What’s the Difference Between a Condo, Co-Op, and Townhouse?

published Oct 3, 2018
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When deciding whether to buy a co-op, condo, or—gasp!—an entire townhouse, knowing the difference between the three is a good place to start.

The simple definition is that condos and co-ops are usually apartments, though detached, private-home condos do exist in some developments. Townhouse, meanwhile, is the preferred term for a row-house, a multi-story structure connected to several others.

Before you head out into the sales market, let us take you on a quick tour of the three housing options:

What is a Co-op?

Cooperative housing has been around for about as long as people have been living in houses, according to the National Cooperative Law Center.

In the United States, the co-op concept began in 1881 with the six-story Rembrandt building at 152 West 57th Street in Manhattan. Unlike in Europe, where cooperative housing was used to meet lower-income needs, the Rembrandt was built to offer a fancier form of housing to wealthy and artistic individuals.

Today, most of the country’s co-ops are located in New York City. They are known to be exclusive but generally less expensive than condos, which in turn are typically easier to purchase.

When buying a co-op, you purchase shares in a corporation. You’ll have what’s called a Proprietary Lease, which gives you stock in the property as a whole. The corporation is regulated by an elected Board of Directors who are responsible for, among other duties, choosing who is allowed to buy into the building. This style of homeownership is appealing to those who enjoy being in a collective, noted Deanna Kory, a broker with Corcoran.

“Co-op ownership attracts a certain type of person who wants to have a sense of control over their building,” she said.

Co-op boards are known to be tough, however, and usually require a filing cabinet of information from potential buyers, including extensive financial statements and letters of recommendation from personal and professional references. “You kind of have to, on some level, be judged,” Kory said of the approval process.

But the benefits to winning over a co-op board include living in a building where your neighbors are more or less permanent, she added. The strict occupancy rules protect co-ops from investors who buy properties just to rent them out and the comings-and-goings of Airbnb guests.

What is a condo?

Condos are not as different from co-ops as some might think, Kory said. Similar to co-ops, condo buildings are governed by an elected Board of Managers. Their tasks include hiring property maintenance professionals and approving interior-apartment renovations. When buying a condo, however, you’re purchasing an actual apartment, along with a portion of the property’s common spaces, such as a lobby and elevator.

Condos were first legalized in Puerto Rico in 1958 to allow developers in the U.S. territory to boost its economy through real estate.

Unlike in co-ops, condo boards cannot decide who can and cannot purchase an apartment, but they can exercise their right of first refusal—which allows the entire building to collectively buy an apartment and gives them first dibs on any that are for sale.

But because there is no board approval process for condos, their price tags are typically higher, Kory warned—meaning buyers pay a premium to avoid the stress.

What is a townhouse?

The term townhouse was originally used for homes in the center of town, often owned by the affluent, as opposed to those in the outlying, rural areas. Townhouse is now synonymous with the urban row house and, often, brownstone—though the latter is technically constructed with that type of sandstone.

Buying one townhouse is the same as purchasing a private home, Kory said: You own that building and are responsible for its roof, hot water heater, boiler, and other utilities.

Though connected, row houses are built with brick or concrete walls between each, giving homeowners privacy, along with soundproofing and fireproofing, from their neighbors.

But because owning a three- or four-story structure in the middle of a city can cost millions of dollars and is financially out of reach for many, the buildings are sometimes divided into one-floor apartments and duplexes as a way for property owners to get a higher return on their investment, Kory noted.