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Co-Operative & Co-Ownership Mortgages

An alternative path to home ownership

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A NEW LENDING OPTION

Joint ownership made easy

As housing costs continue to rise, many home buyers are exploring alternative ownership models. Co-operative and co-ownership mortgages offer an attractive solution, allowing buyers to share in the cost of a building or house. This approach presents a more cost-effective method for acquiring a home.

Why consider a co-op or co-ownership?

Affordability
Co-op and co-ownership mortgages offer a more budget-friendly path to homeownership, allowing buyers to pool resources and reduce overall costs.
Shared costs and responsibilities
Homeowners share both exclusive and communal duties, fostering a strong sense of community and spreading maintenance costs.
Community engagement
Co-operatives create a connected living environment, with residents as shareholders working toward common goals, ideal for those seeking community engagement.
Financing expertise
Luminus Financial, experienced in co-operative financing, provides specialized guidance, streamlining the mortgage process for informed decision-making.

What's the difference?

Co-operative and co-ownership mortgages both involve shared ownership structures, but they differ in legal terms and the nature of ownership.

Co-Operative Mortgages

  • Involves purchasing shares in a co-operative corporation.
  • Buyers become shareholders in the corporation, granting them the right to occupy a specific unit.
  • Ownership is in the form of shares in the entire property.
  • Shareholders collectively make decisions about the property, and their responsibilities often include monthly fees for maintenance.
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Co-Ownership Mortgages

  • Involves purchasing an undivided percentage ownership in a building.
  • Buyers own a percentage of the entire property rather than specific shares.
  • Each co-owner has the right to use the entire property, and decisions are typically made collectively.
  • Responsibilities and costs are shared among co-owners, fostering a sense of community.
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Breaking it down

Owning a condominium vs. being a shareholder/owning part of a co-operative represents distinct legal structures and considerations. The table below outlines the similarities and differences between condominium, co-operative, and co-ownership mortgages
Condo:
Purchaser acquires ownership of an individual Unit by a Deed.
Co-Op:
The Co-operative Corporation is the only registered owner of the property (registered on title). The Purchaser does not own Unit but acquires shares in the Co-operative Corporation and is a Shareholder in the Co-operative Corporation.
Condo:
Purchaser acquires ownership to individual Unit by a Deed pursuant to provisions of the Condominium Act, 1998.
Co-Op:

Purchaser acquires the exclusive right to occupy a specific Unit through a Proprietary Lease, Shareholder’s Agreement, or Occupancy Agreement, not a Deed.

Condo:
Purchaser acquires a percentage interest in the common areas of the building.
Co-Op:
Purchaser acquires a percentage interest in the Corporation commensurate with the percentage interest represented by his/her shares, based on the size of the subject Unit.
Condo:

Purchaser becomes a Member of the Condominium Corporation which: (a) manages the affairs of the building on behalf of the members according to the Condominium Act, 1998, and more particularly the Declaration, Bylaws, and the Rules and Regulations; and, (b) represents the interests of the Owners.

Co-Op:

Purchaser becomes a Shareholder of the Co-operative Corporation which: (a) owns and manages the affairs of the building on behalf of the shareholders according to the Co-operative/ Shareholder/ Occupancy Agreement, the Corporation’s Bylaws, and the Rules and Regulations; (b) grants exclusive occupation rights to shareholders of a specific Unit; and, (c) represents the interests of the Shareholders.

Condo:
Purchaser can individually finance her/his own Unit. Large numbers of lending institutions finance purchases of Condominiums by way of a Mortgage and/or a Line of Credit.
Co-Op:
Only a few lending institutions finance these types of purchases of shares and/or grant Loans and/or Line of Credit on these types of properties.
Condo:
Owner is assessed for percentage share of common expenses, based on the size of Unit in comparison to the whole building.
Co-Op:
Purchaser can finance the Unit, using his/her shares and leasehold interest in the Unit, only if there is no prohibition on pledging shares as security.
Condo:
Owner receives an individual property tax bill and pays for his/her own property taxes.
Co-Op:
Shareholder pays for his/her percentage share of property taxes as a part of their monthly common expenses. The Co-operative building is assessed and taxed as one structure. Shareholder does not receive an individual tax bill.
Condo:

The Condominium Act, 1998, requires a Reserve Fund to be established for maintenance of building. Must comply with the provisions of the Act and generally with the Reserve Fund Study. Study must be updated every three years.

