Within the past decade, there has been a great number of condo conversions throughout Canada as more and more owners find that it is easier to sell smaller units than a large apartment building or row of townhouses. For anyone not up on real estate terminology, a condo conversion is simply a means of transferring ownership of an existing multi-dwelling building to individual owners. These owners become ‘co-owners’ of the entire building.
Photo by James Willamor
Also, there has been movement in the market as greater numbers of people seek to own rather than rent their home. Condos are appealing for a number of reasons, most often because the costs and tasks of general upkeep on the grounds and common areas are shared among the entire complex. This brief guide to buying a condo conversion seeks to explain the two main types of condominiums so that you can make an educated decision if you are in the market.
Divided Co-Ownership vs. Undivided Co-Ownership
Unfortunately, buying a condo isn’t always as cut-and-dry as you would think. Having seen that condo conversions simply attempt to transfer ownership of an entire building to individual units, it is important to note that there are two main types of condos, divided co-ownership and undivided co-ownership.
Here is where there is a bit of confusion for the average person. Let’s say you are in the market for a condo in Montreal, for example, you should determine which type of ownership best appeals to you. Briefly, the difference is as follows:
- Divided co-ownership – In the divided co-ownership model, you actually purchase the unit you will be inhabiting. While you are a ‘co-owner’ of the entire building, in reality, you own the apartment/unit you will be living in along with a share of the common areas.
- Undivided co-ownership- This model is where the entire building is collectively owned but is not divided into separate units. It is possible that there is an agreement that will stipulate which unit you will occupy, but you need to keep in mind that you will not own your own unit.
Condos Have Major Appeal
According to the latest statistics, the housing market is in a slump because many properties are overvalued. Not only are single family dwellings overpriced, but mortgages are also difficult to obtain. Since the market bottomed out globally in 2008 and 2009, many lenders are reluctant to carry large mortgages.
For the most part, condos are priced lower than individual homes which tends to make mortgages easier to come by. However, this isn’t always the case because of the two types of ownership, divided and undivided. Bear in mind that undivided co-ownership means you simply have a slice of the pie, so to speak. Consequently, it is usual to see one mortgage for the entire complex wherein each ‘owner’ will be contracted under a single mortgage. In other words, every owner is a party to the contract.
Before jumping into a contract, take the time to better understand the two types of condo ownership. If one type is more appealing than the other, make sure you are not signing on to a type of ownership that doesn’t appeal to you. Ask as many questions as you need to so that you are not getting locked into a contract that may be difficult to get out of. Buying a condo does have its advantages, but know what you are buying before you sign on the dotted line.