What is a Co-operative or Co-ownership Building?
When the Toronto real estate market inventory gets low or the competition becomes fierce, those looking at alternative options might consider some ‘outside the box’ housing ideas. Not everyone lives in a traditional house or condominium. And, there are several reasons why. In our experience, a co-operative or co-ownership building is a great asset class to explore, as they tend to be more affordable and less competitive. And, who doesn’t love the insider scoop, in our fast-paced market?
Take a look at our Cole’s Notes version to understanding the difference between a co-operative building, co-ownership building, and condominium.
Condominiums
As the purchaser of a condominium, a number of things apply to you.
- You’ll obtain a deed of ownership for your individual unit. This comes with a percentage interest in the comment elements of the condominium building.
- You can finance/mortgage your own suite and there is no requirement for consent to sell, rent or finance the condominium.
- You become a member of the Condominium Corporation. This is where building affairs are handled, including rules and regulations, building finances, property management and maintenance.
- Generally, monthly maintenance fees are inclusive of a number of things. This includes common elements, building insurance, some utilities, parking, and a locker (if applicable).
Co-Ownership Buildings
If you’re purchasing a unit in a co-operative building, here’s what you need to know.
- With a co-ownership suite, you’re buying an undivided percentage of the building that is registered on title. This means, your name is on the legal ownership document. And, the purchase comes with the exclusive right to occupy a specific unit. Here, you’re receiving a deed setting out the percentage interest you have acquired.
- As the purchaser, you have an exclusive right to occupy a suite through a registered Co-Ownership Agreement. You obtain ownership of a percentage interest in the common areas of the building.
- You can individually finance/mortgage your own suite and maintenance fees that are assessed by percentage share.
- Further, you do not need consent from the other owners to sell, rent or mortgage your unit.
- One slight difference is that condominium owners receive individual tax bills. A co-ownership building means you’re paying a share of property taxes as part of your monthly maintenance fees. This can make co-ownership monthly maintenance fees seem higher than those of a condominium (though the difference is often minimal).
Co-Operative Buildings
For purchasers of units in a co-operative building, you’ll need to know these applicable details.
- You buy shares of a corporation, which is registered on Title. However, you do not receive a deed. Instead, you receive shares in the co-operation.
- In addition, you receive an Occupancy Lease for a specific unit with the exclusive rights to use it.
- Also, you’re must receive the co-operative board’s approval to buy shares and move in. If the board approves your purchase, you must comply with the co-operatives’ bylaws that govern the admission of members. With approval, you become an official member of the co-operative.
- If you have interest in leasing your suite, you may require a co-operative board approval. This depends on the individual co-operatives’ bylaws and regulations.
- Further, in many co-operative buildings, the residents often self-manage and self-govern. There is no third party property management company to oversee issues, complaints or maintenance.
The Pros and Cons of Buying into a Co-Operative or Co-Ownership Building
When it comes to purchasing a co-operative or co-ownership building, you’ll want to keep these pros and cons in mind.
The Pros
There are many pros that come with purchasing a co-operative or co-ownership building. First, since many of these property types are older, converted apartment buildings (many built in the 60’s and 70’s), they often exist in very established neighbourhoods. For example, you’ll see this in Rosedale or Yonge and Eglinton. And with this in mind, these neighbourhoods are often seen as out of reach for the average buyer’s price point!
On the other hand, it is typical that these units are much larger than new condo units – a lot of bang for your buck! Furthermore, since there are some challenges with these types of buildings, there may be less competition. And, this means you will often see a reflection in the entry price. Although higher, the maintenance fee often contain your share of the property taxes, heat, water, etc. This is why it’s important to really understand what the fees cover! Lastly, since the buildings are older, they often have tons of character and charm (and, far less turnover), which is very much lacking in our newer condo supply!
The Cons
More of a challenge than anything, these are some things you need to be thinking about. An important difference is that traditional bank financing is impossible to get for co-ownerships and co-operatives. Since only a small percentage of Toronto buildings fall under this category, they represent too small a sector for the big banks to cover. Therefore, many trust companies and credit unions will provide mortgages for a co-ownership or co-operative at competitive rates. However, some will require a 30%-40% down payment (if not the full amount in cash). This may not be achievable for many buyers. In addition to these challenges, more often than not, these buildings are older and have higher maintenance fees, more mature demographics, and outdated details (i.e. shared laundry, no amenities, radiant heat, older windows, common areas, etc.).
Should you, or Shouldn’t You?
So, the question is, should you or should you not? If you are curious about knowing more on buying or selling in a co-operative and co-ownership building in Toronto, just ask us. Personally, I’ve helped two buyer clients investigate these options over the past year. One made a successful purchase and is very happy with this decision. The other? Upon exploring the idea, they opted for a traditional condo instead. Point is, it’s good to know all your options and then choose what works for you.
We Will Co-Operate With You
As a team, we’re happy to walk you through the requirements of buying into a co-operative or co-ownership building. More than this, we’ll introduce you to the right mortgage brokers and lawyers. Our goal is to facilitate a smooth transaction with one of these rare and unique properties.
Interested? Let’s connect! Drop us a line – 416 322 5000.
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This article is written by Fox Marin Sales Representative, Ian Busher. With an extensive background in carpentry and contracting, Ian is our resident “Renovations Expert”! He takes pride in his ability to assess the quality and condition of a house. This, in tandem with his talent for speaking to the feasibility and cost of potential renovations, and his eye for the aesthetic details of a property, makes him a powerful partner for anyone looking to buy a home in the Toronto real estate market.
