A condop is a co-op governed by condominium rules, right? Not quite. Colloquially, “condop” often refers to a co-op that claims to have a lenient board and subsequently operates more like a condominium, but this definition is not actually correct.
In a hybrid condominium-co-op, also known as a “condop,” the building or property is divided into a multi-unit condominium, usually with separate commercial and residential units. For example, in a twenty-story high-rise building, the commercial space on the ground floor may be one condominium unit while the remaining nineteen floors containing multiple residential coop units are considered to be a second, separate condominium unit. The residential unit portion is thereby operated by a co-op corporation, while the commercial unit or units can be retained or sold by the developer.
The portion of the building that comprises the residential condo unit is broken up into small residential co-op units and ownership is largely the same as a typical co-op. Each purchaser executes a subscription agreement to purchase stock in the corporation, and each purchaser is considered to be a tenant-shareholder of the corporation that owns the residential condo unit. Unlike a regular co-op, however, the co-op corporation in a condop owns the residential condo unit rather than fee title to the entire building. The co-op corporation that owns the residential condo unit and the owner of the commercial condo unit would operate the two-unit condominium building that makes up the entire property in accordance with the condominium rules.
It is important for prospective purchasers to know the difference between a condop and a co-op or a condominium building because of the due diligence involved when looking into investing in such property. While one may look solely at the financial information for the condominium as a whole, in a condop, it is necessary to also review the financials of the co-op to determine the financial health of the investment. And it is important to note that a condop will not necessarily have a more lenient board, though this is sometimes the case.
Hopefully this clears up some of the many misconceptions that surround condops. Overall, it is important for any prospective buyer or investor to have a thorough understanding of the rules and policies of any building they hope to deal with, regardless of its label.
Sources:
Vivian S. Toy, What Exactly is a Condop?, N.Y. TIMES, May 20, 2007