Buy & Sell Recreational Property in Canada. Geraldine Santiago
be governed by the bylaws and regulations of the strata corporation or company. You will be required to follow these rules, and violations will result in fines. If you don’t pay your monthly dues, assessments, and/or fines, the strata corporation or homeowners’ association can put a lien on your home.
Co-ownership
If you are purchasing a home with your spouse, family members, or friends, it is important to understand the different types of co-ownership. Co-ownership involves property owned by more than one person. This type of ownership is generally by joint tenancy or by tenancy in common. Your notary or lawyer should explain the differences between these two types of co-ownership in relation to your individual circumstances, and advise you about how you should be registered on the title.
Joint tenancy
Joint tenancy is common among those purchasing with a spouse or partner. If you and your spouse purchase a property together as joint tenants, one partner becomes the sole owner when the other dies. The entire ownership automatically transfers to the survivor without having to go through probate. This feature is known as the right of survivorship. Thus, a joint tenant cannot leave the property in a will to a third party.
Tenancy in common
Tenancy in common is a form of co-ownership among two or more owners, in which each owner may or may not have the same amount of shares or rights. One party may be able to sell his or her share without permission of the other parties. The following are examples of this form of co-ownership.
Fractional ownership
Fractional ownership gives you a deeded share in a vacation residence and the right to use it for a specified amount of time per year, usually 4 to 12 weeks. With one-fifth ownership, for example, an owner co-owns the property with four others and is usually entitled to use the property for 10 weeks per year.
From a legal perspective, owning fractional real estate is relatively uncomplicated because each owner gets his or her own interest — that is, title and legal rights — to a fraction of the property. An owner is granted fee-simple ownership (i.e., absolute ownership with very few limitations), which is registered in the land title office. One owner can put a mortgage on the property or sell it or hand it down to children, independently of the other owners.
There are a number of different arrangements for fractional ownership, but often the property is located in a vacation resort, comes fully furnished, and has maintenance and upkeep handled by a property management company for an annual fee. All the owners contribute equally to the cost of management and maintenance, including regular and preventative repairs and a fund for the future replacement of furnishings. Some fractional real estate programs allow an owner to arrange a temporary exchange of property with an owner at another resort location.
Usage arrangements, ownership structures, and bylaws vary from property to property, so it is important to find out about each property and what particular arrangement would work for you. For example, be sure to investigate restrictions regarding vacation schedules and flexibility around “trading” time with another owner. A local agent can tell you what arrangements are available and how flexible these arrangements are. If you fail to get all the details before buying into a fractional property, this type of ownership may cause more problems than it is worth.
For many buyers, however, fractional real estate is their only option if they want to buy in an expensive market. With a budget of $300,000, for example, buyers could own a quarter ownership of a three-bedroom luxury townhouse in Whistler, one of Canada’s top ski resorts, which would be worth more than $1.2 million for full ownership. Price and the ability to share the potential appreciation in value are among the advantages of fractional ownership.
Though fractional ownership can be very attractive, there is a downside. Financing fractional ownership is often challenging, as some lenders may not be familiar with this type of ownership. If you purchase fractional real estate that already has a lender, you may be in luck. If you can pay for it in cash, you may not have a problem at all.
Chapters
A unique type of co-ownership that has recently surfaced is chapter ownership, in which a property is divided among ten owners — that is, a chapter owner shares ownership with nine others. Presently chapter ownership is unique to British Columbia, in places such as Whistler, and to some parts of the United States, such as Lake Tahoe in California and Aspen/Snowmass in Colorado. Owners are allotted five weeks per year — two weeks in the summer, two weeks in the winter, and one week whenever it is available.
Demographics for this type of ownership vary, and include both baby boomers and younger couples with children who are not able to afford a single-detached recreational home in vacation hot spots, which can have an average price of $1 million.
Baby boomers tend to enjoy the benefits of worry-free maintenance. However, such benefits usually come with a monthly price tag in the form of maintenance charges that can be quite costly. Make sure that if you purchase a chapter ownership, you take into account these additional monthly charges.
In any type of co-ownership, especially fractional ownership, find out your rights and obligations before you purchase. You will want to make sure you agree with all of the terms and conditions that are set out in the contract by either the previous owners or the project developers. In addition, it is advisable to consult your local agent to find out the legalities regarding ownership and resale of co-owned properties.
Timeshares
A timeshare is a property that is owned by several people who each have a right to use it for certain periods each year. There are two categories of timeshare ownership: fee-ownership interest and right-to-use ownership.
In fee-ownership interest, the owner has absolute ownership for his or her share of the property, meaning he or she has a right to encumber, convey, or transfer the property for all future time.
In right-to-use ownership, the buyer receives no registrable title. This means you are not purchasing the property with full rights (as you would have with fee ownership). You only have the right to enjoy use of the property for specific periods of time.
Many provinces currently do not have legislation specifically addressing timeshare ownership. If you are considering buying or selling a timeshare, seek the advice of a lawyer or a real estate agent.
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