If you’re wondering about the differences between condos and co-ops, you’re not alone. These housing types are commonly confused – and, to be fair, they can look fairly similar at first glance.

A condominium, or “condo,” refers to a private residence located inside a shared building or complex that individual owners can purchase. While a housing cooperative (co-op) is also contained inside a larger structure, its residents don’t actually own their living spaces and only have proprietary leases giving them the right to live there.

We’ll take a more in-depth look at the pros and cons of a co-op versus a condo before digging into the main differences within the home buying process to help you decide which is right for you.

What Is A Condo?

As stated above, a condominium is a privately owned piece of real estate within a condo building or community.

When purchasing a condo, you agree to own the interior. The exterior of this type of residential property belongs to a condo association. Your condo association handles things like maintaining lawns and landscaping, handling upkeep in common areas and repairing damage to the exterior of your home.

You pay special fees, called “common charges,” in exchange for these services. Condo fees can vary widely depending on where you live, the size of your home and the types of common areas you can access.

Condo associations function like homeowners associations (HOAs). These associations handle maintenance issues and create bylaws for the community to follow. A condo association can put rules in place such as the types of pets condo owners can have, quiet hours and use of common areas. It’s important to know the rules of the condo association before you move in.

A condo is a great option if you don’t want to spend time and effort maintaining the property. Condos are popular in the outskirts of major cities and are usually less expensive than buying a house, which means they’re a great option for homeowners on a budget.

What Is A Co-Op?

A co-op is a type of housing owned and operated by a corporation. The corporation owns every part of the home, including the interior, exterior and common spaces. Co-ops are popular in large cities where the cost of living is high, like New York City.

You don’t buy a piece of real property when you buy a co-op. Instead, you buy shares of the corporation that owns the building. If you buy enough shares of the corporation, you’re entitled to living space within the property. Generally, the more shares you own, the larger the living space you’ll be able to get.

So, who owns the housing corporation? Everyone who buys shares in the co-op owns a percentage of the corporation. Like a publicly traded company, every shareholder gets to vote on issues that affect tenants. Co-ops usually elect a board of volunteers to collect fees and maintain things like common spaces.

Everyone who owns shares in the co-op splits maintenance fees, property taxes and any mortgage on the co-op building. Housing cooperatives aren’t run with the intent of making a profit. The co-op might also vote to hire a property management company to handle the day-to-day workings of the building.

Co-op associations are often very picky about which prospective buyers they allow into their community. Before you join, the co-op board must approve your application. Co-op owners want to know that you’ll obey their community rules and that you can pay for any maintenance or tax expenses. The board approval process can include personal interviews and a review of your financial documentation.

This is different from a traditional home or condo sale, where the homeowner will sell to pretty much anyone who can pay the bill.