What is a Co-op?

Many times I have been questioned about the word "co-op". There seems to be some confusion among co-op owners and especially the public about the distinction between private co-ops and government subsidized co-ops with respect to the real estate market. In Vancouver, the term "co-op" is often used to describe some forms of Government subsidized housing but please note that this type of housing is not handled by the Real Estate Board and the difference between the two is quite clear to all of its members.

The term "Co-op" is used to describe self-owned apartments pre-dating the Condominium Act. The proper name for this type of apartment building is ‘Apartment Corporation.’ The land and the building belong to a private corporation and apartment owners are given shares to this corporation. Co-op owners then, share ownership of the land and the building much like strata units but without the separate land titles to each unit. The term "co-op" as used by the Real Estate Board, does not imply government subsidized housing.

According to the Real Estate Board and the B.C. Real Estate Council, Realtors have three choices for describing an apartment unit;

1) Strata

2) Leasehold

3) Co-op

There are advantages and disadvantages to each type of unit.

Strata

Strata units are the most flexible because of the separate land title given to each unit (suite ownership is transferred on an individual, per-unit basis) but other suite owners have no control over the type of purchasers (good or bad) that may buy into their building. In a co-op, purchasers must first be approved by the other owners in the building. In New York City, for example, a past U.S. President and may profile celebrities have been turned down by co-op boards because of the unwanted attention that would have been focused on the building. There is no such power to restrict entry for any other type of apartment ownership.

Leasehold

Leaseholds sometimes appear very similar to co-ops in that the right to lease can be sold or purchased in the same way that shares to the corporation owning a co-op can be sold or purchased. However, the lack of any title to the land generally results in a selling price of 10-15% lower than similar co-op apartments. The term "co-op" there fore, implies a higher form of ownership than a leasehold. No ownership or rental restriction are usually in place in leaseholds.

In terms of financing, obtaining a mortgage for a co-op unit is more difficult than obtaining one for a Strata unit because of the ownership structure and the minimum 35% down payment requirement. This may appear to be disadvantage, yet it is viewed by many as an added advantage since this restriction means that co-ops attract people of greater financial stability which in turn, also tends to result in a lower ownership turnover in the building.

To many, private co-op ownership is considered to be a premium form of ownership. The buyers that I have worked with throughout the years request co-ops for very specific reasons - the charm of hardwood floors, the solidity of an older building, often larger rooms, the lower turnover and perhaps the most importantly, the ability to restrict rentals, pets and children.

I consider "Co-op" to be a premium term for a property. Using the term "Co-op" is the best way to describe the advantage that your property has on the market.