Co-ops, Condos & PUDs: What's the Difference?

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Buying

What is a Co-op?

The definition of a Co-op is: a housing complex that is owned by a corporation made up of all the tenants. In a co-op, the tenant becomes a shareholder in the corporation that owns the property. The number of shares that each tenant owns depends on the size of their unit. Larger unit owners have more decision making power in how the building is run. The owners/tenants pay fees to cover their own portion of the building’s property taxes, mortgage, costs of repairs and improvements for the common areas. Each owner depends on each other financially, so they have an interest of both the financial history and personal life of each tenant.

Planned Unit Development (PUD)

PUD owners own their structure individually, plus a they own a small parcel of the surrounding land. As with condo ownership, PUDs will require membership in the Home Owners Association, but the land around their unit is maintained by the unit’s owner. If you’re want to have a yard, this is definitely the way to go.

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The Definition of Condominiums

Owning a condo is very similar to owning a house. The owner has a deed and mortgage, and they have to pay the property taxes. However, what the ownership of a condo is really just the “airspace.”  Condo owners don’t own the walls, floors, and ceilings, as 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, and landscaping. Maintenance is shared with their neighboring condo owners; and the property value depends on the condition and desirability of the entire development. Condo owners are usually allowed to remodel their units within the guidelines provided by covenants, conditions, and restrictions.  When purchasing a condo, it’s crucial to read the covenants before making the purchase.

Advantages of Common Interest Ownership

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

The Disadvantages of Common Interest Ownership

One disadvantage to some people is that the homeowner association dues are not tax-deductible. These dues are an ongoing expense that will lower the amount of the mortgage someone could qualify for. The documents can be long and complex; and many people need a real estate attorney to review them.

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