What is a Condop?

A condop is a condominium that has a residential coop unit separate from the commercial unit and or garage unit. During the late 1980’s several new developments were built as “condops” they were “hybrids” because the developer had an underlying mortgage on the residential portion of the project. The residential unit is a cooperative. Owners are shareholders in a corporation.

The 80/20 IRS rule that restricted passive income over 20% of a coop’s operating budget in any given year may be why some rental buildings with commercial/retail space converted to condops rather than coops. Many of those condops are run more like coops.

While the 80/20 tax law that affected coops was abolished by President Bush, today there are still new construction projects being built and recently constructed that are currently for sale as condops because there is an underlying mortgage.

A condo can not have an underlying mortgage so several new buildings are “condops” because in the offering plan the developer/sponsor leaves the shareholders/owners with the underlying mortgage. The underlying mortgage is included in the maintenance allocated proportionally to each apartment. The Azure and 1 Carnegie Hill on the Upper East Side are new condops and 305 West 16th street is a brand new luxury designer condop building in Chelsea and there is a new condop in Harlem.

Many condops have right of 1st refusal, they are investor friendly and have the same unlimited sublet policy and amenities usually found in condos.

A condop can offer the best of both worlds. It can offer rules and amenities of a condo, tax deduction, lower closing costs ( no NY state mortgage recording tax) like a coop because a coop is not considered “real property” it is considered “personal property.”