Key Differences Between Co-Ops & Co-Ownership of Real Estate

Key Differences Between Co-Ops & Co-Ownership in Real Estate

Co-owning property versus taking part in a co-op housing purchase are property ownership structures which sound similar, but are very different.

In a co-op purchase transaction, owners purchase shares of a private corporation which, in turn, owns and manages the property. By contrast, in a co-ownership transaction (or ‘co-buying’), owners purchase an undivided interest in the property that is registered on title. In other words, co-owners share in a the legal title to an entire property, while co-op parties share in the interest in a corporation which holds legal title to a property.

A Closer Look at Co-Operative Housing

In a co-operative housing purchase transaction, a corporation becomes owner of the land as well as the building and its units. Each purchaser in a co-operative buys shares in the corporation as opposed to buying a specific unit. Purchasers in a co-operative do not own units (as do condo unit owners via their fee simple interest), but rather, they are granted occupancy rights in the unit by the corporation as a “tenant-shareholder” of the corporation that owns the property.

The rights, obligations and liabilities of a co-op purchasers are outlined by several documents, namely a corporation’s incorporating documents, by-laws, and where applicable, offering statements sanctioned by the Financial Services Commission of Ontario (FSCO). Offering statements are required only where co-operative corporations have over 35 shareholders. Interestingly, condominium co-ops are governed by the Co-operative Corporations Act, and not the Condominium Act.

A Closer Look at Co-Ownership Properties

In a co-ownership arrangement, purchasers buy a portion or percentage of real property and share title with the other purchaser(s).  Title to the property is typically held as tenant-in-common tenants, as opposed to joint tenants. The tenant-in-common designation allows for flexibility for each owner to allow for the divestment of the property to be dictated by agreement. Tenant-in-Common gives owners the ability to have a clear sense of knowing what percentage of the property a particular owner controls.

Co-owned properties are not governed by legislation such as the Co-operative Corporations Act or the Condominium Act. The rights, obligations and liabilities of co-owners are governed via contract and are outlined in a co-ownership agreement. Co-ownership agreements define a wide range of terms which govern the relationship between co-owners, including the financing, mortgages, insurance, co-owner responsibilities and liabilities, and dispute resolution mechanisms.  Notably, co-ops cannot be profit-driven corporations: if a co-op p operates as a share capital corporation, then, to the furthest extent possible, must operate “at cost”  – meaning, it cannot on its own be a profit making body.

For more information on co-ownership agreements, please see our previous blog post here.

 Aura LLP is Ontario’s leading law firm in co-ownership of residential and commercial property. We have helped dozens of co-owners structure their agreements, and close on their perfect home. Contact us to learn more about how we can help you.


Ryan Martin
Ryan Martin is a founding partner of Aura LLP, specialising in real estate and commercial law. Ryan is one of Ontario's leading lawyers and thought-leaders in co-ownership of residential and commercial real estate.
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