A sponsor unit is an apartment in a co-op that has been retained by the developer or investor after other apartments that have been sold to individual owners. The developer of a new building may decide to keep some units for personal use or as an investment. Later, the developer may sell those units.
A co-op sponsor unit is a unit owned by the original owner or corporation that converted the building from rental to co-op, so it is not a resale. The main advantage of buying a sponsor unit in a co-op is that the buyer does not have to submit a financial package to the co-op board or pass a board interview.
Once the purchase goes through, however, the new owner must abide by all of the building’s rules and bylaws, including restrictions on subletting. In both condos and co-ops, sponsor units are sometimes less expensive than resales. Also, it is not unusual for sponsor units in co-ops to have original details. That being said, sponsor units can be renovated or in “as is” condition.
Unrenovated units can sometimes be “a more affordable option for a buyer. As well, buyers who work freelance or are otherwise in a financial situation that may not pass the board could still be approved by the sponsor; if they are more lenient since sponsor units do not require board approval. The main disadvantage of sponsor units is that the sponsor may require the buyer to pay the transfer tax, which means closing costs will be higher.
