What are cons of a co-op building?

- Getting a mortgage for co-ops can be a pain in the ass (even if someone buys them outright, the demand for their property will be much lower when selling)

- You can't rent them out easily. All co-op participants will have a say in your decision to rent your unit.

- You do not own your unit, nor the land beneath it. You only have the right to reside in it for as long as you're a shareholder of the co-op. This is different than owning a condo which entitles you to specific areas of a building with full ownership of the unit and partial ownership of the land and common areas.

- Co-ops are rarely maintained well. Most of them look tired. I don't know why.

- They're a good choice for those who just want to live in them for a long time and not bother with all the points above.

Governance.

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.

Financing.

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.

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.

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.

Thank you all for the explanation.
Well, this person is in her late 50s is apparently has around 400K from the previous sale of a property she is ready to put down, but she only makes about $50K So I doubt she can get more than 70-100K mortgage(via bank or credit unit, whatever works) so she can roughly afford something in the area of 460-500K max.

She is planning to live forever at that place. Aside from higher costs with condos, her worry that most will have very high maintenance fees soon as those shiny glass windows and "luxury" look + concierge+security+amenities cost a lot of $$$. They are $500/m for newish places now, very likely much more by the time she retires and will have very little income. She doesn't care about any amenities and looking to buy something where the cost won't be prohibitive when she is just on her CPP/OAS pensions at 65.

Essentially, it seems for her a co-op may be better if she can find one that has a long lease on the land and maintenance are reasonable. Am I getting this right?


Now, some of these co-ops do look bad and still have high maintenance for some reason while others are different. Is there a way to predict?

Here's an example of one at $1,176.57/month utilities. 2bdr. It says all inclusive, but that's extra 250max. wheretf are the other $900/m going?!
https://www.realtor.ca/real-estate/2544 ... brook-east

There's this one low rise which has maintenance @ $431/month for 3bdr
https://www.realtor.ca/real-estate/2550 ... t-lawrence

here's a high rise, similar to the 1st one. Under $500maintenance all-inclusive
https://www.realtor.ca/real-estate/2560 ... er-heights


Why such a huge difference between them, specifically 1 and 3rd?

The senior in OP's post may actually be a good fit in a co-op if she finds the building attractive and can determine that there are no major assessments pending, etc.

I have looked into co-ops over the years (Ontario - I think the laws vary quite a bit from province to province). A lot of them were acquired by people who were not too affluent to begin with. The directors in the buildings I have seen have focused on low monthly costs, and not on keeping them fresh and up to date or making upgrades. Think of seniors on fixed incomes, who will stall and kill any proposed improvement that increases property value, and will defer necessary maintenance as long as possible, if it also increases their monthly fees.

I once tried to 'buy" a co-op unit but the board declined the sale because I am not Ukrainian lol! Some coops were built by ethnic groups who have managed to keep a preponderance of their own people in the building. I am also aware of an Estonian building. While these kinds of restrictions can probably be challenged in court, who wants to bother? Let those ethnic seniors live out their frugal existence.

dazz wrote: ↑ Thank you all for the explanation.
Well, this person is in her late 50s is apparently has around 400K from the previous sale of a property she is ready to put down, but she only makes about $50K So I doubt she can get more than 70-100K mortgage(via bank or credit unit, whatever works) so she can roughly afford something in the area of 460-500K max.

She is planning to live forever at that place. Aside from higher costs with condos, her worry that most will have very high maintenance fees soon as those shiny glass windows and "luxury" look + concierge+security+amenities cost a lot of $$$. They are $500/m for newish places now, very likely much more by the time she retires and will have very little income. She doesn't care about any amenities and looking to buy something where the cost won't be prohibitive when she is just on her CPP/OAS pensions at 65.

Essentially, it seems for her a co-op may be better if she can find one that has a long lease on the land and maintenance are reasonable. Am I getting this right?


Now, some of these co-ops do look bad and still have high maintenance for some reason while others are different. Is there a way to predict?

