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Condo or Co-op?

Q - We are downsizing and thinking of purchasing into a co-op rather than getting a condominium.  Are there any drawbacks?

A - When you buy into a co-op, you own a percentage of the entire building and are assigned the exclusive rights of a unit.  You don't specifically own the unit.  If they are available, you are also assigned parking space and locker.   If you require a mortgage, it is usually a problem because, should you default, the bank cannot take possession of the unit since you don't specifically own it.

In a co-op building, there is only one mortgage on the entire building and one tax bill for the building.  Some of the older co-ops may no longer have a mortgage so individual financing is not possible because a bank cannot foreclose if there is no deed and mortgage.

A condominium building operates within the framework of the Condominium Act which offers statutory protections and safeguards to condo owners. A co-op, on the other hand, is governed by its own incorporation documents, bylaws and regulations. Out of this framework, come the contractual agreements between the corporation and the membership.  It also allows the Board of Directors to be selective regarding membership and new entries require their approval.

Those are some of the highlights pertaining to co-ops.  They each operate somewhat differently and you should closely investigate prior to making any offers.  Having a real estate lawyer review any contractual agreements would also be wise.

The upside is that a well-managed co-op can be a real joy to live in.  There is a great sense of community and pride of ownership reflecting on the entire building and its amenities.  Additionally, the cost to the member is often significantly less than a condominium building.

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