Dashboard

Find us on...

Dashboard

Login using...

New Search X

What is the difference between Co-ops and Condos in Florida?

Posted by Denise Stewart on Tuesday, January 16th, 2018 at 8:58pm.

By: Melissa & Denise Stewart

There are several differences between Co-ops and Condos, especially in the State of Florida. If you look at the buildings you may not be able to tell one is a condo, and the orher is a Co-op.

If you are buying a unit, and you are financing it, you will definately want to know if it is a Co-op, because a lot of lenders will not lend money against a Co-op unit, while borrowing for a Condo is pretty much normal for most lenders.

The definition according to Florida Statute 718 of a Condo is: "means that form of ownership of real property created pursuant to this chapter, which is comprised entirely of units that may be owned by one or more persons, and in which there is, appurtenant to each unit, an undivided share in common elements."

The definition  according to Florida Statute 719 of a Co-op is: "means that form of ownership of real property wherein legal title is vested in a corporation or other entity and the beneficial use is evidenced by an ownership interest in the association and a lease or other muniment of title or possession granted by the association as the owner of all the cooperative property."

One of the major differences between a Condo and a Co-op has to do with the underlying land where the buildings are built. Most Condos are built on land that is owned by the the owners of the condo, meaning that when the condo was originally built the developer owned the land, built a condo building, and declared that the land and building (inluding the amenities like a pool, tennis court, and parking facility) are all part of the Condominium. In theory if you owned 1 condo in a building where there are 100 condos, you would own 1/100th of all of the building and amenities. When Co-ops were originally being developed, the developers had the idea that they would build the Co-op building on land that would be leased to the Co-op Association for 99 years, and for all practical purposes it was tantamount to full ownership. This was partly a tax scheme, and part a finance scheme, but either way nobody really gave it much thought because 99 years was an awful long time. Since some of these Co-ops were originated in the 1960s, the 99 years on the land lease is now down to under 40 years, and it is now something that the Co-ops are having to deal with. Basically, the Co-op Association is in a position where it must either negotiate an extension to the underlying land lease, buy out the land lease, or the people that are the Co-op owners will eventually forfeit their ownership rights at the end of the 99 year term. You can see that there are situations where the value of the Co-op unit can be diminished if the Co-op board has not done anything to deal with the land owner of the 99 year lease. Not all Co-ops have underlying land leases, but they do exist, and this is one of the first questions that you should ask if you are considering a Co-op.

The first time you will see the difference betwee a Co-op and a Condo is at the closing table. When you are buying a Condominium, you will receive a Deed from the Seller, just like you would for a house. If you are buing a Co-op, instead of a Deed, you get a share of stock in a corporation that owns the Co-op property, and then you will receive either a lease, assignment of lease, or another document that gives you the right to occupy the unit. You can purchase title insurance, and regular homeowner's insurance just like a Condo. The Closing Costs when buying a Condo vs buying a Co-op are basically the same. 

Question: Are the Associations in Condos and Co-ops run the same way? Pretty much yes. Both Associations have directors that are voted to office by the owners, and the directors are in charge of running the affairs of the properties, and making sure the utilities are paid, and there is insurance on the property. The Associations are also in charge of making sure the rules and regulations are followed as well as collecting assessments from the owners to pay the bills.

Can Condos and Co-ops be financed the same? This is where one of the big differences lies. For Condos, most lenders that lend on single family homes will also lend on Condos. There may be certain lending requirements that require the condos to be approved, and the LTV may be lower than loans for homes, but there is generally always multiple lenders that will lend borrowers that are buying a condo. For Co-ops it is a little different. There are only a hand full of lenders in Florida that will provide loans where the collateral is a Co-op, and many borrowers (and Sellers) will get frustrated in this process. The bottom line is that if you are looking at possibly purchasing a Co-op, and you will need to borrow part of the purchase price, make sure that your purchase contract gives you enough time to deal with the lender that may have to approve the Co-op as part of the lending process. Some Co-ops actually have restrictions that do not allow buyers to finance the purchase of the Co-op, so again, ask questions up front. 

Other Differences and Similarities:

Budgets: Condos- Yes    Co-ops-  Yes

Directors: Condos- Yes    Co-ops-  Yes

Rules & Regulations: Condos- Yes    Co-ops-  Yes

Reserves:Condos- Yes, but can be waved    Co-ops-  Yes, but can be waved

Title Insurance at closing: Condos- Yes    Co-ops-  Yes

Insurance for Building paid by Association: Condos- Yes    Co-ops-  Yes

Real Estate taxes: Condos- Yes, about 2 % of your Purchase Price    Co-ops-  Yes, about 2% of your Purchase Price

If you have any questions about buying a Condo or a Co-op, please call or email us: Denise Stewart 954 881 9148  email: denise@condo.net

 

Leave a Comment