When faced with a co-op condo, most people shy away from even looking at them. That is because of the uncertainty of what a co-op building is in the first place. I have recently had the opportunity of dealing with a co-op sale and I have to say I have learned a lot from that experience. Please note that I am referring to an "equity" co-op NOT a govenment-subsidized one.
So, what exactly are you getting when purchasing an equity co-op? You are purchasing shares in the building, just like you would purchase shares in andy company, and those shares allow you to "lease" a certain unit in the building. The building is a registered company and all residents are "shareholders". This is not to be confused with a "leasehold", where the property is located on land that is only leased. A co-op building actually owns the land on which it is built. Co-op properties exist because they were built before "Strata" properties came into existence.
What are the advantages of purchasing a co-op? The main advantage is location - these buildings are usually located in premium areas and there is not much chance that new buildings will be built around them. In the West End, for example, you will probably find co-ops very close to Stanley Park and Englixh Bay with wonderful water and park views. These buildings tend to be older because they were built when desirable properties were more available. Because they are older buildings, you must also be prepared to share laundry facilities.
You should always check to see what the rules and restrictions of each co-op are, but expect that the majority of them will not allow rentals. While not as appealing to investors, this creates a feeling of community since all residents tend to stay much longer and get to know and look out for each other. Some will also not allow pets, are adult orinted only and others will also prohibit smoking anywhere in and around the building. Make sure to read the "House Rules" and find out exactly what the rules are. Parking and storage lokcers are usually assigned on a seniority basis.
Any prospective purchasers have to be approved by the Board of Directors before they can actually purchase in the building and this must be specified as one of the subjects in your "Contract of Purchase and Sale". Why do I think of this as an advantage? All residents will feel secure that the new purchasers are aware of what they are purchasing and will abide by the rules and regulations of the co-op. Just to clarify, the interview is NOT about finding out personal information from the purchaser or "screening" a purchaser to see if they fit in. It is more about ensuring that the purchaser has read the "House Rules", is aware of the restrictions, understands how the parking works, understands how the laundry works and so on.
Yet another advantage of purchasing in a co-op is that, in most cases, property transfer tax will not apply. You should always verity with your notary or lawyer, but if the shares are not registered at Land Title chances are you will be saving yourself some fees since you are only purchasing shares and not "land". Your offer must specify the amount of shares you are purchasing. Property taxes are usually included in your maintenance fee but you can still claim your Homeowner's Grant if you qualify for it. Ass assessments, levies, taxes, etc. are based on the co-efficient of each suite - the percentage of the entire building that each suite represents. Again, these numbers are available from the "Articles of Association".
Most financial institutions will require at least 35% down if you are looking to finance a co-op purchase. Van-City seems to be the institution of preference since their requirements for hypothecation are acceptable by the Board of Directors.
Co-op's are run in a very similar fashion to Strata properties, except that they are not covered by the Strata Property Act. They have meetings, they have a Board of Directors and someone has to look after the maintenance. The authority that the Board of Directors has is given to them through the "articles of Association, so it is important to read those as well. The Board of Directors will establish the "House Rules" and they can also change them. When purchasing a co-op, there is no "Form B" or "Strata Plan" - these are forms that are associated with strata buildings. However, there will be minutes, special meetings and information on any special levies that you should request as well as the Rules and Regulations, the Momorandum and Articles of Association, any lease docmentation , a copy of the share certificate and any financial obligations.
Once all approvals have been met and subjects have been removed, the Board will cancel the share certificate and lease agreement owned by the previous shareholder and issue new ones in the name of the new purchaser. All other documentation is prepared by your lawyer or notary just like any real estate purchase. Make sure to contact a lawyer or notary that is familiar in dealing with co-op purchases as well.
In conclusion, a co-op purchase should not be viewed as intimidating. It is a purchase like any other, but because of the restrictions it may appeal to a smaller group of people. On the other hand, I had a lady that came through and gave me her name so that I can call her as soon as there is a unit with a water view in a particular building that she really likes. As she said - "this is a classic - I don't want to live anywhere else".