
WASHINGTON DC COOPERATIVES
There's a mind-blowing amount of info to absorb about Washington DC co-ops, but don't worry, we've complied a page of 'must know' information, along with resources and links you can use when the time is right. Reach out when you have a question, or you're ready to get started on your DC cooperative purchase!
THE BASICS ON WASHINGTON DC COOPERATIVES
- A Washington DC cooperative, or c-oop, is housing that is collectively owned and managed by its occupants. Members do not own their individual units, instead they own shares in a non-profit corporation which holds title to the property and grants proprietary leases to unit occupants;
- The lease grants permanent right to occupy the unit and to use the common elements of the property according to the cooperative bylaws, rules and regulations;
- The number of shares owned is dictated by the size of the unit. Owners actively participate in decision making and share the work involved in running the co-op. Co-ops pay a lower tax rate due to their non-profit status;
- You’ll pay association dues and abide by the rules and restrictions set forth in the CC&Rs.
For a quicker review, review this synopsis: Synopsis of 2014 DC Condo act Amendment WP Also, in 2014, the DC Condo Act was amended. Amendment to the DC Condo Act
WASHINGTON DC COOPERATIVE HISTORY
Washington DC’s first cooperative building, The Concord, appeared in 1891, whereas DC’s first condominium didn’t arrive until 1962-63. Though cooperatives preceded condominiums in Washington DC by more than forty years, condominiums have multiplied at a much faster rate and are more widely understood than cooperatives. One possible reason for this is familiarity among buyers with condominiums due to saturation in suburban areas. Most cooperative projects are located in high-density housing areas of large cities such as New York, Chicago and Washington DC, while condominiums are built and sold in many suburban areas across the United States. Go with what you know, in other words. That’s not to say that cooperatives aren’t a great concept. Edmund Flynn thought so. He helped developed the first housing cooperatives in the District of Columbia, beginning in 1920, while he was employed with the Allen E. Walker firm (the first real estate brokerage to specialize in co-ops). Soon afterwards, Flynn founded the Edmund J. Flynn Company, which has developed and converted more than sixty DC market rate cooperatives. Most early cooperatives were so-called “luxury cooperatives”, which allowed renting for profit, and which typically had high monthly carrying costs. Instead, Flynn pioneered what he called the “100% cooperative ownership” plan. It required high down payments, low monthly carrying charges and a 100% owner occupancy rate. During the Great Depression of the 1930’s, many “luxury” cooperatives folded when owners could not find renters or buyers who could afford the high monthly rates, but Flynn’s “100%” organizations were spared collapse due to his sensible structure. Flynn’s have also historically been the most economically diverse group of cooperatives nationwide, offering high end “best address” buildings to DC’s first moderate income garden-style complex, as well as self-sustaining low-cost cooperatives. Early DC cooperative buildings include The Concord (demolished in 1962), 2852 Ontario (“The Ontario”; still standing) the Porter, the Westmoreland (built 1905 and converted 1948), Presidential, and the Broadmoor. There are approximately 120 co-op buildings in Washington DC today. If you’re shopping for a condo, have 10% or more for a down payment, and may benefit from some of the tax perks associated with co-ops, you owe it to yourself to investigate further.

CO-OPS VS CONDOS
CO-OP PROS
- Typically, Washington DC co-ops have a lower price per square foot than condos
- Co-op maintenance fees (the equivalent of condo dues) include property taxes and some or all utilities. Some or all of the fees are tax deductible and property taxes are geerally lower for co-ops due to their non-profit status
- Co-ops offer shareholders a degree of control over how their investment is managed and who their neighbors are
- The cooperative maintenance team often handles repairs condo owners would have to contract for on their own
- There are likely to be fewer investor units in co-ops projects than in condominium projects since Washington DC cooperatives encourage owner-occupancy
- Closing costs for Washington DC co-ops are similar to a condo purchase. In the past, because it is a stock purchase and not a transfer of real estate, there was no transfer or recordation cost applied to the transaction, but in late 2009, the District withdrew that exemption and now demands the same transfer and recordation charges as a condo real property transfer. Cooperative share purchasers do save on title fees and insurance, and escrows for property taxes
- Some of the most beautiful 'best address' buildings in Washington DC are cooperatives
- Washington DC Cooperatives may be less likely to be severely affected by market downturns due to their owner-occupancy rules and other requirements.

