mortgage."  If this is the case, each purchaser may have a separate loan for the purchase of their apartment.  The security for a co-op apartment loan are the shares of the stock and proprietary lease which is held by the lender while the loan is still pending.  The lender will reqiure a Uniform Commercial Code Financing Statement (UCC-1) to be filed in the county where the apartment is located to place a lien on the shares and proprietary lease.

You will pay monthly maintenance fees to the building which covers all building expenses such as heat, hot water, insurance, staff salaries, real estate taxes and the mortgage indebtedness of the building.  The part of the maintenance covering both taxes and mortgage interest is tax deductible.

The following pointers are important for you to know when it comes to purchasing a Cooperative:

• A Co-op Board of Directors has the ability to determine how much of the purchase price may be financed.  The minimum cash requirements vary depending on the building.
• Subleasing a co-op can be difficult.  Each co-op has its own rules and they should be carefully reviewed prior to application to purchase.
• All prospective purchasers will be interviewd prior to approving any purchase. 

Most co-ops require that shareholders occupy their apartments as primary residences.  Typically, some allowance is made for subletting for one to two years, however, a prospective sub-tenant is required to make a formal application to sublet and must be approved by the board. 

The Condominium Apartment:

The ownership of a condo apartment is similar to the ownership of real property.  A purchaser takes title by deed, which is recorded in the municipal office where the property is located.  In a condominium, a purchaser owns the apartment plus a percentage of the common areas of the building known as "common elements". 

Each individual apartment in a condominium receives its own tax bill.  The purchaser pays monthly common charges which are a share of operating costs of the building, including employee salaries, insurance, fuel, management fees, cleaning and upkeep of the building.  There is generally no approval process or financing limitations on the amount of money you can borrow to purchase a condominium apartment.

The straightforward process of buying a condo coupled with the fact you can in some cases finance up to 90% of the purchse price and sublease them at will, makes condominiums the number one choice for flexibility.  (top)