Comparing Condos, Co-ops and Co-ownerships
Most multi-family buildings in Toronto are set up as condominiums. A condominium is a form of property ownership where the individual owners share ownership of common areas (lobby areas, hallways, exercise rooms, swimming pools, party rooms, common roof terraces, garages, courtyards and grounds, balconies anad patios), while the ownership of their individual unit is private.
Sharing an ownership of the common elements leads to the necessity of individual financial responsibility for a share of costs involved in maintaining the building and grounds, employing staff, and paying for insurance, as well as maintaining a healthy reserve fund. That share of costs is paid by the unit owners monthly as maintenance fee.
Condominium Act governs the way the condominiums are run. You may learn more about condo owners rights and responsibilities from the Ontario Government website.
A co-operative apartment building is owned by a corporation, and the individual owners are shareholders. The owners have a right to vote at meetings, and receive a number of shares proportional to the size of unit they have purchased.
Instead of an ownership of their unit they sign an occupancy agreement giving them a right to long-term possession of the unit. That agreement also lists the obligations - the responsibility to pay their share of operating expenses, building's mortgage and part of the property taxes.
Many of the co-op buildings were originally converted from rental properties, and many of the units were occupied by original tenants. These tenants could not be removed, even if the new owner required the space for their own use. As time passes fewer and fewer of the original tenants remain.
In a co-op building the responsibility for payment of the building's mortgage and property taxes is joint, and if any of the owners default the remaining owners must jointly cover the shortfall, or risk losing their equity. that joint responsibility is one of the reasons for the process of approval of prospective buyers.
It is more difficult to obtain financing for a co-op building, as there is no deed, and the only colateral for the loan are the shares. Some buildings are easier to finance than others, but typically it is necessary to have at least 25% to 30% down payment, and in some instances financing is impossible to get.
An excellent article on co-ownerships was written by Bob Aaron, Toronto real estate lawyer.
Co-ownership buildings are owned jointly by individual unit owners, who are all registered on title, and receive a deed to the percentage interest in the building. While running of the co-ownership is similar to that of a condo - there is a board of directors, building management, and the owners have the right to sell their unit or obtain financing without approval of other owners, a share of property taxes is included in the monthly maintenance fees.
Banks do not finance co-ownerships, nor do they qualify to CMHC mortgage insurance. There are, however, several trust companies and credit unions which provide mortgages for this type of property. The most active in this respect are DUCA, Alterna, Equitable, Italian Credit Union and the Toronto Star Credit Union.
As with co-ops, it is necessary to have at least 25% to 30% of down payment to finance a purchase of a co-ownership unit.
Whether buying a condo, co-op or co-ownership unit, a buyer needs their lawyer to carefully review the documents to make sure the building is in a good financial condition, there are no lawsuits against it, and no significant expenses that might result in special assessments are planned for the nearest future.
Many co-ops and co-ownerships have, or are in the process of converting to condominium ownership. The price of a co-op or co-ownership unit is typically lower in comparison to a similar condominium apartment, therefore an excellent potential exists for increase in unit values once the conversion has occured.