Co-ops, Condo’s and PUD’s OH MY!

Real Estate

What is a Co-op?

Glad you asked! A Co-op is a housing complex owned by a corporation made up of all the tenants. Each tenant becomes a shareholder in the corporation that owns the property. The number of shares the tenants are issued depends on the size of their unit. The larger unit owners have more decision making power in how the building is run. The owners also pay fees to cover their own portion of the building’s property taxes, mortgage, and costs of repairs and improvements for the common areas. Co-op owners depend on each other financially, so there is a lot of scrutiny of both the financial history and personal life of each tenant.

What is a Condominium?

Condominiums are similar in many ways to owning a house. Owners have a deed and a mortgage and they have to pay property taxes. The actual ownership is really just the condo’s “airspace.” Owners don’t personally own the walls, floors, and ceilings, because that is owned “in common” among all residents.

The condo owner must join the homeowners association (HOA) and pay monthly dues to cover management, insurance, maintenance, landscaping, etc. Maintenance is shared with their neighboring condo owners; the property value depends on the condition and desirability of the entire development. Condo owners usually can remodel their units only within the guidelines provided by covenants, conditions, and restrictions (which can be very involved) from how maintenance is handled to what color curtains can be hung. When looking into purchasing a condo it is crucial to read the covenants before making the purchase.

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Explanation of a Planned Unit Development (PUD)

PUD owners individually own their residential structure plus a small parcel of the land surrounding the structure. As with condo ownership, PUDs do require membership in a Home Owners Association, but the unit’s owner maintains the land around each unit. If you’re interested in having a yard, this is a great way to go.

Advantages and Disadvantages of Common Interest Ownership

When considering all the options, there are the advantages of buying a condo, PUD, or co-op. First, prices are usually much lower than single-family homes, plus landscaping and maintenance are minimal or nonexistent. Some people tend to feel safer in a “cluster” environment, and they like having a common maintenance service.

One big disadvantage is that the homeowners’ dues are not tax-deductible. These dues are an ongoing expense that will lower the amount of the mortgage one may qualify for. The documents can be long and complex; many people hire a real estate attorney to review them.