What’s a condop? What do I need to know about buying or selling one in NYC?

When you are hunting for an apartment in New York City, you may come across a listing for a condop, particularly if you are searching for sponsor co-ops. Condops are probably one of the most misunderstood types of NYC apartments, and while brokers often describe them as co-ops with condo rules, in reality, they are a little more complicated.

Here’s a more specific description: Condops are mixed-use co-op buildings with commercial or non-residential space on the ground floor. As a result, they will have multiple boards governing the residential and commercial parts of the building separately. 

Why NYC has condops

Condops are a category of housing created by owners and developers in the 1980s who wanted to circumvent a tax rule that capped earnings for co-op buildings from non-residential or commercial spaces at 20 percent of their income. If the amount went over 20 percent, the shareholders couldn’t take advantage of certain homeowners' tax deductions. To fix that, owners and developers divided their buildings.

The commercial space was designated as one condo unit and the entire residential section was considered another and was divided into co-operative shares. And so the condop was born.

[Editor's note: This article was previously published in June 2023. We are presenting it again with updated information for June 2024.]

Condops were common in the wave of co-op conversions in the 1980s because they allowed for the creation of co-ops while giving the sponsor the ability to own or rent the commercial spaces in the building with all the freedoms of the condo form of ownership.

Their unique structure makes them complex, typically consisting of three boards.

First is a condominium board, made up of representatives from both the residential co-op units and the commercial space. This board handles issues related to the building's general common elements, like exterior repairs or major plumbing upgrades.

The second board is a commercial board, which governs issues for the commercial units.

The third board is elected by the co-op members and deals with shareholder issues for residents' shared spaces, such as common hallways or laundry rooms.

What you need to know before buying a condop

Condops often have substantial and very profitable commercial spaces. As there are two distinct entities involved in governing the condop—the residents and the owners of the commercial space—there can be some very real disagreements, says Dean Roberts, a real estate attorney at Norris McLaughlin.

For example, the representatives of the ground-floor commercial space might resist having to pay for elevators they don’t use. Roberts says in one of his condop cases, the building was half school dormitory, half residential space.

“On the board, the school had three votes, while the residents had two. That means you’re pretty much at the mercy of the school," he says.

Roberts advises any prospective condop buyer to do some detective work to find out how well the boards function and whether they've been involved in any litigation. He suggests asking the managing agent and searching the financial statements for clues. 

It is also important to determine if they are allocating expenses properly. Is something a condo expense, a co-op expense, or a commercial expense? There can be gray areas as to which entity is responsible for different capital improvements.

Real estate attorney Adam Stone, a partner at The Stone Law Firm, advises reviewing both the co-op and condo financial statements to find out what percentage of the condo’s common charges is assigned to the co-op and whether the condo is up to date on its financial contributions.

Who is the right buyer for a condop?

NYC’s major broker firms and listing sites don’t have a filter for you to search specifically for a condop. Buyers will likely be looking for co-ops when they come across a condop listing. You need to get comfortable with the unique arrangement of condops and be willing to live in a mixed-use building.

When a retired couple was looking for a one bedroom in NYC and fell short of the post-closing liquidity required of a co-op, Abra Nicolle Nowitz, a broker at Corcoran, says a condop in Midtown East offered the flexibility they needed. The couple also planned to use money from their IRA for their down payment.

"It was the price point they were looking for and the financial package that would work for them,” Nowitz says.

You’re unlikely to see many new condop buildings because co-ops generally trade for less than condos, by about 15 percent, so developers are reluctant to go this route. Mixed-use condo buildings are more common, although Brooklyn Point is an example of a new development that's designated as a condop. The building is built on leased rather than owned land.

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How to finance or sell a condop

Lenders treat condops like co-ops, says Keith Furer, a mortgage banker at Guardhill Financial. That means a bank will require a slightly bigger down payment than it would for a condo.

“Lenders will want to look at both the co-op part and condo part financials, along with all the other standard documentation that they look at when underwriting a project. Pretty much a similar type of underwriting scrutiny if just a co-op or a condo,” Furer says.

Even so, it’s important to work with a lender who understands what a condop is. Furer says most out-of-state lenders and loan officers don’t truly understand what a co-op is. “I can’t imagine the majority of them have ever even heard of a condop or have any clue what it is,” he says. 

If you are selling a condop you need to be prepared to have a buyer ask lots of questions. That means providing information about how the boards operate. 

Although brokers often say condops have more liberal sublet and finance policies, they are often every bit as tough on sublets and sales as any stand-alone co-op. Your due diligence will be important because every building is unique.

—Earlier versions of this article contained reporting and writing by Marjorie Cohen and Emily Myers.

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