New York City is comprised mainly of cooperative and condominium apartments with a
smaller selection of private homes called townhouses or brownstones. Found in the outer
boroughs, buyers can find conventional houses similar to those in the rest of the country. To
end up with the right home for you, it is important to understand the differences in property
types and the nuances of the purchase process.
COOPERATIVES
Cooperatives (Co-ops) are not a new concept for New Yorkers, but many are unfamiliar with
this type of ownership. In NYC about 75-80% of apartments available for purchase are in
cooperative buildings, while 20-25% is in condominiums or townhouses. This means that
there are more properties to choose from if a buyer includes co-ops in the mix of properties;
typically, prices are more favorable for cooperatives because of supply and demand.
Cooperative buildings are owned by an apartment corporation. Purchasing a co-op can be
intricate, and subletting can be difficult. Each co-op has its own set of rules and should be
considered carefully.
Individual tenants do not actually “own” their apartments as they would in the case of “real”
property. Tenants own “shares” in the corporation which entitles them to a long-term
“proprietary lease.” The corporation pays the total amount of the building’s mortgage (a co-
op may have an underlying mortgage for their specific apartment on the entire building,
whereas a condo must be owned outright), real estate taxes, employee salaries, and other
expenses for the upkeep of the building. The tenant-owner, or “shareholder,” pays a share of
these expenses as determined by the number of shares the tenant owns in the corporation.
Share amounts are usually dictated by apartment size and floor level – space on a higher
floor will have more shares associated with it than its counterpart on a lower floor.
Each building has its own tax structure, but all co-ops offer tax advantages. Shareholders can
deduct their portion of the building’s real estate taxes, portions of their monthly
maintenance expense and the interest on the building’s underlying mortgage. Subleasing a
co-op apartment must be approved by the Board of Directors. Each corporation has its own
rules, and they should be examined if a potential owner intends to sublet. Most cooperatives
only accept buyers who intend to use the apartment as their primary residence. Co-ops are
not recommended for investors.
CONDOMINIUMS
Unlike a co-op, a condominium apartment is real property, and a purchaser is given a deed as
if they were buying a house. The difference between owning a condo and a house is that in
addition to owning the apartment, you also own a small percentage of the common elements
of the building like the halls, stairwells, basement, etc.
Each individual apartment in a condominium receives a separate tax bill from the city. There
is still a monthly common charge similar to the maintenance charges in a co-op, which is paid
to the condominium association to pay for such items as payroll, building maintenance and
supplies, management fees, and building repairs. These charges do not include your real
estate taxes and are not tax-deductible. They also tend to be lower than in co-ops because
there is no underlying mortgage for a condominium building.
The straightforward nature of buying a condo plus the fact that in some cases you can
finance up to 90% of the purchase price and sublet your apartment at will makes this form of
ownership a favorite for flexibility, especially among investors, foreign buyers and parents
purchasing for their children.
PRIVATE HOUSES AND TOWNHOUSE
Owning a house or townhouse provides the owner with a "fee simple" ownership of real
property. There are single-family and multi-family houses or townhouses which can be lived
in or rented out at will. In either case, the owner is responsible for payment of all real estate
taxes, maintenance and repairs of the property. The sale of the property may be conveyed to
any party without prior approval by anyone other than the homeowner.
