Q: We are really confused about the difference, if any, between a condominium and a cooperative. Please explain how one purchases a cooperative, any problem areas or pitfalls, and the tax benefits, if any, from owning a cooperative unit.

A: While there is many definitions of cooperatives, the one I like best is that a cooperative is a multi-unit apartment building, in which each resident has an interest in the entire building, and a lease (or contract) enabling the owner to occupy a particular apartment building within the building.

Whiles a condominium owner actually owns the entire apartment, as well as a percentage of the common areas (called the "common elements"), the cooperative unit owner does not, in fact, own the unit.

The cooperative association, which is usually a corporation consisting of all the unit owners, owns the building and the individual units. Decisions on the management, life style and financial details are made by the cooperative unit members themselves, either through their vote at regularly scheduled meetings, or by delegation to an elected board of directors, which runs the day-to-day operations of the cooperative.

While this may sound complex, in reality cooperative living can be very desirable. Cooperative residents get the same tax treatment as other homeowners. They can deduct their proportionate share of the interest on the mortgage payments for the entire cooperative, and under most circumtances they can also deduct their proportionate shares of real estate taxes.

How do you go about buying into a cooperative apartment? Let us assume that you have picked a building and have agreed with the seller on a price. It is important to enter into a written contract to purchase this unit, spelling out the various terms and conditions agreed upon, including when the transfer will take place, the price, and any financing arrangements between the seller and the buyer.

Having been an observer of the cooperative markets here in the District, it is my impression that cooperative units are rising in value consistently every year. Perhaps the one major drawback of purchasing a cooperative is that financing is not really available.

Unlike a condominium, where the unit can be foreclosed in the event of non-payment, the present laws in the Washington area do not permit foreclosure of cooperative apartments. Thus, you may find it some what difficult to obtain bank financing of your cooperative unit.

As a result, sellers of cooperatives will often "take back" some of the purchase price, by way of a promissory note which you, the buyer, will sign. The security for this promissory note is the ownership contract itself.

When you purchase a unit, you receive evidence of ownership, usually called the ownership contract. Your seller - the lender in this case - will hold this ownership contract as collateral to insure that you will repay the loan.

When you have finally paid off your obligation, the seller will return this ownership contract to you. Under the rules of most cooperative apartments, if your ownership contract is pledged as security, you will not be able to sell you unit to someone else.

While this sounds complicated, in reality it is not. In fact, most cooperative buyers and sellers to not even use the services of lawyers, but instead rely on the assistance of the cooperative board of directors or the management agent.

One interesting aspect of cooperative living is the very active participation in the management of the cooperative by the co-op members. It is this participation - indeed a spirit of involvement - that has kept cooperatives alive and well in the District of Columbia.

It is estimated that there are approximately 5,000 cooperative units in Washington alone. Many members of the City Council have expressed an interest in enacting cooperative legislation, with a view toward making financing of cooperatives more readily available.