We are talking about the difference between condominiums and cooperatives. As we said in our last post, buying a condominium is very similar to buying a single-family house. There is a purchase agreement, a mortgage, a deed, property taxes -- all the trappings of owning real estate.
Condo owners also have a stake in the maintenance of the building and the grounds, expenses that are covered by the association fee. The fee is determined by how many shares a unit has in the association; the number of shares per unit is included in the declaration and bylaws, the founding documents of the condo association.
A share in a co-op is a different animal altogether. When you buy into a co-op, you are buying shares of the corporation that owns the co-op. You buy shares, not real estate. There is no deed, only a proprietary lease to the apartment, and instead of a mortgage you would take out a home loan. You have an association fee, but you do not pay property taxes.
The board of directors in a co-op has slightly different responsibilities from a condo board. A co-op board is still elected by shareholders and still manages the building's finances. The different that affects most buyers is that the co-op board has veto power over who can buy into the building.
When a shareholder puts his unit on the market, then, he is actually selling his shares in the co-op. The board can interview and run background and credit checks on the prospective buyer and, based on that information, reject the sale. At that point, the seller has to start over again.
Bankruptcy and foreclosure are also handled differently by co-ops and condos. Those, however, are subjects for another post.