In Quebec, there are two forms of co-owned properties: divided and undivided. The former, also called a condo, is the most common and best known. As for the latter, it can be chosen by undivided co-owners, but also received, following an inheritance, for example.
So, what can we conclude from the comparison between divided or undivided co-ownership? Both formulas have their own characteristics and assets, depending on the objectives and profiles of the co-owners of the building. Condo Stratégis introduces you to these two common types of co-ownership and outlines their advantages and differences.
Divided co-ownership: definition
The best-known form of co-ownership, a divided co-ownership is made up of one or more buildings divided into private and common portions. When the future buyer acquires their lot, they become the owner:
- Of a private space of the co-ownership building, known as a condo unit, of which they have exclusive use
- Of a share of the common portions of the entire building (entrance, stairs, etc.)
Often referred to as a condo, the apartment has its own lot number and cadastral identification, and the co-owner has their own school and municipal taxes accounts. They are free to make minor changes to the condo unit without the agreement of the condominium syndicate insofar as the work does not affect the common spaces and respects the declaration of co-ownership.
What are the advantages of a divided co-ownership?
Comparing a divided vs. undivided co-ownership clearly shows that the former works in a very structured way, unlike the latter. Each divided co-ownership:
- is managed by a condominium syndicate that may mandate an external condominium administrator
- is subject to a co-ownership agreement called the declaration of co-ownership, making it possible to regulate and organize the life of all the co-owners and occupants of the building
- is required to set up a contingency fund intended to finance the necessary work in the common areas as well as contingencies
- must set up a self-insurance fund to cover the amount of the condominium syndicate insurance deductible in the event of a claim
In a divided condo, the weight of the co-owner’s vote in the decisions of general meetings of co-owners depends on the fraction that they own. Their share of the expenses related to building maintenance management and condominium syndicate management more broadly is also calculated based on the relative value of this fraction.
A lot held in full ownership is also easier to resell than a share of a building. Finally, it’s possible to buy an apartment in a divided co-ownership with a down payment of only 5%.
Undivided co-ownership: definition
In the comparison of divided vs. undivided co-ownership, it stands out at first glance that the latter relates to a building in its entirety. Since the building constitutes one land unit, only one lot is registered with the cadastre, and it only has one municipal and school taxes account.
Unless otherwise indicated in the deed of sale, the shares are also divided between the undivided co-owners. This type of property is commonly found:
- when a married or unmarried couple buys a house
- when a family or friends purchase a duplex, triplex, or quadruplex
- in the event of an inheritance when multiple beneficiaries inherit a building
A building in an undivided co-ownership is not divided into private portions and common portions. While sections 1012 and following of the Civil Code of Québec relate specifically to undivided co-ownership, they do not require a condominium maintenance logbook to be kept nor a joint ownership agreement to be established, although the latter is strongly recommended to:
- ensure the management of the condo building
- administer the exclusive rights of the various residents of the building
- provide for the terms of resale of the shares by establishing, in particular, a pre-emptive right or a deferral of the right to share the undivided co-ownership
To be enforceable against third parties, the joint ownership agreement must be published in the land register.
What are the advantages of an undivided co-ownership?
Looking closely at the comparison between divided and undivided co-ownership highlights the great freedom enjoyed by the co-owners in terms of managing their property:
- According to the terms of the joint ownership agreement, the co-owners exercise control over who can enter into the undivided condo
- As they are not subject to any obligations regarding contingency funds or self-insurance funds or the keeping of accounts for the condominium syndicate, the undivided co-owners earmark the amounts that they wish to finance the necessary work related to the obsolescence of the building and the insurance deductible in the event of an incident
- The undivided co-owners create their own joint ownership agreement and define the rules that govern their building themselves, particularly the meeting and decision-making procedures
Regarding the economic aspect of properties in a divided or undivided condo, the second formula is more attractive in many respects:
- Properties in an undivided co-ownership are usually less expensive
- The management, overseen by the undivided co-owners, generates very few costs
Divided vs. undivided co-ownership: what are the differences for the co-owners?
Divided or undivided co-ownership: which to choose? Truth be told, there is no one-size-fits-all answer to this question; the decision to opt for a divided or undivided co-ownership results from a personal choice. Highlighting the differences between these two options allows you to move forward in this thinking.
Divided ownership and joint ownership
While, in the context of a divided co-ownership, the building is divided into separate parts (private and common), a building in an undivided co-ownership constitutes a single land entity with a single cadastral number and is owned by all the undivided co-owners.
In a divided co-ownership, the condominium syndicate, whose mission is to oversee the administration of the building, is mandatory. Conversely, an undivided condo leaves it up to all the co-owners to manage the building.
Declaration of co-ownership and joint ownership agreement
Each condo is required to have a declaration of co-ownership that regulates the collective life of the occupants of the building and determines the terms of management of the condominium.
Conversely, nothing is imposed in undivided co-ownerships, leaving the co-owners great latitude to govern their internal relations. To avoid future conflicts, it’s best to contact a specialized notary to establish a joint ownership agreement—the duration of which cannot exceed 30 years—specifying:
- the percentage of each undivided co-owner’s share
- the rights of the various residents of the building, particularly regarding exclusive use
- the description of the common expenses payable by the undivided co-owners according to their share
- the establishment of an interlocking mortgage, mutually guaranteeing the undivided co-owners the payment of their mortgage obligations
- the terms of resale of the shares, possibly with the establishment of a preferential right or a deferral of the right to share the undivided co-ownership
Contingency fund and self-insurance fund
A divided co-ownership is required to hold a contingency fund and a self-insurance fund. On the other hand, this law does not apply to undivided co-ownerships, and the co-owners are free to set up their provisions for work and the payment of co-ownership insurance deductibles as they see fit.
Individual account vs. collective account
In a divided co-ownership, each co-owner has expenses and taxes to be paid for their lot.
Conversely, in the context of an undivided co-ownership, the owners of a jointly owned building have only a single account open with the tax authorities for the property taxes related to the building.
Real estate transactions
Observing real estate transactions shows that it is easier to sell a condo than a property in an undivided co-ownership. Furthermore, in the first case, the minimum down payment required to obtain a bank loan is only 5% of the purchase price of the apartment, while it reaches 20% in the case of a property in an undivided co-ownership.
Insurers don’t grant mortgage insurance for properties in an undivided co-ownership. In addition, the undivided co-owners must all obtain their own individual mortgage from the same banking establishment.
It should be noted that most joint ownership agreements prohibit renting out the property. And even if all the undivided co-owners agree to allow rental, they could only place tenants there if they don’t have a mortgage. Indeed, the conditions of mortgage loans prohibit rental in properties in an undivided co-ownership.
Repossession of a dwelling
In the case of an undivided co-ownership with a person other than one’s spouse, the Civil Code of Québec prohibits the repossession of a dwelling located in an undivided co-ownership.
Condominium management fees
Since the co-owners ensure the management, the condo fees are lower in a divided co-ownership.
For all your questions about divided or undivided co-ownership, contact Condo Stratégis
The well-supervised operation of condos appeals to people who want clear building administration rules and few responsibilities in terms of co-ownership syndicate management.
Conversely, an undivided co-ownership, which generates fewer costs in terms of its operation, is suitable for people who are willing to take on voluntary tasks and get involved in the management of the condominium. To ensure its success, it’s best to draw up a customized joint ownership agreement that meets the specific needs of the undivided co-owners.
For all your needs or questions regarding condominium management, contact Condo Stratégis! Our condo experts in Quebec will be pleased to assist you.