If you’ve been studying the listings and searching for a starter condo, you may have come across a number of units that were categorized as Co-ownerships. These units are typically larger then a shiny and new condominium unit, yet sell for much less. So what’s the catch, you ask?
Co-ownership may mean different things to many people, but for a growing number of homebuyers, it represents a way to get onto Toronto’s pricey property ladder for fire sale price. For the most part, a co-ownership is very much like a condominium, but there are a few noteworthy differences.
In a condo, buyers own the unit and receive a deed as proof of ownership. The buyers also share an interest in common elements (area outside of the unit) that they share with other Condominium Corporation members.
With a co-ownership apartment, purchasers own a percentage and receive a deed to the entire building, including the common areas, and given the exclusive right to use an individual apartment. The title of the building is fractured, to allow residents to have individual mortgages.
In a condo, maintenance fees do not include property tax. The owners receive individual tax bills they are responsible for paying.
Co-owners pay their share of property taxes as part of their monthly maintenance fees. While this can make co-ownership monthly maintenance fees appear higher than those of condos, it’s a false impression.
Financing for a co-ownership and financing for a condo is quite different and worth noting. Since in a co-ownership, what is actually sold is a share in the ownership of the building, this is not actually considered “property” to a traditional bank. Therefore, the banks can’t foreclose on it. It’s much easier to repossess a condo unit than a percentage of a building or a company. This has nothing to do with the soundness of a co-ownership as an investment. They simply represent too small a sector for the banks to cover.
So, if banks won’t consider co-ownerships then how do you secure a mortgage? The good news is that there are several reputable trust companies and credit unions that understand the co-ownership concept and will provide mortgages for this type of property, offering competitive interest rates. The one draw back is that co-ownerships do not qualify for CMHC high ratio mortgage insurance and credit unions typically require a minimum 20% downpayment.
The appeal of co-ownerships for buyers is that for a variety of reasons. Co-ownership units can be less expensive to purchase. Also many co-ownership apartments are in older, well-built buildings with spacious rooms and located in prestigious neighbourhoods. Many highly regarded neighbourhoods have a limited number of new condo developments to choose from, and the price of homes can be unrealistic for many. Co-ownership is an affordable way to live in a prestigious neighbourhood with the benefits of low-maintenance living. Also, the turnover in these buildings is often lower and there is a higher percentage of owner occupied units. With that comes more pride of ownership.
Co-ownership properties are also great for those looking to downsize. Since the units are usually bigger then today’s new condos, it makes it much easier to transition from a larger property like a house. Co-ownerships are also smaller buildings, so if you prefer a “boutique” vibe with more character and charm, opposed to a high-in-the-sky living, this is a good option.
Co-owenrships are underappreciated and often overlooked simply due to the lack of knowledge about this type of property. There are so few of them that often real estate agents don’t have a lot of experience with co-ownerships and may not be familiar with the process. People are much more comfortable with the process of a condo purchase. But the purchase process is actually not that much different. The key to a successful co-ownership purchase is good advisors on the market and legal. A good team will do the due diligence that’s needed and you might find a place that feels like a house but has the convenience of a condo.
If you would like to learn more about co-ownerships or condos, don’t hesitate to send me a note. If you’ve been thinking about owning a co-ownership property, here is one of my new listings in Forest Hill —> Mid-Century Bathurst Street Beauty in Forest Hill that will give you a taste of what this type of property is all about.