Divided or undivided co-ownership: Which is right for you?October 8, 2018
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Are you thinking of buying a co-ownership property? Before you start looking at listings, you should know the difference between divided and undivided co-ownership. We’re going to break it down so you can make an informed decision.
Divided co-ownership is what is commonly known as a “condo.” Each unit in the building is designated a private portion with a separate land registry number. The condo owner has exclusive use of their unit. There are fees, shared among the units, to cover maintenance of the common portions. Condos can take a number of different forms, including certain townhouse properties. According to Association professionnelle des notaires du Québec APNQ a condo owner can be the exclusive owner of a house and hold a share in the land, which remains common property.
But one thing is always the same. Each owner has their own mortgage and their own property tax bill, says Michael Chriqui, a notary with Leroux Côté Burrogano (lcbmtl) .
Then when the time comes to sell your unit, you can put it on the market without consulting the other condo owners.
Undivided co-ownership is a form of shared ownership in which owners, with unlimited liability, must hold a single mortgage with the bank.
But they may decide to have separate limited liability hypothecary loans. In this case, as APNQ explains, they are said to have “limited” liability if an indivision agreement has been signed.
One of the advantages of undivided co-ownership is that beneficiaries pay lower municipal and school district taxes because they share the costs. This property structure is often what the owners of a duplex, for example, will choose when they want to switch the duplex to co-ownership, says Chriqui.
However, APNQ suggests entering into this type of contract with caution, in case one party ever wants to sell. “A creditor is not going to want to issue a mortgage for an undivided 50% of a building, and not many buyers will be interested in purchasing an undivided share of a property.
To buy a condo, the minimum downpayment required is 5% compared to 20% for undivided co-ownership.
As property owner, you enjoy rights but you also have obligations. If you have any concerns about what you’re buying, ask a licensed real estate broker for advice. They will be happy to guide and advise you throughout the process.