Here's an example of one at $1,176.57/month utilities. 2bdr. It says all inclusive, but that's extra 250max. wheretf are the other $900/m going?!
https://www.realtor.ca/real-estate/2544 ... brook-east

There's this one low rise which has maintenance @ $431/month for 3bdr
https://www.realtor.ca/real-estate/2550 ... t-lawrence

here's a high rise, similar to the 1st one. Under $500maintenance all-inclusive
https://www.realtor.ca/real-estate/2560 ... er-heights


Why such a huge difference between them, specifically 1 and 3rd?

+
Keep in mind that the property taxes may be included in some listings, but not in others? Some properties may have elevators and central air systems requiring maintenance, while older buildings may be walk-ups where occupants have to use window units. And buildings that have done extensive upkeep involving windows, balconies, water penetration, underground garages, etc. will have to amortize those costs in the fees. I think you need to look closely at the financials.

Dealmaker1945 wrote: ↑ The senior in OP's post may actually be a good fit in a co-op if she finds the building attractive and can determine that there are no major assessments pending, etc.

I have looked into co-ops over the years (Ontario - I think the laws vary quite a bit from province to province). A lot of them were acquired by people who were not too affluent to begin with. The directors in the buildings I have seen have focused on low monthly costs, and not on keeping them fresh and up to date or making upgrades. Think of seniors on fixed incomes, who will stall and kill any proposed improvement that increases property value, and will defer necessary maintenance as long as possible, if it also increases their monthly fees.

I once tried to 'buy" a co-op unit but the board declined the sale because I am not Ukrainian lol! Some coops were built by ethnic groups who have managed to keep a preponderance of their own people in the building. I am also aware of an Estonian building. While these kinds of restrictions can probably be challenged in court, who wants to bother? Let those ethnic seniors live out their frugal existence.

Back then I used to manage subsidized housing, including co-ops that were subsidized. I was kind of a land lord and social service worker.
Co-ops have weird legal structures. They can get away with a lot. They are technically allowed to discriminate based on race and religion! But it has good intentions.
Like the the artist co-op in Toronto that only allows Artist.
Theres a muslim one too i believe.
The point is trying to get them out to communities that have a hard time finding housing elsewhere.
The eastern european ones was because people discriminated against them back then for being poor. Or hate on commies thinking they’re all evil russians or something.
Or that artist co-op trying to help poor starving artist.

dazz wrote: ↑ Thank you all for the explanation.
Well, this person is in her late 50s is apparently has around 400K from the previous sale of a property she is ready to put down, but she only makes about $50K So I doubt she can get more than 70-100K mortgage(via bank or credit unit, whatever works) so she can roughly afford something in the area of 460-500K max.

She is planning to live forever at that place. Aside from higher costs with condos, her worry that most will have very high maintenance fees soon as those shiny glass windows and "luxury" look + concierge+security+amenities cost a lot of $$$. They are $500/m for newish places now, very likely much more by the time she retires and will have very little income. She doesn't care about any amenities and looking to buy something where the cost won't be prohibitive when she is just on her CPP/OAS pensions at 65.

Essentially, it seems for her a co-op may be better if she can find one that has a long lease on the land and maintenance are reasonable. Am I getting this right?


Now, some of these co-ops do look bad and still have high maintenance for some reason while others are different. Is there a way to predict?

Here's an example of one at $1,176.57/month utilities. 2bdr. It says all inclusive, but that's extra 250max. wheretf are the other $900/m going?!
https://www.realtor.ca/real-estate/2544 ... brook-east

There's this one low rise which has maintenance @ $431/month for 3bdr
https://www.realtor.ca/real-estate/2550 ... t-lawrence

here's a high rise, similar to the 1st one. Under $500maintenance all-inclusive
https://www.realtor.ca/real-estate/2560 ... er-heights


Why such a huge difference between them, specifically 1 and 3rd?

Why doesn't she just look for a 1bdrm in a decent building and rent? She can invest the $400k, make a modest return that will likely cover most of her rent and she won't have to worry about unexpected maintenance costs?

And, she'll still have $400k squirreled away and liquid. Can't say the same about selling a co-op if you really need to.

