What’s a Condop, and Should You Buy One? Here’s the Scoop on This Misunderstood Hybrid
When you’re apartment hunting and stumble upon something called a condop, you might pause. Especially if you’re exploring sponsor co-op listings, this hybrid housing type often causes confusion. Many brokers casually describe condops as co-ops with condo-like rules—but the truth is a bit more nuanced.
Let’s break it down.
What Exactly Is a Condop?
A condop is essentially a mixed-use co-op building that includes commercial or non-residential space—often on the ground floor. What makes it unique is its structure: the building is legally split into multiple condominium units, with the residential portion operating as a co-op. This setup typically results in three governing boards:
- A condo board that oversees the building’s shared infrastructure, like exterior maintenance or plumbing.
- A commercial board that manages the business spaces.
- A co-op board elected by residential shareholders to handle internal concerns like laundry rooms, hallways, and resident policies.
Why Condops Were Created
Back in the 1980s, when many rental buildings were being converted into co-ops, a tax regulation capped the amount of income a co-op could earn from non-residential sources at 20%. If a building exceeded that limit, its shareholders lost certain tax benefits.
To get around this, developers started separating the building into two condo units: one for the commercial space, and one for the residential area (which was then divided into co-op shares). And just like that, the condop was born.
This allowed developers to maintain ownership or lease out the commercial units like traditional condo owners—without sacrificing the tax advantages of co-op ownership for the residential portion.
The Condop Maze: What to Watch Out For
Because of its split personality, a condop can be more complicated than either a standard co-op or condo. Here’s what buyers and sellers should be aware of:
1. Multiple Boards = More Complexity
With three boards involved, things can get tangled. The boards may not always agree on capital improvements or cost allocations. For example, commercial board members might push back on paying for elevators they don’t use.
It’s important to ask the building’s managing agent how well these boards work together. Look at the building’s financial statements to check for red flags, like ongoing disputes or unpaid dues.
2. Buying and Financing a Condop
Lenders generally treat condops like co-ops, which means buyers will likely need a larger down payment than for a traditional condo. Local banks familiar with condop structures are your best bet for financing.
Real estate attorney Adam Stone suggests examining both the condo and co-op financial statements. Look for how shared expenses are allocated. Is the building current on its condo-related payments? Who’s responsible for what?
3. Selling a Condop
If you’re selling, be prepared to educate buyers. Most people won’t be familiar with how condops function, and they’ll have questions—lots of them.
Even though condops are often said to have more lenient policies, don’t count on it. Some condops can be just as strict as co-ops when it comes to subletting, renovations, or resale rules.
Real-Life Examples: The Pros and Pitfalls
Real estate attorney Dean Roberts recalls a case where a condop’s residential section was half private apartments and half school dormitories. The dorm held three board seats; the residents had only two. This meant the school could effectively control building decisions—leaving homeowners with little influence.
In situations like these, disagreements are common—especially when it comes to shared expenses for upgrades or repairs.
So before you buy, dig deep. Ask questions. Has the building ever been involved in lawsuits? Are costs being fairly split between the entities? Gray areas can lead to future headaches.
Who Should Consider Buying a Condop?
Condops aren’t for everyone—but they can offer an ideal solution for the right buyer.
Maybe you’re a retiree hoping to buy with retirement account funds or looking for more flexible financial requirements than a co-op typically allows. Some condops offer looser policies, especially around post-closing liquidity or board approval, which can open doors that might otherwise be closed.
Just remember: because co-ops tend to sell for about 15% less than condos, developers rarely build new condops these days. You’re more likely to see them in older, established buildings.
Finding a Condop
Most real estate platforms don’t have a dedicated filter for condops, so searching for one can take a little creativity. Try using “condop” as a keyword, or simply keep your eyes open while browsing co-op or condo listings—you’ll often find a condop hidden in the fine print.
Final Thoughts
Condops offer a unique blend of co-op and condo benefits—but they also come with their own set of challenges. If you’re curious, do your homework and work with a team that understands the intricacies. With the right guidance, a condop could be the perfect fit for your lifestyle and budget.