Condo construction continues to explode in Ontario’s major cities like Toronto, Ottawa and Hamilton, as rising downtown populations force more vertical development. While apartment building-style residences remain the most numerous condominium type, there are actually a variety of different formats recognized under Ontario’s 1998 Condominium Act. In this article, we’ll be walking prospective owners through the different condominium types available in the province to give you a better idea of each one’s characteristics, and the legal obligations involved in ownership.
As you go through this article, you’ll find there are many variations among condo types, and a few exceptions to the accepted general definition of what a condo actually is. With that said, a condominium is typically a living space which is owned outright with shared common elements (such as hallways, elevators and sidewalks) that are collectively owned by a condo corporation. Becoming the owner of a condo unit automatically buys you membership into the corporation, and in most cases, you will pay monthly association fees which go toward the upkeep of these common elements.
Freehold Condominium Corporations vs. Leasehold Condominium Corporations
The most basic division between condominium types is between freeholds and leaseholds.
Freeholds are properties in which you become the owner (as a member of a corporation) of a parcel of land, as well as any structures built on top of it.
Leaseholds are properties in which you buy the structure and buildings you will occupy, but are only leasing the land.
We’ll get into the particularities of leaseholds later in this article, but first let’s look at the three different types of freehold: standard condominium corporations, common elements condominium corporations and vacant land condominium corporations.
Standard Condominium Corporations
As you might gather from its name, a standard condominium corporation is the most common type in Ontario. This could be an apartment in a high-rise building, a stand-alone townhouse or a row-house. Buying one of these condos means that you are the sole owner of the unit you will occupy, and that you also have a share of the common assets in the possession of the corporation or homeowner’s association.
As ownership of the property is collective, you do not have the option of disclaiming this share: you will be expected to contribute fees for the maintenance and improvement of these common elements, whether they be a swimming pool and gym within the building, a parking lot, or the lawns upon which your townhouse sits. It is important to note, however, that you are not the sole owner of any land in this arrangement.
Common Elements Condominium CorporationsAlthough all condo communities include some manner of common elements, in a legally-defined Common Elements Condominium Corporation their nature is distinct. In this case, there are no units - you own your own property, including the land the structure sits upon, outright. The “common elements” which are collectively owned are external. Examples here may include roads, a ski hill, golf course or community centre. As with a standard freehold, your condo fees will go towards their upkeep.
- It is important to bear in mind that your membership in a Common Elements Condominium Corporation is attached to the parcel of land you’ve purchased, not the home you occupy.
- As the Condominium Act sets out, your land is not part of the common elements which are owned collectively and, within the terms of your purchase agreement, you can do with them what you like (and are solely responsible for the costs of maintaining them).
- Your parcel of land must be within the boundaries of the land title where the condo developer registered the corporation, meaning you can’t simply buy into a golf course owned by the corporation without owning your own land in the development.
Vacant Land Condominium Corporations
While the previous types listed here all require the developer to have already constructed dwellings before registering the corporation, a Vacant Land Condominium Corporation is exactly what it sounds like. In this case, you may be purchasing a unit or lot prior to construction of standardized structures (ex. a series of townhouses), or have the opportunity to negotiate some say in the nature of the structure you will ultimately occupy.
Vacant Land Condominium Corporations can accommodate a variety of different kinds of dwelling (ex. a high-rise apartment and row-houses on a collectively owned property). There may however be restrictions set out in the developer’s declaration on the size, construction, design standards and/or maintenance requirements of future structures. This means it is very important that prospective owners read this document over carefully with the assistance of a professional before signing on. (This of course is generally good policy before making any major real estate purchase).
Leasehold Condominium Corporations
As promised, let’s revisit the other overarching condo category we mentioned near the top. In a leasehold, the land is not owned by the condo corporation but is leased from a third-party landowner. Unlike in a freehold, where you have the right to remain on the property in perpetuity, in a leasehold you own only the unit or building you occupy, as well as your share of any common elements owned by the corporation. Your fees will thus contribute to the collective rent being paid to the landowner.
With regard to your own dwelling, you have many of the same rights and obligations at freeholders under the Condominium Act: you can sell or mortgage your unit without seeking the landowner’s permission for example. Leaseholds tend to be less expensive than comparable freeholds, meaning you may be able to afford a more upscale living, but there are some significant drawbacks.
When the condo’s lease on the land expires, your right to dwell there is terminated unless the lease is renewed. In Ontario, a developer’s lease with the landowner must be for a term between 40 and 99 years, ensuring that tenants who join the corporation early on will not be unceremoniously booted after a short time. However, if you purchase your unit from someone else, say 35 years into the lease, you may only have a few short years before the corporation must renegotiate a new lease with the landowner. The term remaining on the lease can therefore have a dramatic impact on resale value: in effect, the value of your property may decrease with each year.
As in the example of collective bargaining in the labour movement or a class action lawsuit, when stakeholders pool their resources, they can achieve more than an individual working alone. Becoming an owner of a condo allows you to dilute the costs of amenities which would otherwise be too costly to afford. It also creates spaces for people who wish to own real estate in crammed downtown cores to do so. As long you enter into any agreement with open eyes, it can be a wise real estate investment. We hope this overview of different types of condominium corporations has proven helpful, and if you have further questions please feel free to reach out to us for advice and information.