Buying a condominium is quite different from a typical house purchase. Whether this is a first home, or the first purchase of a condominium after many years of owning a house, you need to be aware of the unique aspects of a condominium purchase and the questions that you need to ask to protect yourself.
What's a condominium?
A condominium is a residential structure in which apartments or townhouses (both kinds are called "units") are individually owned as pieces of real estate while the land and common elements (e.g., elevators, hallways and/or sidewalks) are jointly owned by all of the unit owners.
A condominium unit could be a suite in a high-rise tower, a townhouse, or even a detached house. Each unit is given a legal description, based on the space that it occupies.
Storage lockers and parking spaces can be created as units within the condominium or they can comprise part of the common elements, designated for the exclusive use of a specific dwelling unit.
The condominium corporation operates the condominium and the land. The unit owners elect a Board of Directors to oversee the running of the condominium corporation, including financial decisions. The Board may contract out the day-to-day workings of the condominium (e.g., paying of utility bills for the common elements, cleaning the common elements, snow removal, etc.) to a property manager or property Management Company or they may run the day-to-day workings of the condominium themselves.
There are many different kinds of condominiums in Ontario, including:
Common elements condominiums: In a common elements condominium, you own the freehold land and the building(s) on the land. There are no specific units. You also own a percentage interest in the common elements. For example, homes could be freehold, but roads and facilities, like a recreational centre, could be common elements.
Phased condominiums: In a phased condominium development, different parts (e.g., new units or new recreational facilities) of a single condominium can be built in phases. As each phase is constructed, it is added into the already existing condominium corporation.
Leasehold condominiums: In leasehold condominiums, you own a unit and a share of the common elements, subject to the ground lease of the property on which the units and common elements are constructed. The initial term of the lease must be between 40-99 years and the owner of the leasehold unit can sell, mortgage, or lease the unit without the consent of the landlord.
Standard condominiums: Standard condominiums are those that aren't defined as the other types of condominiums (i.e., common elements condominium, phased condominium, vacant land condominium or leasehold condominium).
The following documents are registered on the title to each unit and they govern the organization and operation of the condominium:
Declaration: Creates the condominium corporation; Contains the boundaries of the units, the percentage of the total common expenses allocated to each unit, the common elements that are designated for the exclusive use of the owners of specific units and other items regarding the governance of the condominium corporation; May also contain conditions or restrictions regarding the occupation and use of the units and/or common elements, and conditions or restrictions regarding gifts, leases and sales of the units and common elements.
By-laws: Made, amended or repealed by resolutions of the Board of Directors;
Are made to: Set out the specific functions and workings of the Board of Directors and who is qualified to sit on the Board of Directors; Govern the management of the property and the use and management of the assets of the condominium corporation; Authorize the condominium corporation to borrow money
Rules: Made, amended or repealed by the Board of Directors; Affect the use of the units and common elements.
What are common expenses?
Common expenses, which are sometimes called maintenance fees or condominium fees, are payments that unit owners must make every month to cover their portion of the expenses for the common elements.
Common expenses pay for the daily care and upkeep of the condominium (e.g., cleaning of the common elements, snow removal, landscaping, building repairs, etc.), plus property management fees, utilities for the common elements (and, if specified, for the units, too) and more.
What is the Reserve Fund?It is a fund set up by the condominium corporation to cover major repairs, upgrades, etc. to the building (e.g., roof, elevators, parking garage, etc.). A portion of each common expense payment goes to the Reserve Fund.
What is a special assessment?
It is a charge beyond the monthly common expense fee that is established by the condominium corporation if the Reserve Fund does not contain enough money to pay for a major repair. The added expense can be an unwelcome surprise for you.
What is a Status Certificate and why is it important?
A Status Certificate is a written statement of the condominium unit's current financial and legal status and that of the condominium corporation. It will give you specific information about your monthly common expense fees.
It's important for your real estate lawyer to review a copy of the up-to-date Status Certificate because: It includes key information such as: details relative to common expenses, payment arrears, special assessments, any pending legal actions, insurance and any unusual additions to the common elements for your unit that have not been approved by the Board. For example, the condominium corporation may establish a special assessment (a charge beyond monthly maintenance fees) for unanticipated repairs or expenses such as a leaky roof.
It also includes information regarding the Reserve Fund. Reserve Fund studies are an important aspect of condominium management. You want to know that the condominium corporation is complying with its requirements to obtain Reserve Fund studies and that the reserve fund is currently considered adequate for future major repairs.
What else should I consider?
Lifestyle Issues Do you have a pet that will live in the condominium with you?
Do you prefer a patio/terrace that allows you to have a barbeque?
Condo rules may have an impact on these kinds of lifestyle issues, so tell your real estate agent and lawyer immediately of any "deal killers" in terms of your lifestyle.
Property Rights Your real estate lawyer can also explain to you what sort of property rights you will have: for instance, do you actually own your storage locker or parking space, or do you just have exclusive use of them as part of the common elements?
Condominium Board Oversight/Governance The condominium board oversees the working of the condominium corporation and has a great deal of influence over how the condominium is run. Try to find out as much as you can about the board and the character of the building.
Realty Tax Assessment
If you are buying a "nearly new" resale unit, you need to be especially aware of whether a separate assessment of realty taxes per unit has yet taken place. If the assessment has not yet "caught up" with the new development, you may find your realty taxes increase dramatically after an assessment takes place. Your real estate lawyer can work with you to determine whether the taxes for the unit have been separately assessed and make efforts to protect you from having to pay realty taxes attributable to previous owners.
Obtain TitlePLUS title insurance policy
Speak with your real estate lawyer about securing a TitlePLUS title insurance policy on your condominium. Title insurance can protect you from costs and complications in the event that something does go wrong with your new home. Please refer to the TitlePLUS policy for full details, including actual terms and conditions as some restrictions may apply.
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