Condos/Co-op/Co-ownership

Article Below is written by Chris Kapches, Chestnut Park Real Estate Ltd.

Introduction

- In all three types of housing forms, co-op, co-ownership and condominium, there are a number of concerns that Buyers should review before purchasing. Specifically, they include:

(i) In the case of co-operatives and co-ownerships, Buyers should determine the basis for the Board's approval. Is it arbitrary or based on some reasonable criteria, i.e. the credit worthiness of the Buyer? A Buyer does not want to purchase a unit that may have unreasonable restrictions on its subsequent resale as a result the required Board approval. Board approval is generally not a problem.

(ii) The Estoppel Certificates that are provided should deal with all matters of concern for the Buyer. These include the monthly charges, planned work and resulting special levies or increases in the common expense, outstanding or pending litigation, and a declaration that the Seller has observed and discharged all obligations, including the obligation to keep common expense payments current.

(iii) It is advisable that financial statements and current operating budgets be reviewed whenever possible prior to purchasing.

(iv) Determine if a reserve or contingency reserve for replacements and major repairs is in place and fully funded. This is particularly important in older co-operative and co-ownership buildings that may require the commitment of major costs because of their age and condition.

- It may appear that co-operative and co-ownership purchases are unduly complex. This is not the case, particularly if the agents involved familiarize themselves with the building in which the unit is being purchased, using some of the criteria set out above as well as the documentation that is used in these transactions. If all pertinent facts related to a particular co-op or co-ownership building are reviewed, the sale need not be complex, and the Buyer will be obtaining a good, reasonably priced housing product.

- It must not be forgotten that co-op and co-ownership units normally sell for as much as 40 percent less than a condominium unit in the building in similar condition in a comparable location. This price differential is an opportunity for Buyers to enter the housing market at prices that would not otherwise be available to them for a similar housing product. If the building that is chosen is well-run, well-documented, with a condominium-style legal structure in place, it will be a good investment that will be resaleable with few market impediments. This is particularly true if the Buyer has a large downpayment and is able to secure financing.

The above-noted comments are only some of the fundamental differences, and are not designed to deal with all the possible differences related to these three types of housing tenure, and should only be used as a general guide to assist agents when dealing with condominium, co-op and co-ownership purchases.