What Is a Condop in NYC Real Estate?

New York City’s real estate landscape features a variety of property types. Among these, the “condop” stands out as a less common but important hybrid, often leading to confusion. This unique property structure combines elements of both condominiums and cooperative apartments, designed to address specific needs within the city’s complex development and tax regulations. Understanding a condop requires delving into its layered legal and ownership framework.

Defining a Condop

A condop is a mixed-use building that has undergone a legal division into distinct condominium units. Typically, one unit encompasses the entire residential portion of the building, which is then owned by a cooperative corporation. Other units typically consist of commercial spaces, such as retail stores, offices, or parking garages.

The emergence of condops in New York City began in the 1980s, driven by the 80/20 tax rule. This rule stated that if a residential cooperative earned over 20% of its income from non-residential sources, its shareholders could lose homeowner tax deductions. To avoid this disadvantage while allowing developers to retain commercial spaces, buildings were divided. Commercial sections became separate condominium units, insulating the residential cooperative and preserving tax benefits for residents.

Structural Framework of a Condop

The legal and ownership structure of a condop is two-tiered, starting with a condominium declaration. This declaration subdivides the building into multiple condominium units, typically one for residential apartments and others for commercial spaces. For example, a developer might designate the ground floor as commercial and the remaining floors as a single residential unit.

The residential condominium unit is then acquired by a cooperative corporation. This corporation holds the deed to the entire residential portion. Residents do not directly own their apartments; instead, they purchase shares in this cooperative corporation. These shares grant residents a proprietary lease, entitling them to occupy a specific apartment. Thus, while the building is a condominium, the residential component operates under cooperative principles, with the co-op corporation owning the residential real estate.

The commercial condominium unit(s) within the condop are owned by a separate entity, such as the original developer or an investor. This entity holds direct ownership, like a standard condominium. This allows commercial spaces to operate independently, free from the cooperative’s rules and financial constraints. The legal separation into condominium units facilitates different ownership models for residential and commercial components.

Ownership and Management in a Condop

Condop management involves a multi-layered governance system. The residential cooperative portion of the building is governed by its own co-op board, elected by the resident shareholders. This board manages daily residential operations, including setting maintenance fees, approving renovations, and enforcing rules for residential units and common areas like hallways or laundry rooms.

The entire condop, including all residential and commercial units, is also governed by a separate condominium board. This board includes representatives from both the residential cooperative and commercial unit owner(s). Its authority covers shared common elements like the building’s facade, roof, lobby, elevators, and main mechanical systems. Decisions on capital improvements, exterior repairs, or major plumbing upgrades for the whole building fall under its authority.

Common charges for shared elements are allocated between the residential co-op and commercial unit(s) based on their common interest percentages, as defined in the offering plan. The residential co-op incorporates its share into shareholder maintenance fees. This dual governance ensures both residential and commercial interests are represented in property management, allowing for independent operation of components.

Distinguishing Condops from Co-ops and Condos

A condop differs from traditional cooperative and condominium ownership structures, as it combines elements of both. A common misconception is that a condop is merely a co-op with “condo rules,” but its legal definition is more precise.

A condop is not entirely a cooperative, though it contains one. While residential units are owned through cooperative shares, the entire building is not a single co-op. Unlike a pure co-op where the corporation owns the entire building and land, a condop’s underlying structure is a condominium, with the residential cooperative owning only one condominium unit. Separate commercial condominium units, distinct from the residential co-op, are a key differentiator, operating under direct condominium ownership.

Similarly, a condop is not a typical condominium, despite its foundational structure. In a standard condominium, owners hold a direct deed to their apartment, considered real property. In a condop, however, residential occupants do not receive a deed; instead, they own shares in the cooperative corporation that owns the residential condominium unit, along with a proprietary lease. Thus, while the building is legally divided into condominium units, residential ownership within one unit reverts to the co-op model, making residential owners shareholders, not direct deed holders.