Co-ops and co-ownership properties offer you a chance to live in a condo under specific ownership arrangements that are different from direct ownership.
What Do Co-ops and Co-ownership Buildings Have in Common?
On the whole, Toronto co-ops and co-ownership buildings are slightly cheaper than comparable properties in the neighbourhood. Also, because most such buildings were built in the 1950s, they now reside in lucrative and even prominent parts of the city. For these reasons, co-ops and co-ownership buildings offer great value if you are willing to try out the alternative to a traditional condo.
Co-ops Share a Company
Owning a co-op is not the same as owning an apartment. Instead, you own a share in the company that owns and manages the apartment building. Of course, this share entitles you to living in one of the apartments, but it is not the same in the eyes of lenders.
A bank will happily issue a loan collateralized by a title on a property, but it is a little harder to collateralize a title on a (share of a) company. Some smaller lenders may refuse to get involved with what may be for them a non-traditional transaction.
In addition, you have to consult the management and/or other owners if you want to make changes to the apartment you live in, or buy or sell a share. This is because you are partially responsible for many of the company’s outlays (such as taxes, insurance, etc.), and all other owners are as well in virtue of common ownership. Thus, if you default on a payment, the other owners would have to bear the cost.
When you live in a co-op condo, the traditional statutory condo-owner protections do not apply either.
As always, these potential disadvantages are offset by one major advantage: the purchase price. Because you are buying into such a specific scheme, you have a chance to get a very good deal on properties in some of the most prominent locations in Toronto.
Co-ownership Shares a Title
With co-ownership properties, the owner actually shares in a title on the entire property. The ownership is not directly related to specific apartments, but it does entitle the owners to live in them.
Because of the direct-ownership structure, it is easier for co-ownership condo owners to take out a mortgage on their title share. Also, there is less interference from the condo board when one decides to buy or sell her or his share.
Co-ops and co-ownership properties are certainly an interesting alternative to regular property ownership of which many people are not too familiar. Are you up for the adventure?
Whatever you preference, you can start searching for Toronto condos for sale right now.
This article is based on extremely informative material by David Larock, an expert on fringe mortgage products and an Ontario mortgage planner. Read David’s post at mortgages for Co-op and Co-ownership condos.