What is a co-op and how it differs from a condominium

Friday Oct 07th, 2022


The topic of co-op units come up when someone sees a very inexpensive unit on the market and asks why so cheap, what’s the catch or is it too good to be true.

To understand the issue, we will explain what co-op is, how it differs from the typical unit in a condominium and challenges related to buying, selling and owning a co-op.

Legal structure.

In a co-operative structure the corporation owns the land and each unit in the building, owner of a co-op doesn’t own the unit but owns shares in the corporation and is given the rights of possession of a unit. There is no title transfer of the unit to the owner.

In a condominium the owner owns the condo unit and the title of the unit is transferred to the unit owner.


The condominiums are governed by the declaration, by-laws, rules and regulations etc, co-operatives are governed by corporate rules and by-laws of the corporation, shareholder agreement and articles of incorporation. For the day to day operation both are fairly similar.

The main difference is that condominiums are subject to the Condominium Act which does not apply to co-operatives. Many of the rules and procedures which must be followed by the condominiums as per Condominium Act do not apply to co-ops.

One of the main differences, and there are many, in the governance is that the condominiums in Ontario are required to establish a reserve fund for future major expenditures which needs to be audited by qualified engineers every three years. There is no reserve fund study requirement for co-ops, hence much greater risks of the building running into financial issues.


In a condominium the owner of the unit applies for the mortgage financing for this particular unit, and is secured by this unit. The default of one unit owner has no direct affect on other unit owners.

To finance a co-op the mortgage is secured by the whole building and known as a blanket mortgage. The shareholder contributes it’s own share of funds toward the financing of the blanket mortgage. If one shareholder defaults on the financial obligations related to the co-op, other units must increase their share of the payments to avoid the risk of foreclosure of the building.

If there is no blanket mortgage on the building the shareholders can use their own shares as security.

Due to the above it is much more difficult to obtain the financing for a co-op than it for a standard condo, many institutions don’t finance co-ops at all, others (usually credit untions) require a minimum of 30% or more down-payment and the interest rates are typically higher than for a regular condo or a freehold.

Property taxes.

In a condominium the property taxes are calculated for, and paid for by each unit owner.

For co-op the property taxes are assessed for the whole building with all occupants having a joint liability for the property taxes. The amount each shareholder pays is calculated based on the proportionate number of shares owned which is typically determined by the number of units.

Buying and selling.

When buying or selling a condominium no consent is necessary from the condo board.

When buying or selling a co-op the buyer of the shares must be approved by other shareholders.

The consent also extends to leasing of the units.

Land transfer tax.

Despite the fact no actual real estate changes hands, buyers of the co-op pay the land transfer tax based on the purchase price of the shares.

Status certificate upon sale.

The status certificate is required for both ownership structures when selling however co-ops don’t have a standard forms/structure like the condominiums do.


There are approximately 3,000 condominium corporations in Toronto alone, and around 10,000 in Ontario, it is a very common form of the ownership. Co-operatives are much less common with only a handful of buildings in Toronto and GTA. A purchase of a co-op isn’t likely to allow for a significant capital gain in the future, which is reflected by much cheaper prices to date, but can fit someone’s lifestyle and be a good option for a small group of people. For most condominiums is a far better option.

Strictly from the lifestyle perspective co-ops could be a viable option secured or assisted by the fact the new owners must be approved by other members, which may ensure all owners have similar goals in mind.

Please let us know if you have any questions.

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