Dated: 10/18/2017

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How Ownership Type Affects What is Owned

There are many ownership types used to categorize properties according to what a purchaser acquires when they buy a property. Unlike terms such as “duplex” (a property with two units, one above the other) and “semi-detached” (a property with two units, one beside the other) which describe the property acquired, these terms characterize which elements of the property are included, such as the whole building, parts of the building, the land beneath the building and so forth. Below we’ll review the most common types of property ownership.

1.1.1 Freehold

Though it may sound like a technical term for some, this is actually the most traditional type of ownership most people consider when they think of owning a property. The purchaser owns the land and building(s) and can make improvements as they wish, subject to municipal by-laws, and they are responsible for all of the costs of maintaining the whole property.

Freehold owners enjoy full rights of the use of their land and property, subject to any restrictions by the crown and/or by any restrictions (or “encumbrances”) set out at the time of purchase. (Examples would be restricting access on a common road or erecting a fence which blocks common access to waterfront.)

1.1.2 Condominium

Purchasers of condominiums own the particular unit they acquired and a proportionate share of the common areas, such as the front foyer, elevators, and the corridors used to gain access to individual units. Though frequently high rise “apartment” type buildings, condominiums can also include townhouses or gated community developments.

Owners have less responsibility and also less freedom and privacy, since the rules of the building (noise, common areas, renovations and sometimes even colour of curtains) must be followed. Each owner is responsible for the interior of their own unit, while the condominium association is responsible for everything else, including common interior spaces, the building’s exterior, parking facilities and the grounds.

Unit owners pay fees to the association to ensure there are always sufficient funds on hand, well in advance of major repairs, such as replacing elevators. (Purchasers should always check the association’s financials and fee history before committing to buy.)

1.1.3 Strata

Strata ownership is the same as condominiums, except with different terms and perceptions. It is designed to provide exclusive use and ownership of a specific housing unit (the strata lot) which is contained in a larger property (the strata project), with shared use and ownership of the common areas such as corridors, elevators, parking facilities and grounds. Costs are shared among unit holders and paid to the Strata Council.

The difference in terms can be perception (high-rise buildings are more frequently considered condominiums while housing developments are stratified) or regional; strata is more commonly used in western Canada. (British Columbia changed the Strata Titles Act to the Condominium Act in 1978 and due to some confusion, back to the Strata Property Act in 1999.)

1.1.4 Co-operative Ownership

Co-operatives, also known as “Co-ops” are similar to condominiums or strata ownership but structured in a way that owners must be even more “co-operative” with one another! The main distinction is that owners do not own a specific unit but rather shares in the entire building (or complex). Owners are then assigned units in which they live. Once again, owners pay monthly fees for repairs and maintenance to a co-op board (or council).

Like condos and stratas, there are rules and regulations to follow, but co-ops are even more controlling; if an owner wants to sell their interest and move elsewhere, the co-op board (or council) has the right to reject the potential buyer.

1.1.5 Leasehold

Purchasers of leaseholds acquire the right to use property for a period of time, with no rights to the land or building. This is common for institutions, such as churches or universities, who have no immediate need for their land but are unwilling to permanently divest. Original leasehold ownership is often set at 99 years, which is ample time for the purchaser to use for quite some time, and theoretically, for the rest of their lives. However, if the lease is sold to a third party, the purchaser only acquires the balance of lease. Over time, this reduces the value and increases the risk, since the original lease may or may not be renewed.

Leasehold property (at right) on church land

Leasehold property is also offered on city-owned lands, farmland and First Nations reserves.

1.1.6 Mobile Homes

Mobile homes are frequently “set” in mobile home parks, in which land may be owned or rented, though rent will be payable to cover the costs provided by the landlord, such as maintaining the water supply, sewage disposal, fuel, drainage and electrical systems of the park or community in a good state of repair, garbage and snow removal, and maintenance of roads, grounds and all buildings, structures, enclosures and equipment that are intended for the common use of tenants.

These arrangements are covered under provincial Residential Tenancies Acts and any executor intending to sell such property should review the relevant act to understand their rights as well as their responsibilities to the landlord.

1.1.7 Fractional Ownership

Purchasers of fractional ownership acquire a property owned and shared by at least two, and often several, individuals. Such properties are often divided into ten or twelve “fractions”, with individual buyers owning a fraction of the allotted annual weeks (noting some weeks will be withheld for repairs and maintenance.)

Owners of fractional properties actually own a portion of the property unit. This type of ownership is most common in recreational properties, where purchasers with limited resources are able to afford considerably more attractive property than they could otherwise, in exchange for more limited access, which may fit in well with the vacation time they have available for using the property.

1.1.8 Timeshares

Purchasers of timeshares acquire the right to use a property, usually a resort condominium, in which multiple parties hold similar rights, with each shareholder allotted periods of time for their usage. While timeshares provide vacationers with benefits similar to fractional ownership, there is one very important distinction: timeshares do not provide any equity, fractional or otherwise, in the individual property.

The advantage of timeshares over fractional ownership (for the time being) is the ability to trade weeks among other owners for timeshares all over the world. However, the disadvantage is that many timeshares are purchased outside of Canada, creating considerable challenges for executors when the owner dies leaving assets in a foreign jurisdiction.


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