If you are considering buying into a housing cooperative, you should be aware of your rights as a participant. A housing co-op might not seem different from a property like a condominium, but while some similarities exist, a co-op is distinguishable from a condo in important respects.
The Motley Fool describes a number of key differences between a co-op and a condominium that dictate the kind of rights you would have if you bought into a cooperative as opposed to a condo.
Ownership of a living unit
Purchasing a condominium unit means you are buying real property. By contrast, buying into a co-op means you are purchasing shares of a whole building without becoming the actual owner of your living unit. The true ownership of the building is a collective of shareholders who gather together through a nonprofit corporation. By purchasing shares, you gain the right to be the occupant of a specific housing unit. The more shares you buy, the more living space you can acquire.
A condo association runs the risk of violating discrimination laws if it tries to block people from buying a condo unit on account of protected characteristics like race, color or marital status. On the other hand, a housing cooperative has more latitude to exclude buyers, particularly if a buyer has a poor financial situation. A co-op may submit prospective buyers to background checks and other vetting.
Modifying a living space
Your rights to make permanent changes to a living unit owned by a cooperative are more restricted than if you own a condominium. Since the co-op has a collective ownership, you do not have sole authority to change the interior of your unit. How you can modify your living space depends on the rules set up by the cooperative.
If you do not know your rights and duties under a cooperative, you could encounter legal difficulties if you unknowingly violate the rules of the co-op. Take the time to consider if a co-op or a condo is a good arrangement for you, or if other housing arrangements are more to your liking.