Buying or Selling a Condo, Co-op, or Co-ownership? Protect Yourself

A real estate transaction is never simple. Without sound legal advice, unless you are a real estate agent or broker, you may expose yourself to risk, but if you have the advice and guidance of a Toronto real estate lawyer from the beginning, you can reduce that exposure considerably.

With condominium prices rising across Canada, many buyers are choosing alternatives such as co-ownerships and co-ops. If you are purchasing a condo or choosing one of these other options, have an Ontario real estate lawyer advise you and watch out for your best long-term interests.

Co-ownerships and co-ops are created by lawyers for building owners and property developers and vary widely in terms of their rules and by-laws. Would-be condominium purchasers who are reconsidering their options should understand the differences between co-ownerships and co-ops.

What is a Co-op?

A co-op is the product of a corporation which owns the land, the building, and all of the units. Each buyer in a co-op purchases shares in the corporation rather than a specific unit in the building. Buyers do not own their unit, but they have the right to use the unit and reside there.

In most co-op purchases, the buyer also receives a parking space and occupancy agreement. At most co-ops, a new buyer must receive the approval of a board of directors in order to finalize the co-op purchase.

Most banks do not offer co-op mortgages, so most buyers pay with cash or find financing through a credit union or a private lender. The interest rate may be higher than traditional rates, but co-op purchase prices are considerably below the cost of buying a comparable condominium.

What Does Selling a Co-op Entail?

If you are a co-op owner, selling your shares in a co-op is nothing like selling a condominium. The new buyer must be approved by the co-op’s board of directors, while a condo owner is usually free to sell the unit without consulting other owners or the condominium corporation.

No real property is transferred when a co-op is sold, but a land transfer tax may be payable on the cost of the shares. Because it is a sale of shares rather than real property, selling shares of an interest in a co-op also requires compliance with Ontario’s Co-operative Corporations Act.

When you sell a co-op, the Co-operative Corporations Act requires you to offer potential buyers a “full, true and plain disclosure of all material facts relating to the securities proposed to be issued.” A Toronto real estate lawyer can prepare a full disclosure statement on your behalf.

What is a Co-ownership?

Another popular alternative in Ontario is a co-ownership. Unlike co-ops, where the buyer doesn’t receive a deed, a co-ownership buyer receives a deed for a percentage of ownership in the property. A percentage of the property taxes may also be included in the monthly expenses.

Like co-op buyers, co-ownership buyers may receive a share certificate for their percentage of ownership in the project as well as an occupancy agreement or lease. Also like co-ops, some co-ownership boards may require the approval of a new buyer.

What Do Co-ownership Agreements Address?

Co-ownership agreements should clearly state the terms, conditions, responsibilities, obligations, options, and rights of a property’s co-owners. Particularly, a co-ownership agreement should address these questions:

  1.  What amount will each owner initially pay?
  2.  What will each owner pay for ongoing expenses such as insurance and taxes?
  3.  What happens if an owner dies or cannot pay his or her share?
  4.  How and in what circumstances will the property be sold?
  5.  What happens to proceeds from the property’s sale? How are the proceeds distribute
  6.  What if one or several owners want to sell the property, but others do not?

What Else Should You Know About Co-ownerships and Co-ops?

Many co-ownerships and co-ops in the Toronto area require the use of their own purchase agreements. The Ontario Real Estate Association has also developed standardized agreement forms for purchasing shares in a co-op and for purchasing co-ownerships.

As mentioned previously, most banks in Ontario will not offer co-op mortgages, and it may also be quite difficult to finance a co-ownership, although a vendor will sometimes finance a co-ownership purchase with a vendor take-back mortgage.

While co-ownership agreements can effectively prevent most disputes from arising among the owners of a property, disputes may eventually emerge with other parties over boundaries, property taxes, leasing, zoning, land use, or other issues.

When these types of disputes arise, retaining a lawyer doesn’t necessarily mean that you’ll go to court. In fact, in most disputes related to real estate, a real estate lawyer will work to negotiate an acceptable settlement privately and outside of the courtroom.

Why is Having a Lawyer So Essential?

It is imperative to have an experienced real estate lawyer at your side if you are considering the purchase or sale of a condominium, a co-op, or a co-ownership in or near the Toronto area.

An Ontario real estate lawyer will examine each document that is pertinent to the transaction, make sure that the transaction is compliant with the law, and advise you against making any decision or taking any action that may be counter to your long-term best interests.

But how can you select a lawyer in the Toronto area who has substantial knowledge and experience in real estate law – a lawyer who can provide the sound and reliable advice you will require if you are purchasing or selling a condominium, a co-op, or a co-ownership?

Contact a Lawyer at Financial Litigation

On either side of a real estate transaction, you can’t afford mistakes, but the lawyers at Financial Litigation have the substantial real estate experience you need. We represent brokers, lenders, businesses, and anyone who may be buying or selling a property in the Toronto area.

A real estate lawyer at Financial Litigation will work to meet your legal needs and help you reach your goals. If a dispute emerges, the Financial Litigation team has extensive experience resolving the most difficult business and real estate matters.

For representation or advice regarding the purchase or sale of a condo, a co-ownership, or a co-op, promptly schedule a consultation by calling the Toronto offices of Financial Litigation at 647-559-8355. We will address your concerns and ensure that your interests are protected.