Toukolou wrote: ↑ Why doesn't she just look for a 1bdrm in a decent building and rent? She can invest the $400k, make a modest return that will likely cover most of her rent and she won't have to worry about unexpected maintenance costs?

And, she'll still have $400k squirreled away and liquid. Can't say the same about selling a co-op if you really need to.

I agree, this is a good option.
I would add a suggestion to find a rental in a purpose rental apartment building rather than a condo, less chances of an eviction.

dazz wrote: ↑ Thank you all for the explanation.
Well, this person is in her late 50s is apparently has around 400K from the previous sale of a property she is ready to put down, but she only makes about $50K So I doubt she can get more than 70-100K mortgage(via bank or credit unit, whatever works) so she can roughly afford something in the area of 460-500K max.

She is planning to live forever at that place. Aside from higher costs with condos, her worry that most will have very high maintenance fees soon as those shiny glass windows and "luxury" look + concierge+security+amenities cost a lot of $$$. They are $500/m for newish places now, very likely much more by the time she retires and will have very little income. She doesn't care about any amenities and looking to buy something where the cost won't be prohibitive when she is just on her CPP/OAS pensions at 65.

Essentially, it seems for her a co-op may be better if she can find one that has a long lease on the land and maintenance are reasonable. Am I getting this right?


Now, some of these co-ops do look bad and still have high maintenance for some reason while others are different. Is there a way to predict?

Here's an example of one at $1,176.57/month utilities. 2bdr. It says all inclusive, but that's extra 250max. wheretf are the other $900/m going?!
https://www.realtor.ca/real-estate/2544 ... brook-east

There's this one low rise which has maintenance @ $431/month for 3bdr
https://www.realtor.ca/real-estate/2550 ... t-lawrence

here's a high rise, similar to the 1st one. Under $500maintenance all-inclusive
https://www.realtor.ca/real-estate/2560 ... er-heights


Why such a huge difference between them, specifically 1 and 3rd?

In her case I think a coop does make sense. Her $400k will lower her housing costs by maybe $1500 a month which is 4.5 % return. Tax free. Whatever happens with real estate or inflation rents will also increase at a steady clip so even if the equity stagnates that return will continue to rise. A GIC might pay 5% but taxable and also will cause some clawback in benefits at her income level.

The risk is surprise maintenance costs. I don't know what a coop declaration looks like but you will want to examine that carefully. As Dealmaker says that is the big risk. Better a higher maintenance fee that is being saved or used to avoid problems than special assessments she can't pay in 10 years to replace a roof.

fogetmylogin wrote: ↑ In her case I think a coop does make sense. Her $400k will lower her housing costs by maybe $1500 a month which is 4.5 % return. Tax free. Whatever happens with real estate or inflation rents will also increase at a steady clip so even if the equity stagnates that return will continue to rise. A GIC might pay 5% but taxable and also will cause some clawback in benefits at her income level.

The risk is surprise maintenance costs. I don't know what a coop declaration looks like but you will want to examine that carefully. As Dealmaker says that is the big risk. Better a higher maintenance fee that is being saved or used to avoid problems than special assessments she can't pay in 10 years to replace a roof.

If she buys in a decent building, not necessarily "condo", she will enjoy rent control. Frankly, that's way more predictable and steady than ownership in a building where you can get a whopper of bill unexpectedly for a common element repair.

Toukolou wrote: ↑
Why doesn't she just look for a 1bdrm in a decent building and rent? She can invest the $400k, make a modest return that will likely cover most of her rent and she won't have to worry about unexpected maintenance costs?

And, she'll still have $400k squirreled away and liquid. Can't say the same about selling a co-op if you really need to.

senasena wrote: ↑
I agree, this is a good option.
I would add a suggestion to find a rental in a purpose rental apartment building rather than a condo, less chances of an eviction.

teoconca wrote: ↑
+2

Agree, it is better for her.

teoconca wrote: ↑ +2

Agree, it is better for her.

