DIVIDED VS UNDIVIDED CO-OWNERSHIP

You might be wondering what the difference is between a divided and undivided co-ownership property. Don’t worry; we’re here to explain the main points that distinguish the two types of properties! 

By the end of this article, you’ll know which type of property would be best for you, whether you’re shopping for your first condo or looking for your next investment property.

In this article: 

• Difference between divided and undivided co-ownership
• Can you rent out an undivided condo
• What is divided co-ownership in Quebec 
• Can an undivided property be sold?
• Undivided co-ownership mortgage
• Problems with undivided co-ownership

What is the difference between a divided and an undivided condo?

Co-ownership refers to a property owned by more than one person – it can either be divided or undivided.  When you own a house, you are the single owner of your private property and you have no responsibilities towards others. On the other hand, When you become a co-owner of a property, you’re also granted certain rights,  but certain responsibilities and implications come with that which you should be made aware of by your real estate broker if you have one prior to purchase a property.

There are several differences between both types of co-ownership; each comes with a set of its own pros and cons. So you must understand the difference before beginning your search for a new home.

#1: Divided co-ownership

A divided condominium is a type of housing where you are the owner of your private portion ( apartment / unit) in an apartment building. This category of a condo is more popular than the other one. When talking about condos in general, people refer to this type of condo (divided co-ownership). 

In a divided condo, each household has its own apartment with a lot number with the cadastre. However, you share the other common areas of the building, like an elevator, swimming pool, land, corridors, etc.. The minimum downpayment required for a divided condo is 5%. if you are a first time home buyer.

The owner of the divided condo can make changes to his apartment but the syndicate should always be notified. However, the changes should be limited and comply with the terms of the Declaration of Co-ownership, which is a legal document consisting of all the rules and regulations followed by co-owners of divided condos. 

#2: Undivided co-ownership

An undivided co-ownership property is held by several people. In this type of ownership, each person owns a share in the building. They do not have a private portion they own a percentage of the total building. This means that there is more than one owner in the same building The minimum downpayment required for an undivided condo is 20%, whereas condo fees and property prices can be lower for an undivided condo. 

The cost of taxes and municipality is shared among all the co-owners. All the co-owner has to comply with an Undivided Ownership Agreement which is a notarized document consisting of all the laws and rights of co-owners in undivided property. 

Can you rent out an undivided condo? – 

Unlike a divided condo, you can only rent out your condo if it is allowed to do so in the declaration of co-ownership . Even if you, with the co-owners, agree to allow rental, the terms of your mortgage loan may forbid renting out your unit while you are away. This is because the mortgage provider may have rules prohibiting this type of activity.

What is divided co-ownership in Quebec?

Divided co-ownership is most popular in Quebec. The Société d’Habitation du Québec reports that co-ownership of condominiums only began in 1969, but it has quickly grown in popularity throughout Quebec. 

In Quebec, co-ownership properties are governed by the Civil Code of Quebec. This means that the declaration of co-ownership must be in accordance with its rules and requirements.

Can an undivided property be sold?

Each co-owner of the undivided condo is free to sell or transfer his percentage in co-ownership property through a registered sale deed. However, other co-owner may influence the decision or turn away the new buyer as per the laws. So, the co-owner willing to sell may require the consent of the other undivided co-owners. 

Undivided co-ownership mortgage

 In an undivided co-ownership, a 20% down payment is typically required. 

However, each co-owner has their own limited liability mortgage as per the Civil Code of Québec, providing protection to each co-owner. This simply means each co-owner is a liability for their own debt, and in case of non-payment, the other co-owners are protected, and only the defaulted undivided co-owner will be held liable or can be seized by the creditors. 

Problems with undivided co-ownership

Undivided co-ownership comes along with a few challenges. All the co-owners are required to follow the rights and obligations provided by the Civil Code of Quebec, which can result in various conflict situations, such as the exclusive use of part of the building by one of the co-owners.

The undivided property has one cadastre and selling your percentage can be comparatively more difficult than divided co-ownership. 

Lastly, the minimum required down payment for buying an undivided condo is 20%, which is no small feat and can be a significant barrier to entry for low-income buyers. If you are looking to purchase a condominium it is always recommended to work with a buyer agent. You can contact ALP PEREZ to be guided through this entire process to have a problem free home buying experience.