With low supply, steady demand, and limited options because of affordability challenges, house hunters are increasingly becoming more creative in their housing hunt. For many, this mean exploring co-ownership.
Co-ownership is becoming a more sought-after housing ownership model, not just for the purposes of affordability, but as a means of self-creating a community. It can take many forms including building a new home or renovating or adding to an existing home to create multiple units to house co-owners (made possible with the introduction of Toronto’s new as-of-right multiplex policy). I wrote about this phenomenon in this post: Build A New Multi-Generational Family Residence, Co-Housing For 4 Friends, An Income Property Or Small Condominium In East York, Toronto
Another option is to purchase a unit in a co-ownership building, where units are able to be purchased through a co-ownership model. Although on the surface, you may be wondering, isn’t living in a condominium a form of co-ownership, because several units are shared in the same building but owned by separate owners?
While there are common features between co-ownership and condominiums, it is the key differences that make co-ownership a different type of homeownership altogether.
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 a much more economical price. For the most part, a co-ownership is very much like a condominium, but there are a few noteworthy differences.
In a condominium, buyers own the interior of their unit and receive a deed as proof of ownership, which they can register a mortgage against from a conventional lender. The buyers also share an interest in common elements (the area outside of the interior of the unit) that they share with other Condominium Corporation members.
With a co-ownership apartment, purchasers own a percentage interest in the building, often calculated as building ‘shares’. Owners effectively receive a deed to the entire building – including the common areas – with their ‘shares’ granting exclusive right to occupy an individual apartment. The title of the building is fractured, which allows residents to register their individual mortgage on the complex. Only a select number of lenders have lending programs for this type of complex, but with this form of ownership fairly common in Toronto, there are several financial institutions that offer mortgages on this property type.
In a condo, maintenance fees do not include property tax. The owners receive individual tax bills they are responsible for paying whereas, in a co-ownership building, owners pay their proportionate share of property taxes as part of their monthly maintenance fees. While this often makes the co-ownership monthly maintenance fees appear to be higher than condominiums, once you extrapolate the proportionate sum for the unit common fees and its property taxes, the total costs are often on par with each other.
There are also a number of benefits to co-ownership buildings.
With co-ownership units, there could potentially be more options for size and layout. Low and mid-rise condominium buildings are hard to find, but a lot of co-ownership properties fall in that coveted low and mid-rise category.
These properties are not usually “shiny and new” as this RightSizing article “What’s The Difference Between A Condo, A Co-op, And Co-ownership?” points out, but these properties typically have larger layouts and sensible floorplans that more than make up for that.
For Buyers who have sizable down payments, co-ownerships offer a lot of upside for Buyers. First, co-ownerships are frequently less expensive to purchase. Second, many co-ownerships are situated in older well-constructed buildings with spacious floor plans in prestigious neighbourhoods.
Location is a major draw with co-ownership buildings, in that they are often located in desirable, established downtown neighbourhoods, sometimes where condominium buildings may or may not be permitted to be built. It gives buyers options to have a condominium-like property, but in a location that is most appealing to them.
These buildings tend to have lower turnover – because they have fewer tenants – and are typically owner-occupied. What this often translates to is a tighter-knit building and a greater sense of community among the residents.
Co-ownership properties are fantastic for those looking to downsize. Since the units are usually bigger than today’s new condos, which can help homeowners feel like they are not compromising on space. It’s challenging to find a “house-like” condominium.
One drawback with co-ownership buildings is that can be challenging to get financing for a co-ownership model, and buyers would not qualify under high ratio CMHC insurance. This is in part because of the small size of the market, banks are not compelled to underwrite these loans.
Financing for a co-ownership versus a condominium is quite different and worth noting. In a condominium, you actually get ‘title’ to your individual suite of which a traditional mortgage can be registered against. In the event the owner defaults on their payments, it’s easy for a lender to repossess a unit and sell it under ‘power of sale’. However, because a co-ownership consists of ‘shares’ in the ownership of the building, it’s more like owning ‘shares’ in a corporation which are less liquid than owning ‘title’ to an individual unit. This makes it more challenging for a lending institution to extract its capital in the event an owner defaults, so lenders view this as a riskier proposition.
