An apartment from a housing cooperative is still a real alternative to purchasing a property from a developer. Although, as experts from the GetHome.pl website emphasize, the scale of new cooperative investments today is many times smaller than in the 1980s and 1990s, buildings constructed by cooperatives are still being built in the largest cities. However, the conditions for purchasing the premises differ from the standard development contract. The legal form of the apartment and the rules of investment financing are of key importance.
What is the difference between a cooperative apartment and a developer's apartment?
The basic difference concerns the ownership structure. When purchasing a premises from a developer, the buyer receives separate ownership of the premises along with a share in the land and common parts of the building. In the case of cooperatives, two variants are possible:
- Cooperative tenant's right to the premises – the buyer does not become the owner of the apartment, but obtains the right to use it. Such premises cannot be freely sold or mortgaged (unless it has previously been transformed into separate property). The cooperative tenant's right to the premises is not hereditary, but the tenant's relatives are entitled to claim the conclusion of an agreement establishing this right or the return of the housing contribution.
- Separate ownership of the premises established by the cooperative – the buyer becomes the owner of the apartment along with a share in the land and common parts of the building.
The cooperative ownership right to the premises, which was valid until 2007, can no longer be established in new investments (it only occurs in older resources on the secondary market). In practice, new cooperative investments most often end with the establishment of separate ownership of the premises after construction is completed, which brings them closer to the development model.
What does purchasing an apartment from a cooperative look like?
The process usually begins with signing a contract for the construction of the premises. The buyer makes a construction contribution that covers the costs of the investment. The amount of the contribution depends on the construction costs and the price of the land. The cooperative does not operate in the classic development model aimed at maximizing profit, but must cover all costs of the project.
In practice this means that:
- the price per square meter is sometimes competitive with the commercial offer,
- payment schedule can be linked to construction progress,
- the rules for allocating premises are specified in the cooperative's statute.
Some cooperatives require membership, although the regulations have been simplified in recent years and this is not always a necessary condition.
Construction and housing contribution – how much is it and how is it paid?
The key element of financing an apartment from a cooperative is the contribution. Its amount and nature depend on the legal form of the premises.
In the case of a cooperative tenant's right to the premises, it does not cover the entire cost of building the apartment. It usually constitutes up to 30 percent of the investment value per premises, while the remaining part is financed from the cooperative's own funds or with a loan taken out by the cooperative for the implementation of the investment. Such a loan is then repaid by the resident in rent – in the form of installments added to the monthly fees. This means a lower financial entry threshold, but the real construction costs are spread over many years.
What is very important – the tenant can at any time decide to buy it, i.e. the cooperative tenant's right to the premises into full ownership (this may change with an amendment to the Act on housing cooperatives – in the case of new investments, the buyout will not be possible). The condition for the purchase is the repayment of the remaining part of the housing contribution and settlement of the debt to the cooperative. The cooperative is obliged to conclude a property transfer agreement within 6 months of submitting the application.
In the variant of establishing separate ownership of the premises by the cooperative, the situation is different. The buyer makes a construction contribution, which generally corresponds to the full cost of constructing the apartment – it includes participation in the costs of construction, documentation, infrastructure, and sometimes also land. In practice, this amount is similar to the price of the premises in a development investment. After making the construction contribution, there is no element of investment repayment in the rent – only current operating fees and the renovation fund remain.
Payment system
The contribution – both construction and housing – is rarely paid in one lump sum. Most often, cooperatives use a schedule of installments related to the progress of construction. The first payment is made when the contract is signed, subsequent payments are made as the investment is completed. Detailed rules are specified in the premises construction contract and the cooperative's regulations.
As experts from the GetHome.pl website emphasize, the contribution is not an element of the rent. This is a separate benefit related to investment financing. The rent is calculated only after the building is put into use and includes operating costs.
Credit financing
The possibility of financing the contribution with a loan depends on the type of right to the premises. In the case of ownership, banks generally grant mortgage loans because it is possible to provide security. The procedure is similar to financing an apartment from a developer.
In the case of a tenant's right to the premises, financing may be more difficult because the buyer does not obtain ownership rights. Therefore, you cannot finance your housing contribution with a mortgage loan in order to obtain tenancy rights. It is not possible to register a mortgage on such an apartment. However, the bank can finance the purchase of a tenant's apartment, i.e. its transformation into full ownership. Then, a mortgage to the bank appears in the land and mortgage register of the property as security.
Prices – is an apartment from a cooperative cheaper?
It depends on the city and the specific investment. Cooperatives often build on land they have had for years, which reduces the cost of the entire project. As a result, the price per square meter may be lower than in neighboring development projects.
However, the differences are not spectacular. In large cities, the prices of new cooperative apartments are approaching average market rates. If developer apartments cost PLN 14,000-16,000 in a given location, PLN per square meter, the cooperative's offer may be several percent lower.
As experts from the GetHome.pl portal emphasize, it is also worth remembering that the final purchase cost includes not only the price of the square footage, but also notary fees, a possible parking space and finishing costs.
Most active cooperative investments are carried out in large cities: Warsaw, Kraków, Wrocław, Poznań and Gdańsk. These are often projects complementing existing housing estates – the so-called infill development or new stages of previously initiated investments.
Characteristic features of new cooperative buildings:
- moderate scale – several staircases, several dozen apartments,
- standard comparable to the development market,
- functional apartment layouts,
- lower development intensity than in commercial projects.
Cooperatives less often implement investments of a higher standard or premium nature. Their offer is addressed mainly to people looking for an apartment for their own needs, not as an investment.
Fees and maintenance costs
One of the arguments in favor of cooperative housing is potentially lower operating costs. Cooperatives manage the building without an external operator, which may reduce administrative costs.
On the other hand, the amount of rent depends on many factors: costs of maintaining common areas, renovation funds, and utility prices. In older buildings, the rent may be higher due to the need to finance renovations. A lot also depends on the economic efficiency of the cooperative, but it is assumed that the fees are generally slightly lower than in housing communities.
Summary
According to GetHome.pl experts, the cooperative housing market is no longer as developed as it was several dozen years ago, but it is still an important element of the Polish housing market. Purchasing a property from a cooperative requires a thorough analysis of the legal form and terms of the contract, but in many cases it may mean a favorable price and stable property management. This is a proposition for people who focus on the functionality and long-term use of the apartment, and not only on the investment aspect.
Marcin Moneta
