Co-ops vs. Condos: Understanding Manhattan Housing

Real Estate Agent

Understanding Cooperatives and Condominiums

CO-OPS - Manhattan's Primary Housing Style

Co-ops (short for "cooperatives") are apartments buildings owned by a corporation. Individual tenants do not own their apartments in exactly the same way that they would a condominium or home. They actually own shares of stock in the corporation. These shares are apportioned based on the size and floor level of their apartment, and ownership is established by a stock certificate and occupancy is governed by a "proprietary lease". The corporation pays all real estate taxes, maintenance expenses, and the underlying mortgage on the building. The co-op owner's portion of the payment depends on the number of shares owned in the corporation.

Cooperative ownership is the most common form of apartment ownership in New York City. There are three times as many co-ops as there are condominiums in Manhattan, which means that there are more cooperative apartments on the market and they are likely to be more affordable than similarly sized condominiums.

History of Coops

    If the idea of going through a coop baord sounds a little un-American and intrusive, is.  Cooperative living got its start in the 1880's, inspired by Charles Fourier, a French socialist who argued that cooperation bred efficiency.  A French immigrant to New York named Philip Hubert picked up on the idea and built arguably the first co-op, the Hubert Home Club, near the current site of Carnegie Hall.

    But according to the New York Times, despite their utopian origins, co-ops quikcly turned into a celebration of capitalism and exclusivity. Soaring new Hubert Home Clubs opened on Madison Avenue and next to Central Park, offering the sort of living space that has always made New Yorkers envious, according to the writer Elizabeth Hawes.

     Today, co-ops-which sell shares in a corporation that owns the building, rather than individual apartments-- make up the bulk of our housing.  As always, the boards have the right to reject any buyer who doesn't quite fit, however they define "fit."   Socialism turned into New York style elitism?  Yes, indeed.

 Advantages and Disadvantages

Basically, cooperative ownership offers the same advantage with a few extras:

  1. The tenant-owners elect a Board of Directors, whose responsibility is to meet, interview and "approve" or "disapprove" a prospective owner, thereby protecting the present tenants' interest by approving only qualified candidates.
  2. Cooperative ownership offers a more stable community environment. Residents tend to stay for longer periods of time, and few co-ops allow extensive subletting, preferring a high owner-occupancy.
  3. A large portion of the monthly maintenance fee paid by each shareholder is tax deductible, i.e., the pro-rata share of the corporation's real estate taxes, as well as the building's underlying mortgage payment.

There are some disadvantages, however, in purchasing and owning a co-op:

  1. The board often requires a large cash down payment. Usually prospective purchasers are required to put 25% down. Some co-ops may require more. Many of the most exclusive buildings permit no financing at all.
  2. Most co-ops prefer owners to be occupants; therefore subletting an apartment may be difficult. Each co-op board has its own set of rules, but generally speaking, subletting will have to be approved by the board, and permission is usually granted for no more than 2 years. Some co-ops, however, are more flexible and are known as "easy boards".
  3. Owners are normally not allowed to use their apartments for professional or business purposes.
  4. Almost all renovations to individual apartments will have to be approved by the board.
  5. Owners who wish to sell their apartments will have to have the new buyer approved by the board through the application process.
  6. Often co-cops impose a tax on selling called a "flip tax" to compensate the co-op for the inconvenience of someone new moving in. The monies go to the co-cop treasury and often help keep monthly maintenance down.

Despite the disadvantages, cooperative ownership remains a very popular option for residential ownership in Manhattan.


Owning a condominium in Manhattan is the same as owning one anywhere else. It is a fee simple ownership and the buyer receives a deed in a formal title transfer. Monthly payments to the condominium are called "common charges", and they are used strictly for maintenance and upkeep of the jointly owned areas. Of course, the amount of interest on the owner's personal mortgage is fully tax-deductible. Real Estate taxes are paid directly to the city.

Fee simple ownership gives owners the right to rent their own apartment, a place for some people. Mortgage amounts can be as high as 90% of the sales price if the buyer qualifies. Often there is not a formal application process, so the time from contract signing to closing is usually shorter.

