5-point guide to co-ownership condo

05 August 2022 by National Bank
Illustration of a condo’s exterior facade

Thinking of buying a co-ownership condo? Whatever your budget might be or the reasons you’re considering such a move, buying a condo is a major decision. In order to make an informed decision, this quick 5-point guide is intended to help you understand the specific points of this type of property.

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The types of co-ownership 

There are 2 types of co-ownership: divided and undivided properties. Some of the main distinguishing features between them:

  • The minimum down payment required for the purchase (portion not covered by the mortgage loan): you must pay 5% of the purchase price for divided and 20% for undivided co-ownership. 
  • The management method: in Quebec, divided buildings are subject to mandatory regulations and standards. They are therefore generally administered and maintained rigorously. For undivided buildings, administration is more flexible and depends more on the co-owners. 
  • Condo associations: divided buildings have an association that brings together co-owners, managed by a board of directors. 
  • Condo fees and taxes: these are generally lower for undivided co-ownershipwhere owners split a single tax bill - rather than for divided co-ownership, where all co-owners receive a bill.

In order to better understand the 2 types of condos and make the right choice for your needs, check out our article: Divided co-ownership and undivided co-ownership: Key differences.

Condo fees 

Condo fees are used among other purposes to pay for maintenance expenses, administering the building and ensuring an appropriate contingency fund. 

Since they can impact your budget, it’s important to be aware of the required condo fees before buying. Fees can also vary greatly from one location to another. 

In general, fees are higher if there are multiple common areas and services provided (such as a pool or elevators).

The portion of the total condo fees that you will have to pay is equivalent to the value of your share (the portion of the building that you own). In fact, you assume a percentage of the shared expenses. 

Warning: beware of particularly low condo fees.

This could indicate that there are shortcomings in terms of building maintenance and financial management. Example: an insufficient contingency fund may not be enough if urgent work were required. 

Also beware of repeated special assessments. 

This type of contribution is required in addition to monthly payments to address unforeseen situations. This can also be a symptom of poor financial management or maintenance problems requiring work. 

To see a breakdown of what condo fees involve, read our article: Condo fees: What you need to know.

The contingency fund 

The contingency fund is an account in which a portion of the co-ownership fees is paid in anticipation of major maintenance work or unforeseen situations. 

A well-funded contingency fund is generally a good sign 

A condo property that was recently the subject of a contingency fund study can provide you with a bit more peace of mind about its financial health. This type of study helps determine the amount required in the contingency fund based on a number of factors, such as the type of building or its year of construction. 

A non-existent or poorly funded contingency fund should set off alarm bells 

You may be required to pay substantial amounts of money if major work is required. Would you have the necessary funds if it were to occur?

Good to know: Quebec Self-Insurance Fund

Divided co-ownership properties must also have a self-insurance fund to cover the home insurance deductible on the building (the base amount due when a claim is filed, for example).

The declaration of co-ownership 

The declaration of co-ownership (or the undivided co-ownership agreement for undivided buildings) combines several important documents. These may contain multiple clauses and regulations that will have an impact on how you use your unit and your day-to-day life. 

Here are a few points to consider:

  • Looking to rent out your property? Certain declarations of co-ownership set out restrictions in terms of short- or long-term rentals. 
  • Do you have pets? Check the rules concerning pet ownership, which may prohibit certain types of animals or ban them from certain parts of the building. 
  • Want to make exterior changes to your unit? Some condos may prohibit certain changes to the outside appearance of the building. For example: clotheslines or certain exterior decorations.

Important: Undivided co-ownership agreement (undivided buildings) 

An undivided co-ownership agreement is not required but is strongly recommended. This document reflects a healthy undivided co-ownership structure. The lack of such a document could result in numerous difficulties or conflicts between co-owners. 

To learn more about declarations of co-ownership, refer to our article: Declaration of Co-Ownership: What You Need to Know.

Your neighbours and co-owners 

Like for any kind of property, take the time to visit the condo you’re interested in, to make sure that it fits your criteria and wants. 

Although a picture may be worth a thousand words, it won’t tell you about the neighbourhood, ambient noise and how you’ll feel about the place. 

It is also an excellent idea to meet with your neighbours and co-owners. A good relationship with them will help you get full enjoyment out of your new home. 

Now you have a better idea about how to make the right decision in terms of buying your condo. Also think about your offer to purchase and its conditions, your preapproval, your mortgage loan, as well as the type of rate that you will select. 

Feel free to make an appointment with our specialists for personalized support. We're here to answer your questions. 

In order to make your way through the process with confidence, you can also consult our article: 7 steps to buying your first home.

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Image maison neuve

Getting ready to become a first-time homeowner

Ready to buy a home?
We’re here to help!