You might look at two similar buildings and think that they are both condominiums (condos), where in fact, one may be a cooperative (co-op). The question remains: "What is the difference?"

Both are common forms of living, much like apartment building living. In New York City, there are some co-op buildings with extremely luxurious apartments on Central Park. In Canada, most co-op buildings are affordably priced and tend to be geared towards lower cost living. As well, the vast majority of co-ops in Ontario tend to be non-profit. This discussion will not focus on the non-profit segment, but rather exclusively on equity co-ops with share capital.

The goal of this article is to provide some practical information regarding some of the differences between the two, and does not claim to be an exhaustive discussion. Your lawyer can advise you more fully on other differences.

One of the greatest advantages of condominium living is the maintenance free aspect of home ownership. One can quite simply turn the key to lock the door and leave all of the outside work to be done for you - exterior painting, gardening, snow removal, etc. This is often not the case with co-op living.

Co-op is the short form or root of the term "cooperative". You may also think of it in another way - "co-operation". Every resident cooperates and chips in to do the work at the building. Since there are fewer services hired out to external service providers, the monthly fees are also lower. John Smith may be in charge of the bookkeeping, Jane Doe may be in charge of all gardening, David Jones may be responsible for hallway cleaning, etc. These duties may change every month.

From a legal perspective the difference is quite simple. Much like a house or a car, you as a purchaser, obtain precise title (or "deed") to a specific condo unit. You are in essence buying space in the air (apartment condos), but that space is spelled out in detail. If you bought unit #1005 for example, the legal description may read as "Wentworth Condominium Corporation 123, Level 10, Unit 05, and locker #1, and parking space #1). As you can see, it is quite clear what unit you own. In addition to that specific space, you also own a proportionate amount of space of the common elements (hallways, front foyer, basement, outside green space, etc.). If there are 100 units in the condo building, there are 100 individual titles. The governing body over the condo is indeed a corporation, but without share capital. Given that you have specific title to a property, you can arrange for a standard conventional or high ratio mortgage through any mortgage company or bank.

This is precisely the issue that prevents many people from buying a unit in a cooperative - financial institutions will not give a mortgage for a co-op. There is only ONE title over the entire building and the co-op owners hold shares in the co-op corporation, with the right to occupy in a defined unit. Even if there are 100 units in the co-op building, there still is only one title over the entire property. Co-op owners must purchase their unit in cash, since they do not have a specific title to hypothecate (i.e. pledge as security).

Regarding the purchase of a condo, you do not require any approval from any of the residents. On the other hand, you may be restricted from purchasing a co-op. The board of the co-op (comprised of the residents) must approve you as a purchaser. The board wants to ensure that you "fit in" with the other residents. Yes, indeed, this is completely legal. They also want to ensure that you have the financial means to pay your monthly fees and the physical ability to complete the required work.

Also, please keep in mind that there may be additional restrictions governing the use of a co-op. For example, most co-ops will not allow you to rent out your unit.

When you are purchasing a home, you want to make an informed decision. There are several other aspects you will wish to know before putting in an offer on a condo or co-op:

1. If it is an older building, are there substantial funds in the reserve to cover upcoming repairs and maintenance? For example, when the roof needs to be replaced.

2. If it is an older building, has the building recently been retrofitted to meet the new fire code?

3. With a condo, make your offer conditional upon the receipt and review of an estoppel certificate - the estoppel certificate is prepared by the property manager and will show the balance in the reserve fund, whether there is any litigation against the building, whether the monthly fees on your unit are in arrears, etc. You will need to specifically ask these questions to the board of a co-op since estoppel certificates aren't prepared by co-ops.

4. Find out whether there have been any outstanding special assessments levied against the owner's unit?

5. What do the monthly fees include? What obligations are there upon the residences in a co-op?

I hope that this discussion sheds some light on some of the differences between these two types of ownership. Please contact me if I can be of any further assistance to you in the Hamilton-Burlington region.

* not intended to solicit properties currently listed for sale