'We're Moving Back to the U.S. and Are Confused By Co-ops. Help!'

Question: We’re American ex-pats preparing to move to New York after more than a decade abroad. We hope to buy our first home there. While educating ourselves about buying property in New York, we’re quite flummoxed by the whole co-op apartment thing. We understand the basic difference between a co-op and a condo, but why are maintenance fees so high and what in the world is a proprietary lease?

— Strangers Coming to a Strange Land

Dear Strangers:

Everyone who moves to New York starts off a stranger. New York City has more idiosyncrasies than all the countries of the European Union, combined. Fortunately, it won’t take you long to find your niche. Welcome!

Since you say you understand the difference between co-ops and condos, you know that you don’t actually own your co-op apartment, just shares in the building itself.

You can’t live in shares, so the proprietary lease serves two functions. First, it’s a lease that gives you the right to live in your apartment. Second, however, the proprietary lease “defines the rights and obligations of shareholders as tenants and the co-op corporation (acting through the board) as landlord,” explains the absolutely essential, The New York Co-Op Bible by Sylvia Shapiro. “Most of the things you care about (before and after buying) are here for the looking.”

The lease lays out the building’s rules on just about everything you can do in your new place, including what restrictions there are on selling or subleasing or alterations. More importantly, the lease spells what you cannot do in your apartment — no pets, and no business activities, for example.

Which now takes us to maintenance fees. Why do they seem so expensive?

I’m going to illustrate it with two different properties currently listed on StreetEasy: this $1 million Upper East Side co-op and this $1.4 million condo a few blocks away.

Monthly maintenance at the Park Ave. co-op is $2,988, which covers the shareholder’s portion of the building’s mortgage payment and property taxes and a full staff of doormen, porters and a resident super, along with some upscale amenities like a gym, individual storage units a separate bicycle room and, presumably, some portion that goes to the building’s reserve fund for special repairs and improvements. All of those costs are spread over just 89 apartments. (BTW: the building requires a 50% down payment.)

The common charges at the 140-unit UES condo, however, are just $1,221 a month, less than half maintenance at the co-op. The full-service building boasts many of the same amenities as the co-op. But the condo owner has another couple of expenses not included in the common charges: a whopping $1,696 monthly property tax payment and a $121 a month temporary assessment.

So, adding it all up, it looks like this:

Co-op = $2,988 a month. Condo = $3,038 a month.

Now which one looks for expensive?

David Crook is a veteran journalist and author of The Complete Wall Street Journal Real-Estate Investing and Homeowner’s Guidebooks. Do you have a question about anything real estate-related in NYC? Write him at askus@streeteasy.com. For verification purposes, please include your name and a phone number; neither will be published. Note: Nothing in this column should be considered professional legal advice. If you have a legal issue, consult an attorney.