Co-Op:
No legislation requiring a Reserve Fund to be established for maintenance of building. Most Co-operative Corporations do have a Reserve Fund for maintenance of building. No legislation exists requiring or outlining requirements for a Reserve Fund Study. No legislation exists requiring compliance with the recommendations of a Reserve Fund Study.
Condo:
Owner can participate in management decisions by sitting on the Board of Directors and / or voting as a member of the Condominium Corporation at Annual General Meetings.
Co-Op:
Shareholder can participate in management decisions by sitting on the Board of Directors and / or voting as a shareholder of the Co-operative Corporation at the General Annual Meetings.
Condo:

Owner is subject to the Declaration, Bylaws, and Rules and Regulations of the Condominium Corporation.

Co-Op:

Shareholder is subject to the Co-operative/Shareholder/ Occupancy Agreements, Bylaws, Rules, and Regulations of the Co-operative Corporation and other contractual documentation.

Condo:
Owner does not need consent of the other owners or the Condominium Corporation to sell his/her Unit.
Co-Op:
Shareholder does need consent of the Board of Directors of the Co-operative Corporation to sell shares, and assign Lease for Unit.
Condo:
Owner does not need consent to rent or mortgage his/her Unit.
Co-Op:

Shareholder does need consent of the Board of Directors to rent their Unit, which is not unreasonably withheld. There is the odd exception. Buyer / existing Shareholders require consent to pledge his or her shares as security for a loan and to rent their Unit.

*Note: Some buildings prohibit the pledging of shares and the Assignment of the individual’s Occupancy rights.

Condo:
Purchase of a Unit should be conditional upon receipt of a Status Certificate satisfactory to the Purchaser and their lawyer which identifies any outstanding or pending payments, special assessments, or legal actions, re: the Owner, the Unit or Corporation, amongst other items together with all other documents required to be included.
Co-Op:
Purchase of a Share should be conditional upon receipt of an Estoppel Certificate satisfactory to the Purchaser and their lawyer which identifies any outstanding or pending payments, special assessments, or legal actions, re: the Shareholder, the Unit / Shares or Corporation amongst other items, together with all other documents which are included.
Condo:
Condominium Corporations must have, with certain limited exceptions, yearly Audited Financial Reports.
Co-Op:
Co-operative Corporations may (but are not required to) have yearly audited Financial Reports.
Condo:
Condominium Corporations are almost always managed by a Professional Management Company or may be self-managed.
Co-Op:
Co-operative Corporations are managed by a Professional Management Company, or in a number of cases may be self-managed.
Condos
Co-Ownerships
Individual ownership of Unit
Yes
No; Buyer owns an undivided percentage ownership in the building; in some cases in addition to a registered Deed, Buyer also receives a share in the Co-ownership Corporation with right to exclusive use and occupancy of a Unit
Easy to finance
Yes
Limited
Consent needed to mortgage, finance or pledge (as applicable).
No
No
Consent needed to sell
No
Varies – in several buildings consent is required
Separate realty tax assessment
Yes
No – taxes are part of common expenses
Sharing of common expenses on a pro-rated basis
Yes
Yes
Options to participate in management
Yes
Yes
Affected by default of others
No
No
Shareholder relationship
No
No
Nature of Unit ownership
1) Buyer obtains ownership of individual Unit by Deed which is registered on title.

2) Buyer obtains exclusive ownership of the individual Unit, and a percentage interest in the common areas of the building.

3) Buyer becomes a member of the Condominium Corporation
1) Buyer obtains ownership of a percentage interest by Deed, which is registered on title.

