Home ownership types: what you need to know before you buy

The real estate market can be intimidating for new buyers and as you search for properties, you’ll certainly encounter unfamiliar terminology associated with the types of ownership in real estate.

Before proceeding any further, it’s important to understand the different types of property ownership available in Canada. In this article, we’ll cover various types of house ownership that you may encounter while searching for your new home.

Key highlights

• In Canada, there are various types of property ownership: freehold, leasehold, co-ownership, joint tenancy, tenancy in common, and in-trust partnership.
• Each type of ownership has its own unique advantages and disadvantages, and it’s important to understand the differences between them before buying a property.
• It’s also important to consult with a real estate lawyer or financial advisor prior to making any decisions in order to ensure that you’re making the best decision for your individual situation.

Let’s take a closer look at some of the lexicon around the different types of ownership in the?Canadian real estate market.

Registered ownership

Registered ownership in real estate means that the name of the owner of a property appearing on the title deed is the registered owner. In case of a dispute, it’s the name on the title deed that determines the registered owner of the property.

Freehold interest

Freehold is one of the most common types of home ownership in Canada. This type of ownership gives you the most freedom as you own the property as well as the plot of land on which it sits. Most single-family homes are sold as part of a?freehold. As a real estate owner, you are responsible for the maintenance of the property, its buildings and the land.

Leasehold interest

When you buy a property on leasehold, you actually buy the building itself but not the land it sits on. These homes are often built on Native Canadian lands or Crown lands. Those leases usually last for 99 years and can be renegotiated. Properties on leasehold tend to have a lower value than properties on freehold but getting a mortgage on a leasehold home can be complicated. You need to keep in mind that leasehold properties tend to depreciate as the end of the lease gets closer.

Co-ownership

Another form of real estate ownership is co-ownership. In this type of property ownership, several persons agree to purchase a property together. The co-ownership can be formal (buying into a co-operative) or informal (buying with friends or family).

In a co-operative, each party owns a portion of the corporation that owns the property. In a co-ownership, two or more owners (often family members: parents, siblings or friends) enter into a legal agreement to own a single property. In this second case, there are two types of tenancy real estate: Joint tenants and tenants in common.

Joint tenants

In this kind of house ownership, each party owns an equal part of the property. This type of ownership is common when spouses or partners purchase a property together. The ownership of the house is automatically transferred to the surviving partner when the other one dies, without going through probate.

Tenants in common

In this type of co-ownership, each owner holds an undivided part of the property and can choose to pass their share on to heirs. This type of ownership allows each owner to sell or transfer, without the consent of the others. The ownership interests do not have to be equal, and each owner is responsible for their own taxes and maintenance costs.

In trust

In-trust ownership is a legal arrangement where one party holds legal title to the property for the benefit of another party. The trustee owns the property for the benefit of the beneficiary. The trustee is responsible for managing the property according to the terms of the trust agreement, which may include managing the property for the beneficiary’s benefit, investing funds and distributing income or capital to the beneficiary.

Partnership agreement

A partnership agreement in real estate is a legal document that sets the legal expectations, obligations, and rights of those involved in the real estate partnership. The document reflects the specific agreement between the owners for the purchase and management of the property and provides for any potential disputes that may arise.

Talk to a financial planner on how to integrate home ownership and your mortgage into your overall financial plan. They can also connect you with a mortgage advisor, who can advise you on the best mortgage option for your circumstances.

If you don’t have one, contact me and my team and I will be happy to help you.