As Toronto real estate prices remain out of reach for many, some home buyers are going all out to explore alternative solutions. For a while, condos were a viable path, and in many ways, they still are, especially right now with an overabundance of supply.

However, it’s important to know that they are not your only option. Real estate co-operatives are a lesser-known form of ownership. If all goes well, you could end up with a stunning home for much less than you’d pay with a standard purchase. As with any investment, there are pros and cons to co-op housing, and they are certainly not for everyone. Today, we’ll explore what you need to know when considering a Toronto co-op.

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What Is Co-Op Housing in Toronto?

Toronto offers various property types that have different ownership structures. For example, when you buy a freehold you own the land and the building. When you buy a condo, you own your particular unit, and the shared spaces are owned by the condo corporation.

Real estate co-ops are in a separate category altogether. In this case, you don’t own the home or the land. Instead, you’re buying shares in the corporation that holds the property, then you gain the exclusive right to live there. There are two different types of co-ops you might encounter:

Non-Profit Co-ops:

This is the most well-known version of a real estate co-op. According to the City of Toronto, a non-profit co-op is a corporation formed and operated by those who live in it. Once approved, you will have the right to live in your unit as long as you abide by the building’s guidelines.

Non-profit co-ops require an application to join, and they can come with long waiting lists before housing becomes available. It is also important to know that co-ops are governed by the Ontario Co-operative Corporations Act. Your rights and responsibilities are different than they would be when renting under the Residential Tenancies Act.

Equity Co-ops:

Like a non-profit, an equity co-op is a community of residents who have formed a corporation to share the costs of a property. The main difference is there are no subsidies to help with their purchase, and often, units can be more luxurious.

Buying into an equity co-op is similar to acquiring stocks in the stock market. If the building increases in value, your net worth also grows. When housing prices decrease, your share values will also go down, at least momentarily.

As with any investment, real estate co-ops can fluctuate. However, they do offer one benefit no other asset can give you, you’ll have a place to live for the long term.

Real estate co-ops can be more difficult to finance as many lenders consider them higher risk. However, some credit unions across the GTA specialize in co-op mortgages, which can make this form of homeownership more accessible.

Do you have more questions about how co-ops work or how to find them? Get personalized answers by booking a buyer’s appointment with our team.

Co-Ownership of a House Versus Co-op Ownership

How does co-op housing work compared to standard co-ownership? While we understand the confusion given the similar titles, they are two completely different concepts.

When buying a house or condo with someone else (a spouse, a family member, or a group of friends) each owner has a stake in the property itself. Each party has rights of possession and occupancy, the extent of which depends on whether the title is set up as Joint Tenants or Tenants in Common.

A real estate co-op is different because the corporation goes on the title, and no one directly owns the property itself. You don’t need consent from other members to sell your share, but the board can reject your buyer and cause your transaction to fail. Finding the right fit can be challenging due to the stringent application and approval process, in addition to the larger down payment required.

Are you planning to start the search for your new house? The posts below can help you be a more informed buyer:

• Home Buyers Beware: What You Need to Know About Mortgage Appraisals
• Our Guide to the Home Buying Process
• What Is a Loft in Toronto?

Should I Buy Co-Op Housing?

Perhaps a better question is, “who is eligible for co-op housing?” Since each owner has the exclusive right to live in the property, the co-op board doesn’t just let anyone join, no matter how well-funded they may be.

Rules vary, but generally speaking, you’ll have to go through an application process before you can buy into a building. Often, you’ll need to have an interview with the board before they approve you as a member. There are some other considerations before moving forward:

• If you’re planning to sublet your unit or advertise it on Airbnb, a co-op is likely not the right fit as the board almost certainly won’t allow it.
• A co-op is probably not your best option if you’re hoping to resell your shares for a quick return. While you’re within your rights to do so, these units typically take longer to sell.
• A smaller pool of buyers who must pass the approval process can also mean a slower rate of appreciation.

It may seem like a complicated system, but it does come with a substantial benefit. Since each resident is so carefully vetted, you can look forward to a peaceful and safe community. If you have the funds to cover the down payment and want to get a gorgeous home in an enviable location for much less than you might pay otherwise, a real estate co-op could be for you.

Do you want maximum guidance and support while searching for your next home? Our West Toronto Realtors® are here for you every step of the way. Contact us today at 416-788-1823 or email kim@kimkehoe.com to learn more.