2) Buyer gains exclusive right to occupy a specific Unit through a registered Co-ownership Agreement and through the provisions of that Agreement.

3) Buyer becomes a member of the Co-ownership Corporation
Governing legislation
The Condominium Act, 1998
No specific Act; The Corporation is subject to the Ontario Business Corporations Act.
Buyer financing
Buyer can mortgage his or her own Unit.
Buyer can individually mortgage his or her interest in the Co-ownership i.e. mortgage their Unit.
Governing documents
The Condominium Corporation administers the Declaration, By-laws, Rules and Regulations.
The Co-ownership Corporation administers the Co-ownership Agreement, the Co-ownership By-laws, Rules and Regulations.
Owner’s obligations as to conduct the Rules and Regulations
Owner is subject to the Declaration, By-laws of the Condominium Corporation.
Owner is subject to the Co-ownership Agreement, By-laws, and the Rules and Regulations and other contractual documentation of the Co-ownership Corporation.
Owner participation in management
Owner can participate in management decisions by sitting on the Board of Directors and / or voting at the Annual General Meetings of the Condominium Corporation.
Owner can participate in management decisions by sitting on the Board of Directors and / or voting at the Annual General Meeting of the Co-ownership Corporation.
Status or Estoppel Certificate
The sale of the Unit is subject to receipt of a Status Certificate which identifies any outstanding or pending payments, special assessments, or legal actions regarding the Unit or the Corporation; it also confirms that the Corporation has the required Building insurance.
The sale of the Unit is subject to receipt of an Estoppel Certificate which identifies any outstanding or pending payments, special assessments, or legal actions, regarding the Unit or the Corporation; it also confirms that the Corporation has the required Building insurance.
How Owner’s share of common expenses is calculated
Owner is assessed for a percentage share of common expenses (based on the size of the Unit in comparison to the entire building)
Owner is assessed for percentage share of common expenses (based on the size of the Unit in comparison to the entire building)
Role of the Corporation / Management of building
The Condominium Corporation:

a) manages the affairs of the building according to the provisions of The Condominium Act, 1998; and,

b) represents the interests of the owners. Often, a property management firm is hired for day-to-day management, although in some cases the Corporation may be self-managed.
The Co-ownership Corporation:

a) manages the affairs of the building according to the provisions of the Co-ownership Agreement, and other relevant documentation and in accordance with the provisions of the Ontario Business Corporation Act; and,

b) represents the interests of the owners. Often, a property management firm is hired for day-to-day management, although in some cases the Corporation may be self-managed.

Note: some of the smaller Co-ownership buildings are not incorporated and are therefore not governed by the provisions of the Ontario Business Corporation Act. They effectively are Partnerships of the registered owners.
Financial Management Reserve Funds
The Condominium Act, 1998 requires a Reserve Monetary Fund to be established for the maintenance of the building.
There is no legislation requiring a Reserve Monetary Fund for the maintenance of the building, (although many buildings have established one). Some Co-ownership buildings are required to have a Reserve Fund in accordance with the provisions of their Co-ownership Agreement.
Financial Statements
Condominium Corporations must have yearly Audited Financial Statements prepared in accordance with the provisions of The Condominium Act.

Note: certain exemptions for Condominium Corporation consisting of 25 Units or less
Co-ownership Corporations may or may not have yearly Audited Financial Statements prepared. If the Financial Statements are not Audited there should be some form of Annual Financial Statement prepared.
Property Management
Condominium Corporations are almost always managed by a Professional Management Company.
Co-ownership Corporations are almost always managed by a Professional Management Company or may be self-managed in some cases.
Limitations on owner’s right to sell, rent or mortgage
Owner does not need the Consent of the other Owners or the Condominium Corporation to sell, rent or mortgage his or her Unit.
Owner generally does not need the Consent of the other Co-owners or the Co-ownership Corporation to sell, rent or mortgage his or her Unit. *Note: there are some buildings where the Consent may be required but Consent could be unreasonably withheld.

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