A condominium is defined as a building of which several people are the owners. It can take two forms, divided or undivided.
The distinctions are numerous, but each type has advantages and constraints that it would be better to know well before shopping for a new home.
Let’s define condo divided and undivided
A condominium is the term widely used to describe a divided condominium. All dwellings and private spaces (private portions) have their respective owners and have their own lot number in the land register. The ownership of the common areas is distributed among the owners according to a percentage established in the deed of co-ownership. The grounds, elevators, stairwells, exterior walls, roof, swimming pool, training room and other attributes of the building for the use of all residents are examples of common areas.
As its name suggests, joint ownership means that the entire building is owned by more than one owner and is registered as a single lot number in the land register. While this definition also includes the typical case of a couple who jointly owns a house, this text relates more specifically to undivided “plex” -type properties in which several owners reside in their respective dwellings.
Purchase, sale and financing
Mortgage financing is certainly the major difference between the two types of condominiums. In dividing, we find substantially the same requirements and procedures as for the purchase of a single-family house for example.
In undivided, all owners must be financed from a single banking institution. Plus, and it’s not nothing, the minimum down payment is 20%. It acts as a barrier to entry to ensure that all have relatively strong financial strength. Take care, if one of the co-owners comes to no longer be able to meet its commitments to the building, it could put you in the embarrassment.
It can not be ignored that this can significantly reduce the number of potential buyers when you decide to sell. If the market value of undivided housing is relatively low, it is more rare for this type of buyer to have the financial means to pay the necessary downpayment.
School and municipal taxes
As for the school tax and municipal tax accounts, the joint ownership will cost you a little less. However, since there is only one bill for the building, the owners are all held jointly liable in the eyes of the issuer. If one of the owners does not pay his share in time, all will be penalized.
Syndicate and condominium agreement
The constitutive act is only obligatory for a divided co-ownership, but it is however highly recommended to have one in case of undivided, named condominium or joint ownership agreement. Moreover, the mortgage lender may require it and it must appear in the Land Registry. It ensures co-owners the definition of spaces for exclusive use and the respect of a list of commitments and obligations by each.
A condominium syndicate must be formed for a divided building only. The syndicate, collector of co-ownership fees, is responsible for the management and maintenance of the building.
Again, even if it is not mandatory, it is prudent to establish a contingency fund in undivided to compensate for unforeseen events.