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Cooperatives and Condominiums

Cooperatives (co-ops) and condominiums (condos) are each forms of ownership in which you purchase certain rights to the use of a home, apartment or vacation property, of the type that you might otherwise rent.

In the case of a cooperative, you own shares in a cooperative association. You lease your home or apartment from the association. You also share in the expenses of running the cooperative, including part of the general mortgage for the building or development. As with a conventional home, you will also pay for whatever mortgage you take on to purchase your shares in the co-operative association. A co-op board runs everything, and the board must approve you before you will be able to buy your co-op. If you sell your co-op, they must also approve of the new buyer, otherwise the sale will not go through.

With a condominium, you own your home or apartment outright and share the ownership and expenses for “common areas” like the grounds, security facilities, parking and athletic facilities. An association in which you can participate takes responsibility for the common areas.

During the years when the real estate market was booming, many Americans did well with their investments in these properties. Logic dictated: “why throw away money in rent, when you can own.” Now that the boom times are over, however, many co-op and condo owners regret being stuck with properties that can only be sold with difficulty. Renters, after all, can always move on to rent somewhere else.

Beyond the return on investment issue, dealing with co-op and condo associations can be difficult. They decide how much you pay each month for “maintenance” and how often you must contribute for special assessments, say, for new landscaping for your development, or for a new boiler for an apartment building. Unless you become involved in the association yourself, which may be difficult in many cases because a few key owners have control, you might have little say in how your property is managed. This situation can be especially vexatious in the now common case in which the unhappy owner cannot move because of real estate market considerations.

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