with the purchase price. If they are to be included in the sale, make sure these chattels are added to the purchase and sale agreement.
Ranch and Farm Recreational Homes
Some people are looking to purchase a ranch or farm as a recreational home or hobby farm. This is a very specific enterprise and requires a certain level of experience. You need to consider what type of crops and/or animals can be raised on the land, what is required to maintain them, whether the property’s borders are fenced, what facilities are included, and what the main residence is like. Figure out exactly what you have in mind and speak to a local agent who specializes in this type of property.
Title and Ownership
When you are preparing to buy or sell a recreational property, you need to understand the different types of home ownership and the terminology used in land titles. The following are the most common types:
• Freehold
• Leasehold
• Strata title
• Co-operative
• Co-ownership (includes joint tenancy, tenancy in common, fractional and chapter ownership, timeshares)
Freehold
A freehold interest is the same as ownership of property. The owner of a freehold interest has full use and control of the land and the buildings on it, subject to the rights of the Crown, local land-use bylaws, and any other restrictions in place at the time of purchase.
Leasehold
A leasehold interest means that the building or structure such as a townhouse, apartment, or house is built on government-owned land. That is, only the building or structure and not the land can be bought and owned by individuals, and leasehold fees must be paid. The term leasehold can also apply to single-detached houses on farmland, on First Nations land, and so on.
Leasehold interests are for a defined period of time, and the term can either be fixed or on-going. Frequently they are set for 99 years, in which case there will be no review of the lease rate for the full 99 years. After the term ends, the lease can usually be renewed. If the land lease does not have a fixed term, it will have periodic reviews of the lease rate, which is often done every 33 years.
The sale of a leasehold property differs greatly from the sale of a freehold property because the seller is only selling the improvements (the buildings) on the land, not the land itself. In the case of a 99-year lease, if the previous lessee had lived in a building on the leasehold land for 20 years, the new lessee would purchase the remaining portion of 79 years. The shorter the remaining portion, the less a buyer will pay for the leasehold.
Financing may be a big obstacle for buyers, as many institutions will not finance this type of sale. Ask your agent if he or she can provide a list of financial institutions that are receptive to financing leasehold interests.
Strata title
In strata title, you not only own your unit, but you also share ownership of the common areas of the strata property, such as hallways, garages, and elevators. You share financial responsibility for their maintenance with the other owners of the building, and this is reflected in monthly maintenance fees.
Co-operative
A co-operative is a type of ownership in which the property is owned in the name of a company or a registered association. Buyers purchase shares in the company, which gives them ownership of a suite (and often a parking stall as well).
In a condominium co-operative, you will 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
