I went to an open house for a co-op. Is that the same thing as a condo?

From a practical standpoint it is the same as a condo in that you get to live in a particular apartment and you have to pay a monthly fee to cover the costs of operating the building. However, there are legal distinctions between the two, the principal one of which is the way you finance your purchase of a co-op as opposed to a condominium unit. In a co-op there is a corporation which owns the building. When a purchaser buys stock in the co-op corporation it entitles you to a proprietary lease of the unit that you are buying. What you are paying for is the equity in the shares of stock which is the difference between what you are paying and what the percentage of stock you own as to all of the stock in the co-op corporation times the outstanding mortgage balance on the building. When you buy a condominium unit you get the mortgage on the unit just like you would on a single-family house. In a co-op the proprietary lease payment is used for the maintenance obligations of the building and in a condominium in the monthly condominium fees are used for the same purpose. However, in a co-op you are also paying for the mortgage debt service that is on the building at the interest rate on that mortgage. Many co-op buyers pay cash so the only obligation they have is for their share of the mortgage debt service on the building. In most co-ops the paperwork is somewhat daunting to finance the shares purchased but there generally are local banks that may provide financing but because the financing is not sold on the secondary market, it generally is more expensive than the plain vanilla mortgage loan that is sold on the secondary market.

If you have questions about this or any other legal matter, please contact Tom Bennett at (617) 531-6574 or tvb@barronstad.com.