Review of Cooperatives (Co-ops)

  • The cooperative corporation owns the building and the tenant (unit owner) owns shares of stock (assigned according to size and type of apartment).
  • Co-ops are governed by a board of directors (resident shareholders) that determines the requirements for applicants.
  • The co-op application process is quite lengthy and may require flexibility in terms of occupancy date.
  • Renting in a co-op building is referred to as subleasing. Prospective subleasors are subject to the same application process as someone wishing to become a shareholder.
  • Applicants must provide financial and social information to the Board of Directors and will also be required to attend a personal interview.
  • The Board of Directors may accept or reject applications without furnishing a reason.
  • There are both modern and older co-op buildings, however, most prewar buildings are co-ops.
  • Cooperative ownership also involves a monthly maintenance fee (for building upkeep), preservation of common areas, staff salaries, etc.) that is based upon the number of shares assigned to a particular owner. The monthly maintenance charge also encompasses an owner's share of building real estate taxes. This portion of the maintenance is tax deductible.

Review of Condominiums

  • Condominiums are considered real property.
  • Some condominiums require a purchaser to submit detailed financial and social information. A personal interview is usually not required.
  • The condominium application process can be quite lengthy and may require flexibility in terms of occupancy date.
  • Condominium buildings account for approximately 20% of the total ownership buildings in Manhattan.
  • Use of on-site health club and pool is sometime included in the monthly common charges.
  • Condominium ownership also involves a monthly fee called Common Charges (for building upkeep, preservation of common areas, staff salaries, etc.) that is based upon the square footage of a particular owner's apartment. Real estate taxes are excluded from the common charges and are paid to the City separately. Real estate taxes, are, however, tax deductible.

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Comments (7)

Carole Cohen
Howard Hanna Cleveland City Office - Cleveland, OH
Realtor, ePRO
Hey Mitchell I love the historical information on the Hubert Clubs and Charles Fourier! I just had to google him before I commented. Truly fascinating and I never imagined it. Had more of a picture of the elite establishing that practice! Fascinating.
Feb 13, 2007 12:45 PM
Mitchell J Hall
Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn
Hey Carole, Yes, interesting origins of coops. Today they're pure capitalism and exclusivity.
Feb 13, 2007 01:22 PM
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro
Very informative.  My daughter moved their from Texas last year and it was definitely been a learning experience for us.  She was living in Manhattan but has since relocated to Queens.  She moved their as a graphic artist and found she hated corporate America and is now happily working as a flight attendant.
Feb 13, 2007 02:49 PM
Mitchell J Hall
Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn

Hi Marchel,

Thanks and good for your daughter. Travelling is more fun than sitting in a cubicle all day and now she can visit her parents anytime.

Feb 13, 2007 02:59 PM
Louis Snitkin
Halstead Property - Manhattan, NY
"Results That Will Move You"

Mitchell - Your blog site is very well written and informative. You've inspired me to get my rear in gear, so to speak, and develop my own.

I know it may confuse the "tourists," but this list isn't complete without the New York "Condop." 

For anyone who's interested:

The definition of a Condop, in daily use by New York real estate brokers, relates to cooperative apartment buildings that do not have board approval requirements or restrictions on rentals (Condo style by-laws). These buildings are viewed as hybrids wherein the ownership form is a cooperative corporation but the procedural characteristics are similar to a condominium.

The legal definition of a Condop is a building, which has been partitioned into mixed-use segments; with each segment receiving a condominium unit deed. In turn, one of these segments is identified as a residential component that is owned by a cooperative corporation. This residential component is therefore referred to as a Condop since the cooperative corporation effectively owns a condominium unit deed rather than a fee simple interest in the land.

The initial motivation for creating Condops (as legally defined) was to avoid potential adverse consequences of violating section 216 of the Internal Revenue Code. Included within this provision is a requirement that a cooperative corporation cannot receive more than 20 percent of its income from sources other than tenant-shareholders in order to qualify for a tax deduction pass through of interest and real estate taxes to individuals [The rules were changed at the end of 2007 by the Mortgage Forgiveness Debt Relief Act (HR 3648)]. In addition, another motivating factor was that federal law created certain limitations on the ability of sponsors to enjoy the benefits derived from utilizing a master lease on the retail component of the property at a below market rent for an extended period of time.

Which leads me to the most important thing: If you have any questions regarding Condops, please consult your attorney. Also known around here as "CYA."

Sep 09, 2009 05:30 AM
Mitchell J Hall
Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn

Thanks Louis,

FYI: I currently have a 1 bedroom with a balcony for sale at The Boulevard, a full service luxury condop on the Upper West Side.

Please bring your buyers.  

Oct 15, 2009 04:16 AM
Grant Hammond
Metropolitan Brokers, LLC - Nashville, TN
Nashville Homes

This is a very important distinction that many Southern condo buyers do not understand. I have a condo owner relo to NYC last year and she really could have used this knowledge to make a better decision. I guess Nashville condo living is also a little less sophisticated than NYC...

Feb 23, 2011 10:03 AM