CO-OP CONS
- When it’s time for a co-op shareholder to sell their shares, they may find that the bylaws dictate who they can sell to. There may be requirements about buyers’ income and other financials, employment history and background. A prospective buyer will be vetted by the board of directors, who must comply with all DC Equal Housing laws;
- Sub-letting of a shareholder’s leased unit will have similar restrictions and there can be limits on how many shareholders can sublet at a time. Read the cooperative bylaws, rules and restrictions carefully before purchasing;
- There may be restrictions on renovation or remodeling of cooperative units. Co-op owners may not be able to install a new bathroom, update the unit’s kitchen or reconfigure the space as a condo owner might, though many simply require similar approval to that required by a condo board;
- Financing interest rates and down-payment may be slightly higher for cop-ops than for condominiums;
- Co-op fees appear higher, so buyers and agents unfamiliar with co-ops often shy away unnecessarily. This can lead to longer Days On Market on resale. Unlike condos, cooperatives include property taxes and, typically, some or all utilities in the monthly fee. Maintenance of mechanicals or low cost repair options may also be included. To compare fees, divide the annual property tax on a condo by 12 and add that amount to the condo association fee. Now add an monthly average for utilities. This gives you an apples-to-apples comparison with a monthly co-op fee. They’re not always higher;
- Co-op owners don’t get the DC Homestead Deduction. That goes to the association;
- Shares in a co-op association are considered intangible personal property, which is why co-op financing requires a special lending process. This means lines of credit or home equity loans probably aren't an option.
WASHINGTON DC COOPERATIVES: WHAT TO LOOK FOR
- The financial condition of the association or corporation managing the property. Ask for the latest financial statements and budgets, the investor ratio (how many owner-occupied units and how many rented units), maintenance fee increases, and recent sales
- How long have the units listed for sale been on market? What are the challenges in re-selling a unit in the cooperative?
- The cooperative association may require its own inspection before listing and just prior to settlement and if association required repairs are not made by the current share owner, they will become the responsibility of the new owner. Buyers should hire an independent inspector to check the non-common elements of the unit as well. Association inspections cover only very specific items and an independent buyer’s inspection will be more comprehensive.
WHY DO CO-OP FEES SEEM SO HIGH?
- Unlike condos, DC co-ops include property taxes and, typically, some or all utilities in their monthly fee. Maintenance of mechanicals or low cost repair options may also be included. To compare fees, divide the annual property tax on a condo by 12 and add that amount to the condo association fee. Now add an monthly average for utilities. This gives you an apples-to-apples comparison with a monthly co-op fee. Remember that co-op owners don’t get the DC Homestead Deduction. That goes to the association.
FINANCING A WASHINGTON DC COOPERATIVE
Instead of a conventional mortgage obtained to purchase a condominium unit for which the unit itself is collateral, co-op purchasers typically obtain a “share loan,” with their membership certificate or stock share and occupancy agreement as collateral.
Financing for cooperative shares can be obtained from banks or other institutional lenders, similarly to obtaining a condominiums or fee simple mortgage, however many lenders do not finance co-ops and individual co-op boards have recognition agreements lenders must enter into to provide financing. These agreements define the relationship between the lender, co-op and borrower, and create the priority for claims if the borrower falls into arrears on fees or the mortgage.
The owners/members of a cooperative may decide to mortgage the co-op to fund major building improvements. This differs from fund-raising methods used by condominiums, where fee increases and/or special assessments are utilized to raise funds for unforeseen expenses. The co-op version is called such a “blanket” or “master” mortgage. A portion is allocated to each unit, assumed by the purchaser, and deducted from the seller’s proceeds at the time of settlement.
Real estate taxes and interest on blanket mortgages are paid by the cooperative, then allocated to owners/members. They are tax-deductible.
Co-ops may carry an underlying mortgage. which is the initial mortgage taken to establish a cooperative. A good number of DC’s cooperatives have underlying mortgages. When renters and/or developer decide to create a cooperative, shares in the new entity are sold to owners, who sell the building(s) by transferring its debt to the corporation. If there is a mortgage needed to supplement share sales, the cooperative obtains the loan and all shareholders service the debt. Even co-ops that can afford to pay off their underlying mortgages may not want to do so because the shareholders receive a tax benefit from their shares of the monthly interest payments. It’s important to have an expert evaluate the financials of a Washington DC co-op before purchasing shares. Your lender will also want to review them to determine percentage of maintenance represented by debt service and underlying debt per unit compared to average unit sales price, among other factors. A reasonable quantity of debt is not unhealthy for a cooperative. According to experts, debt lower than $15,000. per unit is acceptable and debt above $30,000. per unit is seen as an issue. It is important to note that each situation is different and debt guidelines change.
