Condo living is a fantastic choice for many people, in many different stages of life. For young people who want out of renting and are entering the world of home ownership, it’s a great option! And, on the other end of the spectrum, it is ideal for empty nesters who want to downsize and keep a “home-base” close to the family while they travel. No matter what the reason, condominium ownership could be the right choice for you.
When buying a condominium, there are many different factors that need to be considered. Firstly, you need to acknowledge the fact that you are not only buying the condo, but you are also buying into a condominium corporation. Condo buildings and complexes are all run and maintained by a “condo board.” Typically, board members owners who are voted in. The number of members on a condo board varies and is largely dependent on the size of the condominium complex, or building. The condo board oversees making decisions for all owners. Whether financial or maintenance-related, these decisions will be voted on by the board. They are the ones who make the big decisions on behalf of all owners. Condo boards must base their decisions on what is best for the condominium corporation and all unit owners, and cannot be based on personal preference or gain or financial position. This is a big step in choosing your condominium. You want to make sure that any building or complex you buy into is well managed by the board. You will be able to get a good feel of how the board runs things in the condominium documents (more on that later).
Speaking of management, this is another area you want to investigate. Most of the time, a management company is hired by the condo board to help manage day-to-day operations of the condo corporation (not all the time as in some cases the board members decide to self-manage, but that is more common when there is a small number of units in the building or complex). They handle the accounting side of things, hire trades and maintenance workers, and take minutes at all the meetings. A lot of times, they are the ones who implement the decisions made by the condo board. It is always a good idea to research the company who oversees managing any condo building you are considering. A mismanaged building/complex can be a nightmare to deal with, and an expensive one at that! But keep in mind, you will not find a management company that has not had some negative reviews or comments made about it. Unfortunately, you can’t make everyone happy all the time, and with the internet in everyone’s pocket, everyone has the ability to post their opinions. So be careful, and try to look past the noise. You will find that really bad management companies or poorly managed buildings will have a much higher volume of negative feedback.
When you write an offer on a condominium, you will likely (HIGHLY RECOMMENDED) have it conditional upon reviewing condominium documents. You will need to obtain a list of condominium documents that will include (but is not limited to):
(1) a statement setting out the amount of any contributions due and payable in respect of the unit
(2) i. any action commenced against the corporation and served on the corporation
ii. any unsatisfied judgment or order for which the corporation is liable iii. any written demand made on the corporation for an amount in excess of $5,000 that, if not met, may result in an action being brought against the corporation the particulars of:
(3) the particulars of, or a copy of, any subsisting management agreement
(4) the particulars of, or a copy of, any subsisting recreational agreement
(5) the particulars of any post tensioned cables located anywhere on or within the property that is included in the condominium plan
(6) a copy of the budget of the corporation
(7) a copy of the most recent financial statements, if any, of the corporation, including the most recent year-end and monthend statements
(8) a copy of the bylaws of the corporation
(9) a copy of the most recent approved and most recent draft minutes of the annual general meeting
(10) a copy of the minutes and draft minutes of meetings of the board of directors of the corporation for not less than the past 12 months
(12) a copy of the reserve fund report
(13) a copy of the reserve fund plan
(14) a statement setting out the amount of the monthly contribution (commonly referred to as condominium fee) and the basis on which that amount was determined
(15) a statement setting out any structural deficiencies that the corporation has knowledge of, at the time of the request, in any of the buildings that are included in the condominium plan
(16) a copy of any lease agreement or exclusive use agreement with respect to the possession of a portion of the common property, including a parking stall or storage space
(17) a copy of the registered condominium plan
(18) a copy of the condominium additional plan sheet certificate (CADS)
(19) a copy of the insurance certificate
(11) a statement setting out the amount of the capital replacement reserve fun
If you’re thinking “what the hell is a reserve fund study?!” you’re not alone. This can be an overwhelming number of documents for most people and, unless you’re a forensic accountant, you probably won’t be able to efficiently or accurately navigate through them all. Luckily, there are document review companies who can do this for you (for a fee of course). Your realtor should be able to refer you to a knowledgeable review company. They will thoroughly review the documents and give you an unbiased report on some of the main points to be aware of and the general well-being of the condominium corporation.
As well as the aforementioned steps, you will still have your offer conditional upon obtaining financing (if applicable) and a home inspection. Many times, I’m asked if doing a home inspection is necessary with a condo as they can be small in livable space, or newly built and the condo board is usually responsible for anything outside of the unit (common property). My answer is always yes. The fact is that even if it is new, there can be hidden issues not visible during your initial walk-through and the cost of a home inspection is not only worth the peace of mind, but could save you big in the future. Most often inspectors do not inspect the entire building/complex, they typically just inspect the unit or condo you are considering purchasing, but I have seen some do a visual throughout the complex/building. It depends on the inspection company and is a question you will want to ask when considering what inspector is right for you.
It is very important to know heading into this that there are no perfectly run condominium projects or management companies. They all seem to have their issues, some larger than others, and it is up to you to get through all of the noise and get all the information to help you decide if it’s worth taking them on, or not. When you have a large group of different people sharing “common property,” you are bound to have some issues here and there. By doing your homework and proper due-diligence up front, it can help minimize any future issues/costs, or at least help you plan for them.
I hope you have found this information both helpful and useful with your condo purchase. If you have any questions, or would like to discuss in more detail please don’t hesitate to contact me.