Co-op or condo in New York City?

What you actually own

Co-op. A corporation owns the whole building. You buy shares in it, and the shares come with a proprietary lease that gives you the right to live in your apartment. New York's tax law describes a co-op sale in exactly those terms, shares in a cooperative housing corporation tied to a proprietary lease (NYS Department of Taxation and Finance), and the city's transfer tax applies to transfers of co-op shares (NYC Department of Finance).

Condo. You get a deed to the unit itself plus a share of the common elements, much like buying a house (Brick Underground). Each condo unit is its own tax parcel, assessed and taxed separately (Real Property Law §339-y).

That one difference drives most of what follows. A co-op is a company whose shareholders choose who joins and set rules for living there. A condo is a collection of separately owned properties with a board that runs the building.

Board approval or right of first refusal

Co-op boards approve buyers. You submit a board package and usually meet the board, and the sale can't close without its consent. New York law doesn't require a co-op to say why it rejects a buyer; a bill that would require it is still in committee (NY Senate bill S6346). Courts give co-op boards wide latitude: under the business judgment rule adopted in Levandusky (1990), a court won't second-guess a board that acts for the co-op's purposes, within its authority and in good faith, as the Court of Appeals restated in 40 West 67th Street Corp. v Pullman (NY Court of Appeals, 2003). That latitude stops at discrimination: a board can't reject you for a reason the NYC Human Rights Law forbids, such as race, creed, national origin, disability, family status or lawful source of income (NYC Commission on Human Rights).

Condo boards usually can't say no. Where the declaration or by-laws give one, the board has a right of first refusal: it can buy the unit on the same terms, or waive. If it buys, the seller refunds your deposit and the contract ends (NYC Bar condo contract form). Either way, your attorney needs the board's waiver before closing. Our step-by-step buying guide covers both processes.

Down payment and financing

Neither law nor the city sets a minimum down payment; the lender does, and in a co-op so does the board. According to Brick Underground, a New York real estate site, most co-ops ask for 20–25% down, with a range from a rare 10% to 50% or more in higher-end buildings, and condos typically need 20%, sometimes as little as 10%. The same source says co-op boards commonly want savings left after closing, often around two years of mortgage and maintenance payments (Brick Underground). These are market norms, not rules: ask the building's managing agent for its own.

A co-op loan is a loan secured by your shares, and the lender and the co-op sign a recognition agreement. Our affordability calculator includes the co-op board tests (a debt-to-income limit and months of savings left over), and you can change both to match the building.

Closing costs, side by side

The mansion tax applies to co-ops and condos alike: 1% of the price from $1 million, more from $2 million in the city (NYS DTF). The big difference is the mortgage recording tax. A condo loan is a mortgage on real property and is taxed when recorded; a loan on co-op shares is not, because there is no mortgage to record (NYC Department of Finance). A co-op also needs no title insurance, only a lien search. Buying a new condo from the developer usually adds the seller's transfer taxes to the buyer's bill.

For a $1,500,000 apartment with 20% down, our calculator gives these buyer's costs:

The taxes are fixed by law; the other lines are our calculator's estimates, not quotes. The co-op comes out $30,870 cheaper to close than the condo, mostly the $23,100 mortgage recording tax. Open each in the calculator: co-op, condo, new development, or read our closing-cost guide for every line.

Maintenance against common charges and tax

A co-op's monthly maintenance pays your share of running the building and your share of its property tax, apportioned by your shares. A condo's common charges cover running the building only; the city bills you separately for the unit's property tax (Brick Underground; RPL §339-y). So a condo's monthly charge looks lower than a co-op's for the same apartment until you add the tax.

Ask whether the co-op has its own mortgage on the building, how large it is and when it falls due; the financial statements show it, and it affects what maintenance may do later. Compare the two on the same basis, maintenance against common charges plus tax, and put the figure into the affordability calculator.

Flip taxes

Many co-ops charge a fee when an apartment is sold, known as a flip tax. It isn't a government tax. New York's Business Corporation Law allows a co-op to charge different fees on the sale of shares as long as they are provided for in the proprietary leases, the offering plan or properly approved amendments (Business Corporation Law §501(c)). The amount, how it is worked out and who pays are in the building's own documents. It is usually the seller's cost, but a contract can shift it to the buyer, so ask early, and remember you'll face it when you sell.

Renting it out later

Whether you can rent the apartment out is set by each building's documents, not by law, so read them before you buy if you might move. As a general pattern, Brick Underground reports that co-ops restrict subletting, often to one or two years in a five- to seven-year period, with board approval of the tenant and a sublet fee, while condos are looser: some ban short stays, but there is usually no cap on renting out, and the board can only block a tenant by using its right of first refusal on the lease (Brick Underground).

Condops

A condop is a building split into condominium units, typically a commercial unit on the ground floor and a residential unit that is itself a co-op, a structure many buildings adopted in 1980s co-op conversions. You buy shares in the residential co-op, so expect co-op-style approval. Lenders usually treat condops like co-ops, so plan on a co-op-sized down payment, and brokers who describe their rules as more relaxed can be wrong: they can be as strict as any co-op (Brick Underground). Review both the co-op's and the condominium's finances.

Who each suits

A co-op may suit you if you plan to live there for years, have a large down payment and savings to spare, and value a building where owners live in their own apartments. You pay less at closing, in exchange for board approval, tighter rules on renting out and, possibly, a flip tax when you sell.

A condo may suit you if you need flexibility: a smaller down payment where the lender allows it, the freedom to rent the apartment out, and a purchase without a board interview. You pay for that at closing, in the mortgage recording tax and title insurance.

Either way, start with the cash. Estimate the cash to buy as both a co-op and a condo, then test the monthly cost and the board tests in the affordability calculator.