A buyer may have better luck through a credit union or trust company in getting financing.
This Globe and Mail article provides good context around co-ownership apartment building conversions: A New Twist On Home Buying. It was published in 2007, but the info is still pertinent- even more so- as the race is on in Toronto to create housing supply, particularly in the missing middle.
The city does not permit apartment buildings to be converted into condos in order to preserve affordable rental stock, which is indeed a problem with such low vacancy. Condominiums are subject to much more policy and regulation, whereas co-ownership apartment conversion is a bit more of a grey area.
The above Globe and Mail article explores how one Forest Hill landlord went through the process of converting apartment units as they came available to co-ownership units for sale. Back then there was an uptick in interest in co-ownership units and apartment conversions, and, in the time since that article was written, there have been more of these buildings converted. However, they still represent a low proportion of properties (estimation of around 50 in Toronto).
At the time, the provincial government became increasingly concerned about the filtering of affordable rental spaces from the market, and therefore introduced the Rental Housing Protection Act, which propelled forward an explosion in condominium development, which in turn deterred the conversion of apartments into co-ownership units. This act was repealed by Mike Harris in 1997.
Policy around rentals is back in the forefront again, with skyrocketing rents, razor-thin vacancy and low, low inventory. With high immigration targets over the next few years (which additional pressure on the tight rental market), the calls for reform will probably get louder.
A challenging market requires thoughtful consideration of all of the options available to homeowners, drawn from research and experience to guide you along. With decades of experience in the real estate trenches, I’m here to help!
As coveted and rare-to-market as co-ownerships can be, we are thrilled to announce that one has just come to MLS!
As Toronto – the City of Neighbourhoods – exponentially explodes with hundreds of construction cranes building predominantly high-density towers, Buyers navigating the real estate market in the central core of the City are discovering the quest to secure a more spacious boutique residence is increasingly challenging. Especially if one desires to be well-situated in a Triple-A neighbourhood with excellent transit, superb access to green space, and everyday amenities within walking distance.
Are you seeking special? Check out this new listing that we call: A Panoramic Penthouse Perch In Forest Hill
Offered for sale at $689,900, this generous one-bedroom penthouse suite (it used to be two bedrooms!) is over 1000 square feet, with a large south-facing terrace of almost 300 square feet! Dreamy!
Questions? Want a private tour? Contact Steven Fudge at email@example.com!
Looking for the services of an on-trend well-informed experienced realtor who has been a consistent Top Producer for 3 decades?
Serving first and second-time Buyers, relocations, renovators, and those building their long-term property portfolios, our mandate is to help clients choose the property which will realize the highest future return on their investment while ensuring the property best serves their practical needs and their dream of “Home” during their ownership.
Are you considering selling? We welcome providing you with a comprehensive assessment free of charge, including determining your Buyer profile, ways to optimize your return on investment, and tailoring the listing process to suit your circumstance. Check out How Urbaneer’s Custom Marketing Program Sold This Handsome Edwardian Residence In East York to learn more about what we do!
Consider letting Urbaneer guide you through your Buying or Selling process, without pressure, or hassle.
We are here to help!
With three decades of experience navigating the ever-changing Toronto real estate market, a commitment to promote the sale of properties like yours with interesting and relevant information, and the ability to guide Buyers with credible insights and well-informed guidance, the Urbaneer Team help without pressure or hassle.
Thanks for reading!
-The Urbaneer Team
Steven Fudge, Sales Representative
& The Innovative Urbaneer Team
Bosley Real Estate Ltd., Brokerage – (416) 322-800
– we’re here to earn your trust, then your business –
*Did you know we were recently listed as one of The Top 25 Toronto Real Estate Agents To Follow On Twitter! – The Top 50 Blogs On Toronto – and The Top 100 Real Estate Blogs In Canada? Consider signing up in the box below to receive our FREE monthly e-newsletter on housing, culture and design including our love for unique urban homes and other Toronto real estate!
*Love Canadian Housing? Check out Steve’s University Student Mentorship site called Canadian Real Estate, Housing & Home which focuses on architecture, landscape, design, products, and real estate in Canada!