FHA financing is not available for DC co-ops. At one time the FHA 203N mortgage loan was offered for the purchase of cooperative shares, but it is not currently among the products available from the Federal Housing Administration.
When an individual cooperative loan is fully paid, the lender will return the original stock and lease to the purchaser and forward a “UCC-3 Termination Statement” filed by the borrower in order to terminate the bank’s security interest.

WHAT YOUR CO-OP RESALE PACKAGE SHOULD INCLUDE
The shortlist, in layman's terms:
- Current budget and financial condition, reserve funds
- Current Bylaws, architectural guidelines and CC&Rs (Covenants, Conditions and Restrictions) that define the rules and regulations for co-op shareholders
- Association Fee Breakdown
- Master Insurance Policy coverage
- Occupation limitations (number of people who may occupy a unit)
- Statement of unpaid fee assessments, special assessments, and/or upcoming assessments
- Records of any pending legal action or judgements by or against the association
- Certification of filing for the association’s annual report to state board (some associations exempt)
- Records of approved alterations to the unit
- Violation notices to current unit shareholder(s)
Smaller associations and self-managed associations may not offer the same packages as larger, professionally managed associations.
RULES OF THUMB WHEN REVIEWING YOUR RESALE PACKAGE
Compliance
Is the current unit owner in compliance with the rules of the association, has he/she any outstanding fines, dues, underlying mortgage payments or special assessment payments? If so, make sure you stipulate that these be brought current at the seller’s expense and shown as such on your settlement statement, or you will likely become liable for them. Ask if any improvements or alterations have been made to the unit and if they are in compliance with board/association regulations and standards, obtained the proper permitting if required and were inspected, if required. You will inherit violations and associated fines/penalties if not.
Important Questions
It is always important to ask the association or management representative in writing if the association is involved in any planned, pending or unresolved litigation. This can affect the ability of mortgage lenders to lend against the property. It is also important to ask about the association’s investor ratio (ratio of renters vs owners), the square footage percentage of commercial property associated with the association (retail components) and percentage of delinquent dues by owners (as well as the length of time they are delinquent). All are subject to percentage caps that can render a building unwarrantable (unlendable). You’ll also want to verify that the current owner is up-todate on dues and learn the percentage of owners delinquent on dues. Ask about planned or levied special assessments as well as major improvements being discussed for the next one to three years. Other questions include restrictions for pets, rentals and smoking, as well as the rental cap, if any, and waiting list length. Check to see what the policies and fees are for move-ins and ask about the amount of capital contribution, if any.
Special Assessments
This disclosure should be included in your purchase agreement provisions and your agent likely checked the box that says the seller will be responsible, but make sure. Your lender will request a Condo Questionnaire that should pose this question, also. Ask your lender for a copy. Surprisingly, condo owners are not always aware that there are special assessments pending, so even if they answered ‘no’ to the question on your purchase agreement, it’s important to read the resale certificate package and the condo questionnaire. These are “official” responses. Liens and Judgements During the contract process your agent should have specifically asked about liens and judgements. At any given time, there are a number of developer marketed properties with mechanics liens against them, and privately-owned properties can have these, too. If there are liens against the association and unit, it could make it difficult or impossible to get financing and the payoff of liens and judgements can result in higher condo fees and special assessments. Be sure to get all documentation if there are liens, and take it to your selected title company and lender for review.
Budget
Examine expenditures in the budget, and volume of reserves. New condos often haven’t built up large reserves just from capital contributions, developers often are supressing the condo dues while they’re selling, as well as keeping the budget lean until the homeowners take over the association. There are many reasons for this, but the bottom line is that it’s important to realize that expenses and condo dues are likely to increase-sometimes significantly-when the unit owners take control of the association. This typically occurs when the project is 70% to 75% sold. Check to see if the condo dues have increased, how often, and by how much. Is there an annual cap on raises? In older communities the reserves may have been depleted by costly repairs, unpaid dues, and community expense increases as amenities age and staff and services become more expensive over time. When reserves are low and major repairs are needed, the unit owners are typically assessed for the costs in shares based on the unit size. Does the association have sufficient reserves for repairs? Especially in older condo buildings, this is important. Lawsuits or judgments pending against or involving the condo association can also be a source of condo fee increases and special assessments. Ask for copies of association meeting minutes for the past 6 meetings. Review them for discussions of expenditures, repairs, legal proceedings and other issues that might shed light on the association’s future spending and assessment plans.