How you hold your residential apartment will have enormous legal consequences. The three major ways of doing so is renting, as a co-op, or a condominium. However, many people do not realize the differences between them.
The most familiar one is renting. A landlord rents one of his apartments to you pursuant to a written lease which sets forth the details of the landlord-tenant relationship. The tenant has no interest in or responsibilities for the common areas. In a multiple dwelling, the landlord is required to maintain not only the common areas by also the tenant's apartment under a warranty of habitability and quiet enjoyment. A landlord may be held liable even for damage caused to your apartment by another tenant.
When you buy a co-op apartment, you are actually buying shares in a cooperative corporation which owns the building. An elective Board of Directors runs the Co-op. In return for buying the shares, you are issued a long term lease for the apartment. You are a tenant of the co-op in a typical landlord-tenant relationship. However, you do receive the advantage of any increase in the value of the stock, which will correlate with the value of the apartment, and you can deduct on your income tax returns a portion of the real estate taxes and the interest on any underlying mortgage of the corporation. You would also have an opportunity to participate in the management of the building. In a multiple dwelling the cooperative corporation has the same liability as an ordinary landlord. If the cooperative corporation was negligent in preventing one of their tenants from causing damage to your property, they may be held liable. See this interesting New York Times article about a co-op dispute.
When you buy a condominium apartment, you are actually purchasing your unit and will receive a deed with a metes and bounds description. The common areas of the condo building are owned in common with the rest of the unit owners. You are entitled to exclusive use and possession of the unit subject to the by-laws and rules and regulations adopted by the condo's Board of Managers. You have to maintain your own apartment. Unlike a co-op, sale of your unit is usually unrestricted or with minor review. You are entitled to take any tax deduction if you owned a home, such as interest on your mortgage and real estate taxes. A unit owner is not liable for injuries caused by a defect in the common areas. However, a unit owner owns his unit and is therefore liable, like a homeowner, for injuries caused by defects in the individual unit. Purchasing an apartment is a big expense. You should know the legal ramifications of yourpurchase before you do so.
Kim Steven Juhase, ESQ.
Novak Juhase & SternCheck us out on Facebook, LinkedIn, and at njslaw.com