The closing costs associated with a co-op differ substantially from other types of real estate, such as condos or single family residences. Purchasing a co-op involves purchasing shares in a cooperative housing corporation, and as such, there are unique closing costs to consider. Examples of these costs include payments to the cooperative corporation, the management company in charge of managing the property and attorney's fees. A charge you won't always see when purchasing a co-op is title insurance, but leasehold insurance may be available.
Cooperative Corporation Fees
The corporation typically charges the seller a "flip tax" or transfer fee for selling the co-op unit. While this charge may be assessed by the corporation for the seller to pay, the individual contract between the buyer and seller will ultimately dictate who pays this fee. Additional fees charged by the corporation include a move-in fee or deposit to the buyer and a move-out fee or deposit to the seller. The buyer may also have to pay the prorated co-op's maintenance charges depending on the day in the month that the closing occurs.
Management Company Fees
Like condos, co-op are managed and operated by a property management company. Various fees will be paid to the management company in connection with a purchase or sale of a co-op. Those fees may include a recognition fee and any other administrative fees they charge to facilitate the closing.
Other fees associated with the purchase or sale of a co-op include any applicable costs for the co-op's attorney's fees, a fee to run a lien search on the subject property, any assessments that may be applicable and the broker's commissions. There may also be transfer taxes, depending on the state in which the property is situated.
Purchasing a co-op involves purchasing shares of stock in a corporation. As such, you're not actually purchasing real property, but rather personal property represented by a stock certificate and a proprietary lease. Title insurance is generally purchased to insure the title of real property, and as a result, is not applicable for the purchase of a co-op. However, "leasehold insurance" may be purchased. This insurance is similar to title insurance because it insures that the co-op unit is free and clear of all liens and encumbrances.
Ryan Stearns has contributed to various online legal publications. He received his J.D. from New York Law School and his B.A. in political science from SUNY College at Buffalo.