The Affordable Apartment in Toronto

The Case for Purchasing Shares in a Co-operative Building 

What would you say if I told you that you could have a 3 Bedroom, 2 Bath, 2,300 square foot condominium in Rosedale, with a 24 Hour Concierge, two swimming pools, one indoor and one out, and extensive landscaped gardens for less than $2,000,000.00.  It is very unlikely that you could, but you can have it all in a Co-Operative building. So what is a Co-Op building and why are they generally less expensive than condominiums?

In a Co-op building, the apartment building is owned by a corporation and the residents buy shares in that corporation. Ownership of those shares gives the buyer the right to occupy a specific unit in the building, sometimes parking and locker as well. This is different from a condominium in which the residents own their individual units (generally from the backside of the drywall in and the upper surface of the concrete slab floor to the lower surface of the concrete slab ceiling, although the Condominium Corporation owns the structure of the building and all of the common areas (halls, laundry room, amenities etc.). A condominium gives you an ownership interest in land, a Co-operative building does not.

Many Co-operatives, but not all, require Board Approval of any new owner, this generally requires the purchaser to provide some basic financial information and meet with the Board for an interview. Many Co-operatives have strict rules around renting your unit and some actually prohibit it. There are some Co-Operatives in the City that have rules requiring the occupants to be adults of a certain age.

In most other ways the two are very similar. Condominiums have a Declaration that creates the condominium and by-laws, rules and regulations that set out how you can use your unit and your rights and obligations as an owner. Although each Co-op is slightly different, most have some sort of Occupancy Agreement, which is like the Condominium Declaration, and By-Laws and Rules and Regulations that set out how you can use your unit and your rights and obligations as an owner. Condominiums have annual meetings to elect a board of directors who run the building as do Co-operatives.

In both types of buildings you will be paying monthly maintenance fees that are used to maintain the common areas and the structure. But in a Co-Op building your monthly fee also includes the property taxes because the Co-Operative Corporation owns all of the real estate. When comparing the monthly fees to condominiums you must therefore keep this in mind.

The other big difference between them is that the big banks will not finance the purchase of a Co-Op. If you need a mortgage you will need to obtain that from a Credit Union and the Credit Unions generally insist that you retain a lawyer on their list of approved lawyers to act for you on the purchase and the financing.  That is because the legal work on the purchase of a Co-Op is totally different from the work required for a Condominium. Darlene Richards-Loghrin at Junction Law is on that list. She has been closing Co-op purchases for over 20 years and is well versed in the work required to get that done for you.

The hesitancy of buyers to wade into this uncommon type of ownership is one of the main reasons the prices are low and unless something changes it is unlikely that the value of a co-op apartment will increase at the same rate as a condominium, once the market improves. That being said, if you are looking for your forever home and are not worried about short term resale value, a Co-operative may be just the place for you.