Types of Home Ownership
Question: What type of home ownership is right for me?
Here are the categories of home ownership that you may not be aware of:
Freehold Home Ownership
Freehold is the most common type of home ownership. Freehold homes in Toronto offer the most privacy and freedom of choice of any other type of home.
As an owner of the entire structure and grounds, homeowners are free to decorate and renovate as they please. However, with that freedom comes a lot of responsibility. All of the maintenance (indoors and out) is the sole responsibility of the owner which can be costly in terms of both money and time, but offer the largest rewards.
Condominium Ownership
Condominium ownership is popular as it is more affordable and requires less maintenance by the owner. The homeowner owns the unit and shares in ownership of common elements. Condominiums are usually apartment buildings, but also include townhouse developments and developments of detached buildings on private roads.
The homeowner is responsible for the interior area of the unit. The condominium association is responsible for the up-keep of the exterior of the building, common interior elements (halls, elevators and parking garages, for example) and the grounds.
All condominium owners pay a monthly fee to the condominium association to cover maintenance costs and common utility fees and taxes.
Condominiums often have strict rules regarding noise, use of common areas, and renovations to units. Condominium residents often enjoy less privacy than residents of detached homes.
Co-operative Ownership
Co-operatives, or more commonly referred to as “co-ops” are similar to condominiums but instead of owning your unit, you own a share in the entire building or complex.
The main distinction between a housing co-op and other forms of homeownership is that in a housing co-op you don’t directly own real estate. The corporation owns or leases all real estate. As part of your membership (being a shareholder) in the cooperative you have an exclusive right to live in a specific unit (this is established thorough a occupancy agreement or proprietary lease) for as long as you want, as long as you don’t break any of the rules or regulations of the cooperative. As part of your membership, you also have a vote in the affairs of the corporation.
Co-op residents pay for maintenance and repairs through monthly fees and are subject to the rules and regulations of the co-op board.
If you decide to sell your shares and move out, the co-op board has the right to reject your prospective buyer.
Remember, since you are buying a share of a corporation that owns real estate, you will want to find out about the financial health of the corporation. You will also want a clear understanding of what your financial obligations to the cooperative will be. Be sure to find out what all the rules and regulations of the community are. Here are some sample questions to ask before making your investment:
What is the share price?
Where can I obtain share loan financing?
How much are the monthly carrying charges?
What is the underlying mortgage?
What is your pet policy?
What is your subletting policy?
What is the policy for making alterations to my unit?
Leasehold
In some cases you might purchase the right to use a residential property for a long, but limited, period of time. The owner of this right of use has a type of ownership called a leasehold interest. This type of ownership is used most often for townhouses or apartments built on city-owned land. It is also occasionally for single detached houses on farm land, on First Nations reserves and for apartments where the owner of the freehold interest of an entire apartment block sells leasehold interests in individual apartment units to other “owners.”
Leasehold interests are frequently set for periods of 99 years, but regardless of the length of the original term, you will only be able to purchase the remaining portion. Of course, the shorter the remaining portion, the less you, or the person who eventually purchases from you, will be willing to pay for the leasehold interest
Strata
The strata form of ownership is designed to provide exclusive use and ownership of a specific housing unit (the strata lot) which is contained in a larger property (the strata project), plus shared use and ownership of the common areas such as halls, grounds, garages, elevators, etc.
This type of ownership is used for homes, duplexes, apartment blocks, townhouse complexes, warehouses, and many other types of buildings. Because ownership of the common space is shared, the owners also share financial responsibility for its maintenance such as the commonly owned roads, disposal system, landscaping, elevators, management, etc.
