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Co-operatives and Co-ownerships

Region: Ontario Answer # 414

Co-operatives and co-ownerships are two forms of housing which are different from condominiums. Although co-operatives and co-ownerships involve buildings with several units, their legal organization is different from that of condominiums. Real estate matters, such as the rules regarding how condominiums must be run, involve large sums of money and complicated legal issues. To get help, ask a lawyer now.



In a co-operative, a corporation owns the land and the building, including all the 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 their units but are given the right to occupy them by the corporation. Thus, the legal interest of the co-operative dweller is that of a shareholder of the corporation that owns the property. This is why the co-operative dweller is often referred to as a tenant-shareholder. The legal interest of the tenant-shareholder is different from that of the condominium owner who has the greatest ownership right in his or her particular condominium unit, called a fee simple interest.

The rights, duties and liabilities of a tenant-shareholder in a co-operative are governed by the following documents:

  1. The incorporating documents of the corporation
  2. The by-laws of the corporation
  3. Where applicable, a shareholders’ agreement among the tenant-shareholders

Ontario’s Co-operative Corporations Act (the”Act”), and not the the Condominium Act, applies to co-operatives. The Financial Services Commission of Ontario (FSCO) is the government office that registers organizations conducting business as a co-operative. In most cases, if the co-op is planning to sell shares to more than 35 people, or if the sale of additional shares increases the number of shareholders in the co-op to more than 35, the co-op must file an offering statement with the FSCO.

Under the Act, an offering statement must provide, “full, true and plain disclosure of all material facts relating to the securities proposed to be issued.” This is similar to prospectus requirements under the Securities Act. Essentially, the offering statement is intended to provide full information to the prospective share purchaser, so that they can have a clear picture of the rights and obligations that they will be acquiring once they purchase the shares.

Co-operatives: Mortgages & taxes

Since the units are not owned by the individual tenant-shareholders, mortgage financing is initially secured for the building as a whole, and is often referred to as a “blanket mortgage.” In this situation, the corporation is usually the mortgagor.

Each tenant-shareholder contributes toward the blanket mortgage, and if one tenant-shareholder is in default, the others must increase their payments to meet the deficiency or risk a foreclosure or power of sale proceedings against the whole building. After the co-operatives have been in existence for some time, there is often no financing at all remaining on the building.

There is one tax bill, which applies to the entire property, and all tenant-shareholders are jointly liable under the tax bill.

The amount that each tenant-shareholder has to pay for mortgage and tax is based on the number of shares each one purchases. The number of shares they each purchase is determined by the size of the unit each wants to live in and when the shares were purchased.


Selling shares of a co-operative

If an individual wants to sell his or her shares in a co-operative, it is much different from a condominium owner selling his or her unit. In a co-operative the new purchaser will have to be approved by the board of directors of the corporation before acquiring shares in the corporation. With the sale of a condominium, the unit owner is generally free to sell his or her unit to a prospective purchaser without consulting fellow unit owners or the condominium corporation.

Unlike the sale of units in condominium corporations, the marketing of an interest in a co-operative to the public requires compliance with the Act because it is a sale of shares as compared to a sale of real property. Although no interest in real property is being transferred when an interest in a co-operative is sold, land transfer tax is payable on the sale price of the shares.


An alternative to co-operatives and condominiums is co-ownerships. Instead of shares in a corporation that owns the building, purchasers buy a percentage of the building’s real property, or “title”, becoming an “owner in common” with every other purchaser. This also comes with the right to occupy a specific unit.

In the co-ownership system, buyers are legally bound by the terms in their contract rather than by any legislative provisions, such as the Condominium Act.  Like the co-operative, the co-ownership involves only one mortgage and one tax bill for the entire property, with each person being responsible for his or her proportionate share of the costs.

The Ontario government has recently published new co-ownership guidelines that provide information on how to create a legal contract between co-owners, mortgages and how to finance properties, insurance, what paperwork is required, and even how to resolve disputes.


It should be noted that with co-operatives and co-ownerships it can be difficult to arrange individual financing to assist a purchaser in the acquisition of an interest in these types of projects. It is not uncommon therefore for the vendor to finance the purchase by way of a vendor take-back mortgage. For more information about co-operatives and co-ownerships visit our Links, or contact the Co-operative Housing Federation of Canada.

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Get legal help

Real estate matters, such as the rules regarding how condominiums must be run, involve large sums of money and complicated legal issues. To get help, ask a lawyer now.

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