Are you looking to buy a condo? When you are considering purchasing a co-ownership property, one of the initial steps is to ascertain whether it is a divided or undivided co-ownership. These two types of co-ownership have their own unique characteristics. It’s crucial to ensure they align with your needs and expectations.

Divided vs. undivided co-ownership: what’s the difference?

Divided co-ownership (condominium)

More common and popular, divided co-ownership is often what comes to mind when you think of a condominium. Legally, ownership is limited to a private portion (the unit itself, parking, balcony) and a percentage of the common areas (yard, pool, private gym, etc.). When you buy a divided co-ownership, you’ll get your own lot number, meaning your own cadastral number registered with the city and determined by a surveyor.

In terms of responsibilities and cost allocation, properties structured as divided co-ownerships are administered by homeowners’ associations (or syndicates of co-owners) or by specialized management firms. Major decisions concerning common areas are voted on by the syndicate. As a result, owners don’t need to consult their neighbors or co-owners for changes made to their private portion, or their unit.

Down payment

To acquire a divided co-ownership, you must make a down payment of at least 5% of the desired property’s purchase value.

Taxes

Each condo has its own cadastral number, meaning co-owners are responsible for the municipal and school taxes associated with their unit.

Condo fees and contingency fund

Condo fees and the contingency fund are two elements to consider when you want to acquire a co-ownership.

In Quebec, condo fees are mandatory for all divided co-ownership properties. Paid monthly by all co-owners, these fees can vary significantly depending on your situation. Charged monthly, they cover:

• Contribute to the contingency fund
• Pay for the regular maintenance of common areas
• Pay the building’s insurance fees
• Contribute to the self-insurance fund
• Cover administrative fees

Note that the contingency fund is a mandatory monetary reserve to ensure the long-term sustainability of a co-owned building. It’s specifically dedicated to significant expenses for major repairs and the replacement of common areas.

Undivided co-ownership

When you buy an undivided co-ownership, you become a co-owner of the entire building. Financial and legal limitations are not set according to the individual units that make up the building. You can then think of a couple of friends or a family buying a triplex. If several individuals are implicated in the transaction, the property is undivided. It’s the same when several people inherit a property. Unlike divided co-ownership, the organization of undivided co-ownership doesn’t depend on a syndicate, but rather on an agreement that doesn’t need to be notarized.

Undivided co-ownership is perfect for people who don’t want to bother with bureaucracy, syndicate procedures, and voting systems.

Undivided co-ownership agreement

Although not mandatory, the undivided co-ownership agreement is an essential document that sets out the rights and responsibilities of each owner in an undivided co-ownership.

An undivided co-ownership agreement can include:

• The duration of the agreement.
• The rights and obligations of co-owners (such as the exclusive right to use certain parts, each undivided co-owner’s share, a right of first refusal, and a right of withdrawal).
• Expenses.
• Obligations regarding the maintenance and renovations of the building.
• Any other administrative rules for the building.

This document is highly recommended to prevent future conflicts between co-owners and manage everyone’s expectations. For it to be enforceable against third parties, this agreement must be published in the Québec Land Register.

Down payment

Undivided co-ownership also has its own financial specificities. Right from the start, the down payment must be higher, with a minimum of 20%. This criterion often eliminates first-time buyers who can’t reinvest profit from a previous property.

Taxes

One of the advantages of undivided co-ownership is the sharing of all types of taxes. Indeed, municipalities will only issue a single tax bill, which will then be divided equally (or according to the undivided co-ownership agreement).

No contingency fund

An important point to consider is that undivided co-owners are jointly and severally liable for the building’s expenses, but they have no legal obligation to contribute to a contingency fund.

This can become problematic in certain situations. For example, if a co-owner doesn’t pay their share on time.

Stepping stone to homeownership

For many people, undivided co-ownership is a way to access homeownership. It makes purchasing more affordable because initial costs and ongoing expenses are shared, thereby easing the financial burden on each co-owner.

Are you looking for the property that meets all your needs?

To evaluate the advantages and disadvantages of an undivided or divided co-ownership, one of our real estate brokers can help you get a clearer picture. Speak with one of them now!