Co-ops, Condos, and PUDs: What’s the Difference?

What is a Co-op?

A Co-op is a housing complex owned by all of 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 is determined by the size of the unit itself. Larger unit owners have much more power in the decision-making process in how the building is run. The tenant-owners pay fees to cover their own potion of the property taxes, mortgage, and cost of repairs for the common areas. Each owner depends on one another financially, so they have the interests of both the financial history and personal lives of each tenant.

Planned Unit Development (PUD)

PUD owners own their property individually, plus they own a small part of the surrounding land. Similar to condo ownership, PUDs require a membership in the Homeowner’s Association (HOA), but the land around their unit is maintained by the unit’s owner. If you want a yard, a PUD is the way to go.

Condominiums

Owning a condo is very similar to owning a house. The owner is responsible for a mortgage, they have a deed, they have to pay property taxes, and they have a deed. However, the “airspace” is what the ownership of a condo truly is. Condo owners don’t necessarily own the walls, the floors, or the ceilings. Those are owned by all the other residents in the condominium. The condo owner must join the Homeowner’s Association (HOA) and pay monthly to cover management, insurance, maintenance, and landscaping.

This ensures that the neighboring condo owners as well as the owner themselves are well taken care of. Condo owners are usually allowed to remodel their space while staying within guidelines provided by the condominium management. When purchasing a condo, it’s crucial to read the covenants before making the purchase.

Advantages of Common Interest Ownership

When considering all these options, there are advantages of buying a condo, or participating in either a PUD or a Co-op. The prices are usually much lower than that of single-family homes, and landscaping and maintenance responsibilities are little to none. Some people tend to feel happier in a more crowded environment, and they like having a common maintenance service.

The Disadvantages of Common Interest Ownership

However, the disadvantage to some people is the HOA dues are not tax-deductible. These dues are also an ongoing expense that will lower the mortgage that someone could potentially qualify for should they ever wish to leave a Common Interest Ownership property. The documents entailing the responsibilities and dues of such a property can also be long and complex and it isn’t entirely uncommon to have a real estate attorney look over the documents before the owner makes a decision.