I am not sure I am following. How can she turn $400K into a steady investment income to cover ~$2200-2500/month rental cost of most 1bdr apartments?

dazz wrote: ↑ I am not sure I am following. How can she turn $400K into a steady investment income to cover ~$2200-2500/month rental cost of most 1bdr apartments?

5% return, $2k/mth. $450k, $2250/mth

If all I have in the world is $400-450k and it gets spent on a co-op, well then I have to worry about coming up with the maintenance fee every month, and also have to worry about anything else cropping up co-op related. And I don't have $400+k in the bank.

Nah, imo renting is the way you go. Hands down.

teoconca wrote: ↑ No.

Sorry to say, it's very very hard. Why would she? Should she be better to rent (renter) instead of LL? $400K is not enough in GTA. Positive cash flow in GTA doesn't exist anymore. If she buys co-op to rent out, rent increase will be limited (2%). Put $400K into GIC to collect + 5%.

Wish luck to her.

She doesn't want to buy as an investment, he means if she rents a place and takes her $400k and invests it somewhere, how can she make $2200-2500/mth.

Toukolou wrote: ↑ 5% return, $2k/mth. $450k, $2250/mth

If all I have in the world is $400-450k and it gets spent on a co-op, well then I have to worry about coming up with the maintenance fee every month, and also have to worry about anything else cropping up co-op related. And I don't have $400+k in the bank.

Nah, imo renting is the way you go. Hands down.

Can you guarantee that she will always make 5% and she is protected against loss? probably not. Can you guarantee rents won't be $3000+ in 10 years? Probably not. An old person in her 60s,70s are not keen on playing the roulette and prefer stability and knowing she can cover bills. My suggestion for her was to move to another province,but she is set staying in the city as all of her friends are here.
If she can buy something with no mortgage, even with possible maintenance increases, it shouldn't be bad if she uses a decent realtor/lawyer who won't suggest a bad place.
And as she is still working now she has time to save.
CPP and OAS should bring her to about $1900-2000/month(current value). Even with increases in maintenance, that should be ok as she is frugal
Real Estate prices will only increase.

Worst case, the way I see it, she can sell that place in maybe 20 years from now when she is in her late 70s, get that 450-600K in cash( hypothetical increase in value) and then rent at that time with $450K+ in the bank. It may not be a "money making scheme" but it seems to be the more safe, no?

dazz wrote: ↑ Can you guarantee that she will always make 5% and she is protected against loss? probably not. Can you guarantee rents won't be $3000+ in 10 years? Probably not. An old person in her 60s,70s are not keen on playing the roulette and prefer stability and knowing she can cover bills. My suggestion for her was to move to another province,but she is set staying in the city as all of her friends are here.
If she can buy something with no mortgage, even with possible maintenance increases, it shouldn't be bad if she uses a decent realtor/lawyer who won't suggest a bad place.
And as she is still working now she has time to save.
CPP and OAS should bring her to about $1900-2000/month(current value). Even with increases in maintenance, that should be ok as she is frugal
Real Estate prices will only increase.

Worst case, the way I see it, she can sell that place in maybe 20 years from now when she is in her late 70s, get that 450-600K in cash( hypothetical increase in value) and then rent at that time with $450K+ in the bank. It may not be a "money making scheme" but it seems to be the more safe, no?

Lol, I can't guarantee anything. What I know is that if she rents a place it will be rent controlled, likely to a ~2% increase a year.

Also, should she become incapacitated for any reason, how is she going to pay her maintenance? If the building has a special assessment and each unit needs to pony up $5 or 10k or more, how is she going to come up with that?

Obviously your friend will make the choice she feels most comfortable making. If it were me and I had $400k and lived frugally, I would look for an older building, in the neighbourhood I want to live in, and rent as long as I could. I would feel a lot better knowing I had that cash liquid than having to sell a niche property like a co-op should the need arise (the increase in co-op values greatly lag "regular" properties too). But that's just me.

I think buying an older condo that is well run would be a better option than a co-op. Buildings such as 5 Greystone are very well run and provide more certainty than any co-op, not likely to get anything right now for $400K but can get a spacious 1+1 sub $500K, if condos continue to struggle the price can get lower.