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Co-ops and co-ownership are emerging as alternatives to condos

Jul 10, 2021 | 2021 Toronto Star Property Law Columns

By Bob Aaron
Toronto Star contributing columnist

With the rapid increase in the price of condominium units this year, some buyers are turning to co-ops and co-ownerships as an alternative.

With the rapid increase in the price of condominium units this year, some buyers are turning to co-ops and co-ownerships as an alternative.

Unlike condominiums, which are creatures of statute, co-ops and co-ownerships exist under originating documents created by their developers and lawyers. For the most part, no two co-ops or co-ownerships have the same bylaws, rules and occupancy agreements.

Buyers who are interested in exploring these options should know the differences among condominiums, co-ops and co-ownerships.

Co-ops, also known as equity co-ops, are created by the incorporation of a holding company which remains the registered owner of the entire building. Instead of a registered deed to their unit, buyers receive a share certificate representing their percentage ownership in the project, along with the exclusive right to occupy and use their residential suite, and possibly a parking space and locker, and an occupancy agreement.

In many cases, buyers must be approved by the board of directors before they can complete their purchase.

Financing the purchase of a co-op unit can be challenging, as most banks will not give mortgage loans on a co-op’s share certificate. Instead, buyers will either pay cash or obtain financing through credit unions.

Interest rates may be slightly higher than conventional bank financing, but that is offset by purchase prices which are significantly lower than comparable condominiums.

The other ownership alternative to condominiums is known as a co-ownership. Unlike co-ops, where owners do not receive a registered deed, buyers in co-ownerships receive a registered deed to a small percentage of the ownership of the entire building. A buyer, for example, might receive a registered deed to 1.2345 per cent of the property, and with it, that interest can be subject to a registered mortgage.

Like co-ops, buyers may also receive a share certificate in the management corporation, along with a long-term lease or occupancy agreement. Buyers may also be required to sign a co-ownership agreement dealing with the duties, rights and obligations of the individual owners.

The boards of some co-ownerships may also be required to approve new buyers. A proportionate share of property taxes will also be included with the monthly common expenses.

Some buildings have their own purchase agreements, which buyers must use. As well, the Ontario Real Estate Association has developed standard form agreements for buying shares in a co-operative building (form 102), and for buying an interest in a co-ownership (form 115).

Among the downsides of buying a co-op or co-ownership is that there is no standard form of status certificate similar to those in condominiums. As well, there is no statutory requirement for maintaining a reserve fund and the funds that do exist may be inadequate for future needs.

Before embarking on the purchase of these properties, it is important for buyers to consult with a real estate agent and lawyer familiar and comfortable with both concepts.


Contact Bob Aaron

Bob Aaron is a Toronto real estate lawyer and frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.

Aaron & Aaron specialize in Real Estate Law, specifically Sale of Rental, Condominium, Residential, Rural Recreation, Offer to Lease, Commercial, and New Construction

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