Condo, Strata, HOA & Co-op – What’s the Difference?

For a lot of urban dwellers, buying a property in a common interest development (CID) is an affordable option. Not only are the prices typically a lot cheaper than your average freehold home, the location and amenities of such properties are usually a lot more desirable.

But when it comes to CIDs, there are a few options, including condominiums, strata, homeowners association (HOA) and co-op associations. Many people might use these terms interchangeably, but they actually each have their own unique characteristics.

Here’s a run-down of each, and a brief explanation of how they differ.

Condominium

A condo is a unique type of property ownership that lets the homeowner fully own an individual unit in a multi-unit complex. These owned spaces are considered to be everything inwards of the walls of the unit. Homeowners in these complexes also have undivided interest in common areas – like the lobby, elevators, hallways, and building amenities – as well as exclusive or semi-exclusive use of specific common property, including balconies, patios, parking spaces, and lockers.

These common areas are owned and managed by a condo corporation that’s made up of the owners of the units. Condos charge a fee that covers expenses such as landscaping, repairs, building and property maintenance, and charges for amenities.

Strata

Unless you live in Australia or British Columbia, Canada, there’s basically no difference between “condo” and “strata,” where the latter term also includes townhouses.

The term “strata” was initially used to describe apartment blocks that had two or more levels. But strata pretty much has the same concept as a condo, which deals with individually-owned units with shared common areas.

Homeowners Association (HOA)

HOA’s oversee any changes or developments that could and should be carried out in a shared property. It’s a non-profit organization that’s put in place to improve the overall community, and has different responsibilities and purposes than the condominium association. An HOA isn’t limited to apartments; it can be put in place in just about any residential community with homes. Unlike a condominium, HOA bylaws aren’t recorded in land records.

An HOA is a group of homeowners who live in a development or community, and are involved in the maintenance and repair of certain facilities, as well as the enforcement of the covenants and restrictions that have been previously accepted by the community.

Common areas of the development are owned by the HOA, which the lot owners do not have ownership interest in. While owners are free to use these common areas, they must do so according to the covenants and restrictions. If an owner violates these regulations, these rights can be suspended.

Like condo associations, HOAs charge owners a set of monthly fees to help cover the expense of maintaining the property and carrying out any necessary repairs. However, these fees are typically a lot less compared to those of a condo association because of the reduced maintenance, repair, and insurance obligations of the HOA.

Co-Op Associations

A co-op association owns a certain property and its common areas and facilities. Residents own a share in the co-op association in order to be allowed to occupy a unit. They are free to use all common amenities, and can even vote in members to be a part of the Board of Directors.

The major difference between cooperative housing associations and condos is the fact that residents do not actually own the units – instead, they merely have a share in the co-op.

Basically, residents in a co-op association buy shares in a not-for-profit corporation, and have the right to lease their units within the complex. The monthly fees that are charged not only cover maintenance and repair costs, but also mortgage payments, taxes, and management fees, which is why they’d typically be a lot higher compared to those of a condo.

Shares in a co-op association are considered intangible personal property, which means residents most likely wouldn’t be able to get a line of credit or home equity loan against ownership because nothing is actually owned. Any shares in a co-op would be passed on to an executor after the resident passes on, which are then subject to certain regulations.

Don’t just assume that every complex that involves the sharing of common areas is necessarily a “condo.” Make sure you understand that these separate options are available to you, and that each come with their own sets of traits. Do your homework to find out what these differences are so you can be sure to pick the one that’s right for you. Luckily, your real estate agent will be able to cut trough the confusion and lead you in the right direction when it comes to home ownership.