Co-ops offer unique style of home ownership

How is co-op ownership different from other types of home ownership?

Canada is fortunate to have a number of homeownership models that provide buyers some choice.

Buyers are probably most familiar with freehold homeownership and condominium ownership. With the former, you own the home and the land. With the latter, you own your individual unit while the rest of the condo complex are considered shared common elements and owned by the condominium corporation.

Less well-known is co-operatives, or co-ops, as a form of home ownership.

Co-ops are often compared to condominiums because they can both be multiunit residences — usually townhouses or mid-size highrises. They are also both run by an elected board of directors.

The major difference between the two is how you “own” the home.

With a condominium, you purchase your individual unit outright or with a conventional mortgage. In addition to the purchase price, you pay monthly fees for the upkeep of the shared common elements. Condominiums have legal descriptions that are registered in their local Land Registry Offices. This means you can buy or sell an individual condominium unit, including a parking space or storage locker, if it has a separate legal description and deed.

Co-operatives, on the other hand, are not considered real property. When you buy into a co-op, you purchase a share in a corporation that owns the property. With that share, you get exclusive use of a unit in the co-op as well as the right to vote in how the co-op is operated.

You also pay a monthly fee that funds operating costs, including the upkeep of the co-operative’s amenities.

Another key difference is that you must apply to be a member and the co-operative’s board determines whether you are able to become a shareholder.

Many co-ops have a strong sense of community and focus on providing housing for niche groups of people.

Co-ops are also known for having stable occupancy, so if you are interested in becoming a share holder of a particular co-op, it may take some time before a unit becomes available.

However, if it does, I would encourage you to practise the same due diligence you would in any real estate transaction.

I recommend hiring a real estate salesperson and real estate lawyer with experience in these types of transactions who can help you determine the corporation’s financial health and any fees you will have to pay as a shareholder. You should be aware that financing options for co-ops may be limited, compared to those available for condos, since there is no separately-deeded title that can be secured by a mortgage.

You should also meet with members of the co-operative who are fellow shareholders and who have a financial stake in how the co-op is run. Ensure they have the same priorities as you do in being part of the co-op community.

If you have a question about the home buying or selling process, please email information@reco.on.ca.

Joe Richer is registrar of the Real Estate Council of Ontario (RECO) and contributor for the Star. Follow him on Twitter: @RECOhelps