The dream of owning a home no longer evokes only a house on its own plot but, to many, calls to mind visions of a condominium (condo) or cooperative (co-op). Both are units of rooms in either an apartment building or a group of attached townhouses. Your home is an individual unit, but you share with your neighbors such common areas as entrances, elevators, the grounds, and parking and recreational facilities.
When you buy a condo, you receive a deed. You own the unit you live in and, if it’s a townhouse, the land it’s on. You share ownership of the common areas with the other residents and pay a monthly maintenance fee for the upkeep of such areas. The residents elect an association to make rules for the development.
When you buy a co-op, you get shares of stock in the corporation that owns and manages the building. The number of shares depends upon the size of your unit. Your monthly maintenance charges, based on how many shares you have, are a portion of the principal and interest on the building’s mortgage, taxes, and maintenance costs. The co-op board of directors-shareholders elected to run the co-op approves the sale of any unit and sets and enforces bylaws and rules to operate the building. What to look for
Before buying a condo or a co-op, investigate its location. A convenient area with stores and public transportation protects your investment. Carefully inspect your unit, the entire complex, and its common areas for potential and existing problems that might change your mind about buying or help you negotiate a better price. If you don’t know much about structural problems, hire an engineer to inspect the premises.
Talk to other owners about their units and the management of the complex. If the developer has built or owns other complexes, find out whether the owners of units in those complexes are satisfied with the management. Read the prospectus carefully. Check the financial background of the owner, or builder, especially if the units are new: consult your local consumer affairs office to find out whether there are any outstanding claims against the owner or builder.
Once you decide that a condo or co-op is for you, you should read certain documents before signing on the dotted line. Have your lawyer explain what documents your state requires. Those most commonly required follow.
The declaration of condominium (or prospectus for new condos) states the physical extent of the complex and plans for its management, the value of each unit, any conditions and restrictions on your rights as an owner, and the election process for the association. For a co-op, you receive a copy of the same lease that is given to all the tenants. It declares your rights and duties as a shareholder and the powers of the board.
A financial disclosure statement for the last 3 years tells you in dollars and cents how well the condo or co-op management runs the complex and whether there is a separate fund for emergencies or large repairs. This gives you an idea of the accuracy of the estimated monthly charges and the need for special assessments-extra fees for unexpected expenses.
The bylaws and rules detail the procedures governing the board and define unacceptable behavior-such as unleashed dogs and noise after midnight-and the remedies.
The management agreement explains the responsibilities and costs of operating the complex. Often the service employees contract accompanies this agreement. It lets you know how much the employees make and when they are due for a raise or a new contract-expenses that affect your maintenance charges.
The purchase and sale contract for a condo describes the condo’s size and location, the buyer and seller, the purchase price and down payment, the monthly fees, the real estate taxes on the unit, and the closing date when you become the owner. For a coop, the contract states the number of shares bought, the price and down payment, the monthly charges, and any special assessments. It should also provide that if the sale depends on board approval, you’ll get back your down payment if rejected. For both condos and co-ops, financing terms, the right of the seller to sell the unit, and repairs to the unit are just a few of the provisions you might want to add to your contract.