top of page

The difference between condominiums and co-ops

Both condominiums and cooperatives seem to be the same form the outside. They are both the unit in some apartment buildings. But what is the main difference between two of those? Scroll down to find out.



A housing cooperative is formed when people join together to own or control the housing and/or related community facilities in which they live. Usually, they do this by forming a not-for-profit cooperative corporation. Each month they simply pay an amount that covers their share of the operating expenses.

Personal income tax deductions, lower turnover rates, lower real estate tax assessments (in some local areas), controlled maintenance costs and resident participation and control are some of the benefits of choosing a cooperative (or, simply “co-op”).

residential building

The main distinction between a housing co-op and other forms of home ownership is that in a housing co-op, you don't directly own real estate. But if you don't own real estate, what exactly are you buying? You are buying shares or a membership in a cooperative housing corporation. The corporation itself owns or leases the real estate.

As part of your membership (being a shareholder) in the cooperative, you have an exclusive right to live in a specific unit (which is established through an occupancy agreement or proprietary lease) for as long as you are a member, provided you don't break any of the rules or regulations of the cooperative. As part of your membership, you also have a vote in the affairs of the cooperative’s corporation.

There are three different types of housing cooperatives as far as equity is concerned.

  • Market rate housing cooperatives

  • Limited equity housing cooperatives

  • Leasing cooperatives (or zero equity cooperatives)

In a market-rate cooperative, a person can buy or sell a membership or shares at whatever price the market will bear. In this way, purchase prices and equity accumulation are very similar to condominium or single-family ownership.

In a limited-equity housing cooperative (LEC) there are restrictions (most commonly maximum prices) on what outgoing members can get from selling their shares. The restrictions are usually imposed because the co-op's members benefit from features that make the housing more “affordable” to both the initial and future residents for a specified period of time. For example, mortgage loans that offer lower than normal interest rates, grants, and real estate tax abatement (tax reduction).

In some co-ops, these limitations are voluntarily imposed by the members. These restrictions are usually found in the cooperative's bylaws. The documents may also establish limits on income for new members so the co-op can target the special benefits of the housing to families who need them the most.

In a leasing cooperative, the cooperative corporation leases the property from an outside investor, which is often a nonprofit corporation that is set up specifically for this purpose. Since the cooperative corporation does not own any real estate, the cooperative is not in a position to build up any equity (just as a tenant doesn't build any equity). However, as a corporation, the cooperative is often in a position to buy the property if it comes up for sale at which point, they may convert it to a market rate or limited-equity cooperative. Some leasing cooperatives allow outgoing members to take with them at least part of their share of the cash reserves that were built up by the cooperative corporation while they were in occupancy.



A condominium is one of a group of housing units where each homeowner owns their individual unit, and each dwelling shares ownership of the areas of common use. The individual units normally share walls, but this isn't a requirement. Detached condominiums exist where an individual owns the lot their unit is built on. However, we’ll focus our remaining discussion on non-detached condominiums.

The main difference between condos and single-family homes is that there is no individual ownership of common areas. All of the land in the condominium project is usually owned collectively by the homeowners.

The legal definition of condominium is:

The absolute ownership of a unit based on a legal description of the airspace the unit actually occupies, plus an undivided interest in the ownership of the common elements, which are owned jointly with the other condominium unit owners.

The common elements can be undivided or limited in nature. A common element would be a rooftop deck for all owners and a limited common element would be something assigned to the unit owner such as a storage space.

residential apartment building

Condo projects that are built as multi-story apartments are usually recognizable as condos because they don't have land under each unit. Each condo project will form a condo association to make decisions about the expenditures for repairs, handle administrative work and manage the common areas of the project. The association normally maintains the exterior of the building and common grounds but does not maintain the interiors of the units. The maintenance and potential replacement of shared property is taken out of monthly homeowner dues, which is a fee to support the maintenance of the common areas. The association typically holds an insurance policy to cover the jointly owned parts of the property, while the individual owners carry insurance for the interior components of their unit.

multy-story building

In a condominium, the owner has individual title (ownership) to the inside space of his/her unit. Sometimes the ownership of a condominium is described as beginning with the paint on the walls. Because the owners jointly own common areas, they have an undivided interest in them - for example, the physical components of the buildings and the land.

modern townhouses

While some condo projects look like lofts or apartments, others may look like duplexes, garden homes or residences on regular lots. It is possible that a condominium may just be two units of a duplex. In this case, the two owners may jointly make decisions concerning maintenance of any common areas. By setting up the units of a duplex as two condos, the owner is able to sell them separately to two different owners.

Generally, creating a condo development allows the developer to get a greater number of homes in a given area approved by the city or county than he/she would with single ownership lots. This is usually the reason why a condo development is chosen over the single ownership of lots. Many times, an owner of apartment buildings will convert the apartments into condominiums. There are regulations regarding this conversion process to help protect the existing tenants who may be displaced.

I hope that now all the differences had been cleared. If not, don't hesitate to contact me with any real estate question.


Marina Zaric

Real Estate Broker for North Pacific Property


Featured Posts
Recent Posts
bottom of page