By Carline Martin
Each month, I normally choose 1-2 questions presented to me by readers. However, in response to last month’s column, I received several versions of the same question in response to buying vs. renting. The underlying questions is “what is the difference between a condo and a co-op?” Many people don’t realize there is a difference between the two and those who do, are often unsure what the difference is. I’d like to take a moment to explain this.
Co-ops are very popular in New York City (where they started in the late 1800’s) and in Washington, DC. However, in other parts of the country, they are generally not as common as condominiums. Co-op is an abbreviated way of saying cooperative living. Unlike condominium living, there are no individually owned units in a co-op. Instead, each resident owns a fractional share of a non-profit company, which owns and manages the entire property. Depending on whether the occupant is in an ownership co-op or a non-equity co-op, they will either receive their occupancy rights through a transfer of title or a proprietary lease, which allows them to occupy their particular unit and to partake in the use of common areas. In essence, investing in a co-op is similar to investing in a stock. You will have a vested interest in the overall financial success or decline of the entire property and a say in how the property is run.
Maintenance fees on a co-op apartment, typically, include each tenant’s share of the building’s mortgage, some or all of the utilities, taxes, maintenance and services. Monthly fees may vary from one resident to another based on how many shares each resident owns. A larger unit is allotted more shares and, therefore, pay higher fees. Residents may, however, deduct a portion of the mortgage interest and real estate taxes, even though they are not the owner of any real property.
Co-ops have very stringent guidelines about who they will allow to buy into the property. An application must be submitted to the cooperative board, normally accompanied by personal and professional letters of recommendation and full financial disclosure. Often, they will accept few to no financing options and fewer lenders provide financing on co-ops, which can not only make it difficult to buy into but to sell, as well. Most importantly, the boards approval can be very subjective. If you need to move and have difficulty selling, renting your unit may not be an option either, as many co-op boards will prohibit this or limit rentals to immediate family members only.
If you are someone who plans to stay put and likes to have control over who your neighbors will be, co-op living may be for you. However, if you are someone who likes flexibility or are adverse to providing the information required for board approval, you may be wiser to consider another option.
Q: With the cold weather we have been experiencing, I am concerned about my pipes freezing. What steps can I take to prevent this from happening?
A: Dealing with frozen pipes can range from an inconvenience to a full-blown nightmare. The best way to avoid this scenario is to take proper precautions to ensure that your pipes do not freeze in the first place. Insulating exterior walls and pipes that are on exterior walls is the best measure to take. However, in some homes this is difficult without breaking into walls. At the very least, you should insulate any pipes that are exposed. Additional measures include leaving cabinet doors under a sink ajar to allow for heat circulation. Also, leave your cold faucet on a slow, steady drip. I can almost guarantee that the cost of a burst pipe will far exceed the cost of the additional water used by allowing your faucet to drip.
If you turn on your faucet and nothing comes out, it’s likely your pipes are frozen. In this case, it’s best to correct the problem before pipes burst. Using a space heater or hair dryer aimed at the affected area may help melt and free up the ice. Open the faucet completely while thawing and do not leave a space heater unattended. Once you see the water start to trickle out, leave the faucet on until you have the pipe completely thawed. If these measures fail or if you notice water on the floor or pooling under the pipe, which is indicative of a burst pipe, turn off the water at the main valve immediately and contact a licensed plumber.
This link from Aquarion Water Company contains very useful information regarding prevention and treatment of frozen pipes.
Clarification – I was contacted by a very astute reader with regard to a point I made in last month’s column. I discussed the property tax deduction limit for homeowners stating “Property taxes and necessary home improvements may also be deducted. Property taxes up to $10,000 as a couple or $5000 as an individual may be deducted. Necessary home improvements, such as modifying your existing home to accommodate a handicapped or infirmed occupant as an example, would be considered necessary home improvements. For a complete description of what would be deemed necessary in the eyes of the IRS, you should always check with your accountant.”
While this is true, what I should have made more clear, however, is that the limit is $10,000 for a married couple filing jointly or single homeowner. However, for a married couple filing separately, the limit is $5,000 for each individual. My apologies if there was any confusion and many thanks to my reader for pointing this out!
SEND ME YOUR QUESTIONS – If you have a real estate or home related question for which you would like a professional opinion, please email me at carlinemartin@bhhsne.com with “Sentinel” in the subject line. Each month, I will provide answers to one or two selected questions. Email me your Real questions. I look forward to hearing from you!
This article does not offer the opinions of Berkshire Hathaway/New England Properties and is not intended to provide legal or tax advice.
