Co-ops and Condos may seem similar, but legally they’re much different. Both are typically suites in multi-unit buildings and in fact to see them, you wouldn’t know the difference. But one can be easily financed and the other is almost impossible to finance. Why?
In a Condo, or strata-titled property, the legal title to the unit is registered in the name of the owner. This makes it easy for a lender to take this as security for a mortgage. In a Co-Op, the title to building is held in the name of the Co-Op and the owner only owns an interest in the Co-Op and a related right to use their suite. Unlike a Condo, the owner’s name does not show up on the legal title to the unit. This is an important distinction because it makes it much more difficult for a lender to take effective security in the unit. As a result, lenders tend to avoid them.
There is a reason that Co-Op units are marketed at prices that seem low for a neighbourhood, and that’s because the purchasers usually have to pay the full purchase price in cash.
If you aren’t sure about the title that your client has, it’s a good idea to contact a lawyer for advice. If it’s something that can be financed, the underwriting team at Kokanee Mortgage would like to help.