“For those who are thinking of buying a condo in the near future, you will be faced with two types of condos: divided or undivided. They are more becoming more and more similar and they each have their own advantages.
A condominium, or condo, is considered to be a divided property, meaning that each unit is independent of the others and has its own cadastral number.
Undivided co-ownership is a form of common property with only one cadastral number, as seen in instances where duplex owners convert a building into condominiums.
Each type of co-ownership is suited to different needs.
The most common types of condos are those that are held in divided co-ownership. Among them are all of the new condo projects (new constructions) and all of the condos on the resale market that were never used for renting purposes, meaning that the units have never been rented as apartments.
Divided co-ownership has the advantage offering wide-ranging and attractive financing solutions. Take the example of a new condo project consisting of 8 units. By purchasing one of 8 condos, you will be 100% owner of your unit and will have your own lot (for example, lot 1234567 Cadastre of Quebec) with the municipal tax and electricity statements. You will also become 1/8 owner (or 12.5%) of the common portions such as the roof, corridors and elevators.
The declaration of co-ownership that is associated with the building establishes the relationship between co-owners and clarifies the building regulations. This type of condo can be financed under the best mortgage conditions with only a 5% down payment.
Condos held in undivided co-ownership are a bit different. If we take the same example, in contrast to being 100% owner of your unit and owning 12.5% of the common portions, in an undivided condo you would be owner of 12.5% of the entire building. Does that mean that your unit does not completely belong to you? Not at all.
In fact, an undivided condo is not disadvantageous since the ownership agreement (a document that is comparable to the declaration of co-ownership) clearly states that you have exclusive use of your unit, although in theory you only own 12.5% of it. The only notable difference lies in its financing since mortgages have special features that protect you should a co-owner ever default on his payments. In short, you need a 20% down payment (formerly 25%) to buy an undivided condo and you must usually visit a Caisse Desjardins.
The higher down payment required is the main disadvantage. In contrast, as the entire building will have only one municipal tax and single insurance plan, your annual fee (taxes, insurance, condo fees) will be significantly lower than for a divided condo.
Note that the undivided condos are especially popular in the Plateau Mont-Royal neighborhood as the majority of buildings have already been used as apartment blocs. So if this is an area that interests you, you will have to accept that it will probably turn into undivided ones!
In sum, with the exception of the higher down payment for undivided co-ownership, there is nothing wrong with this type of condo and it is completely safe. You must simply read the ownership agreement to make sure everything is in order.
Do you plan on sub-letting your condo?
Undivided co-ownership has a significant limitation: you simply can’t rent out the property.
Even if you have an agreement with your co-owner, mortgage rules typically prohibit you from renting your property.
In the case of a condominium, however, renting is an option”