Divided vs. Undivided Co-Ownership: What’s the Difference?
So, you found the perfect condo in the perfect neighbourhood! Congratulations! However, did you know that divided and undivided co-ownerships are not the same thing? Learn more about the differences!
The difference between divided and undivided co-ownership
Divided co-ownership is the most well-known type of condo.
What you are buying is a private portion (your condo unit and private parking space) and a common portion (corridors, swimming pool, gym, elevators, etc.). You are the sole owner of the private areas, and co-owner of the common areas.
Each apartment or unit has its own lot number (cadastre) as well as school and municipal tax accounts. As owner of the private portion, you have the right to sell your fraction without the permission of the other co-owners. You will also have your own mortgage. Conversely, you will not be affected if one of your neighbours has a solvency problem.
A syndicate of co-owners manages the building and, if you wish, you can be part of it.
Undivided co-ownership is not as well known.
In this case, what you are purchasing is a percentage of the entire building which is jointly owned by several owners.
There is no syndicate of co-owners. An indivision agreement is used to administer the rights of all owners, establish your rights of exclusive use (your unit, private parking space), and sets out how the property is operated and managed. Although optional, an indivision agreement is strongly recommended.
If you want to resell your share, the agreement specifies if you are free to sell it to anyone or if you are obliged to offer it first to the other co-owners. All future buyers are bound by it. You can consult the agreement in the Quebec Land Register.
There is only one lot number (cadastre) for the building. School and municipal taxes as well as maintenance and repair costs are shared by all co-owners according to their respective share.
To make an informed purchase, consult the article Buying an Undivided Condo: the Pros and Cons.
Let’s talk down payments and mortgages
To acquire a divided co-ownership unit, a down payment of at least 5% of the purchase price is necessary. However, in undivided co-ownership, a down payment of 20% of the purchase price is required. Regardless of the type of co-ownership, if the down payment is less than 20%, you must insure your mortgage through the CMHC.
As for mortgages, which banking institution you use is up to you in the case of divided co-ownership. In undivided co-ownership, you will have to take out a mortgage from the same banking institution as the other co-owners of the building.
Your homebuying goal
Are you undecided between a single-family home and a condo? Read the article: Buying a Condo: What Are the Advantages?
No matter what type of condo you’re interested in buying, a real estate broker will help guide you through the entire purchase process.