Condo-Cooperative Hybrids Are Back
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Rising costs for real estate in New York have brought back a trend popular in the 1980s: condops.
These hybrids of condominium and cooperative are most often cooperative apartments that have condominium bylaws, behaving much the same as traditional condominiums.
The owner of a condominium owns the actual piece of property, while a cooperative owner is a shareholder in a corporation that owns the building. Since the 1920s, cooperatives had always been a first choice for New Yorkers, but in the 1960s, the first condominiums opened their doors, and while they were slow to take hold, they now regularly sell for up to 30% more than comparable cooperative apartments.
In the 1980s, when condominiums began to dominate the market, condops became a way for cooperatives to adopt some of the flexibility condominiums had. The buildings adopted bylaws similar to those condominiums used while retaining cooperative status, thus becoming a hybrid, or condop.
This time around, condops are emerging for different reasons. The high prices of New York City property have meant that selling land often means incurring large capital gains tax burdens. Instead, landowners are signing long-term leases with developers, and because condominiums cannot be built on leased land, the developers are opting to build condops on the properties. These developers would rather build condops because they resemble the condominiums that are most coveted in the current market.
“As a developer, our goal is to mirror condos because it has the broadest market appeal,” said the vice chairman of the Related Companies, David Wine, about the condops in his company’s buildings.
One other reason condops are on the rise is the paucity of undeveloped land in the city. Much of the developable land is owned by nonprofit organizations that are prohibited by their charters from selling their land.
“We are going to see more and more condops coming to market because there is very little land available to build on, and what is available has increased in value so much that tax-wise it makes more sense to lease it,” Mr. Wine said.
This is the case with the curvy glass building at 26 Astor Place, a 22-story condop that is built on land leased from Cooper Union. The Related Companies, which developed the building, is also building another condop on the Upper East Side. The 42-story tower, known as One Carnegie Hill, is being built on land leased from a nearby mosque and is set to open next November.
Despite the fact many condops behave like condominiums, there are exceptions. Some condops, especially older ones, more closely resemble cooperatives.
“Many people think that condops are just co-ops with condominium bylaws, but that is technically wrong, although some condops do have lenient rules similar to condos,” said a lawyer at Kane Kessler, Eric Gonchar. “There are numerous condops that act just like a co-op.”
Mr. Gonchar, for example, has lived in a condop at 200 W. 79th St. for 15 years that has never adopted condominium bylaws. He said, “We behave just like a co-op, with a board that interviews potential buyers and has all the same rules as a co-op does.”