Within the housing market, you'll find two types of property co-ownership that are important to differentiate: divided co-ownership and undivided co-ownership.
Better known as a condominium, divided co-ownership of a property includes private areas and common areas.The private areas usually take the form of apartments that belong exclusively to their respective owners: each co-proprietor is responsible for his/her own mortgage. The private space can also include, for example, a parking space or a balcony.
Common spaces are those spaces for which the property rights are shared by all the co-owners. Examples include the garden, the pool, the entry hall, the roof, the stairs, etc. The regular upkeep of these spaces is the responsibility of all the co-owners, as are the major repairs that have to be done on the building itself. As such, each co-owner must pay condo fees, generally on a monthly basis, so that money will be available for the upkeep of the building.
The administration, management and preservation of a divided co-owned property is managed by a co-ownership syndicate (condo corporation)—all the co-owners come together to make decisions on matters that affect the collective.
It is worth noting that there are two types of insurance for co-owners: commercial insurance contracted by the corporation and paid via condo fees, and individual condo insurance for you! The insurance provided by the corporation doesn't cover your personal belongings and furniture, and doesn't ensure liability insurance for the privately owned areas (to which only the co-owner has access).
Unlike divided co-ownership, undivided co-ownership—which is only available in resale—does not include property rights to a specific dwelling within the building. The division between “private areas” and “common areas” is not present in undivided co-ownership. The entirety of the building is owned in a joint manner by all of the proprietors who are in turn in charge of upkeep.
Normally, the financial institution will take the financial capabilities of the combined co-owners into account before granting a mortgage loan. The co-owners are thus also responsible for the other co-owners' loans. It is also worth noting that the owners are jointly responsible for municipal taxes, insurance, and school taxes.
Since the co-owners have no corporation and are under no obligation to pay co-ownership fees (as is the case with divided co-ownership), it is in their best interest to protect themselves from possible financial setbacks from other co-owners. To this end, the co-owners can choose to sign an ownership agreement that dictates, among other things, the way in which the building will be used and managed, creating what is called organized undivided co-ownership.
An ownership agreement delineates which parts are reserved to the exclusive use of which owners, including dwellings and parking spaces. The agreement also contains protective measures to guarantee that the co-owners each cover the costs of their various obligations. Without this ownership agreement, buying an undivided property comes with heightened risks of conflict and even financial loss.
So, divided or undivided co-ownership? In either case it is important to make sure that you're well informed before taking the leap, and make sure to formalize all agreements in writing.