I get asked this question all the time: “What is the difference between a condo and a coop?”

Then comes the second question: “Why are co-ops so cheap?”

I think by answering the first question, we’ll be able to address the second…

Ownership

CONDOMINIUM: Purchaser obtains ownership of the individual unit (deed).

COOPERATVE: Co-Op corporation is the registered owner of the property (registered on title); the purchaser does not own the unit.

Possession

CONDOMINIUM: Purchaser gains ownership to individual unit by a deed pursuant to provisions in The Condominium Act.

COOPERATIVE: Purchaser has long term, exclusive use of the individual unit through a lease, or occupancy agreement, not a deed.

Common Areas

CONDOMINIUM: Purchaser gains a percentage interest in the common areas of the building.

COOPERATIVE: Purchaser acquires shares in the Co-Operative and is a shareholder in the corporation.

Membership

CONDOMINIUM: Purchaser becomes a member of the Condominium Corporation which:
a) manages the affairs of the building according to the Condominium Act, and more particularly, the Declaration and the by-laws
b) represents the interests of the owners

COOPERATIVE: Purchaser becomes a member of the Co-Operative Corporation which:
a) owns and manages the entire building and land on behalf of the shareholders and more particularly the by-laws and the Co-Operative agreement
b) grants exclusive occupation rights to shareholders of a specific unit

Financing Rights

CONDOMINIUM: Purchaser can individually finance his/her own unit.

COOPERATIVE: Purchaser can finance the unit, using corporation shares and leasehold interest in the unit, if the building does not have a blanket mortgage registered on it and if there is no prohibition on using shares as security.

Maintenance

CONDOMINIUM: Purchaser is assessed for percentage share (based on the size of the unit in comparison to the whole building) of common expenses.

COOPERATIVE: Purchaser is assessed for percentage share (based on the size of the unit in comparison to the while building) of common expenses.

Reserve Fund

CONDOMINIUM: Condominium Act requires a reserved monetary fund to be established for maintenance of the building.

COOPERATIVE: No legislation requiring a reserve monetary fund for maintenance but most Co-Operative agreements require a reserve monetary fund for maintenance.

Management Decisions

CONDOMINIUM: Purchaser can participate in management decisions by sitting on the Board of Directors and voting at Annual General Meetings.

COOPERATIVE: Purchaser can participate in management decisions by sitting on the Board of Directors as a voting member of the Co-Operative Corporation.

Rules & Regulations

CONDOMINIUM: Purchaser is subject to the Declaration, rules and by-laws of the Condominium Corporation.

COOPERATIVE: Purchaser is subject to the rules and by-laws of the Co-Operative Agreement.

Sale/Rent of Unit

CONDOMINIUM: Purchaser does not need consent of the other owners to sell, rent, or mortgage his or her unit.

COOPERATIVE: Purchaser needs consent of Board of Directors of Co-Operative Corporation to sell shares, assign lease for the unit, or rent the unit, which is not unreasonably withheld.

Sale of Unit – Procedure

CONDOMINIUM: Sale of unit is subject to receipt of an estoppel certificate (“Status Certificate”) which identifies any outstanding or pending payments, assessments, or legal actions, re: the unit or Corporation.

COOPERATIVE: Sale of unit is subject to receipt of an estoppel certificate (“Status Certificate”) which identifies any outstanding or pending payments, assessments, or legal actions, re: the unit or Corporation.

Audit & Financials

CONDOMINIUM: Condominium Corporation has yearly audited financial reports issued to all owners and is managed by a professional management company.

COOPERATIVE: Co-Operative Corporations have yearly audited financial reports issued to all shareholders and are self-managed or managed by a professional management company.

I think the above information would indicate that “condominiums” are a more desirable form of ownership than “co-operatives,” would you all agree?

Perhaps not in every situation.  I think the cases of a 24-year-old, first-time-buyer and that of an elderly 88-year-old pensioner would contrast significantly.

But empirical evidence clearly shows how much cheaper co-ops are than condos.

The main reasons, I believe, come down to three issues:

1) Ownership.  You don’t own your co-op, whereas you do own your condo.

2) Financing.  It is far easier to obtain a mortgage on a condo than on a co-op, since you don’t actually “own” the co-op unit.  Co-op purchasers often encounter difficulty obtaining financing if the Co-Operative Corporation has taken out a blanket mortgage on the property and/or if there are any restrictions put in place on using shares of the co-op as security for the mortgage.

3) Sale.  The Board of Directors of a co-op must approve any sale or lease of the unit (ownership in the unit), and while approval isn’t unreasonably withheld, it can be withheld at times for any number of reasons.  It is also a much longer sale process and more complicated.

Ultimately, it’s up to the prospective purchaser to decide if a co-operative is the right form of ownership for him or her.

It’s an out-dated, rare form of ownership and that alone has to raise a few red flags.