Condo ownership basics every buyer should know before buying
If you’re thinking about taking the big plunge into the real estate market and looking at a condo as a first time buyer or maybe downsizing from a big home to a condo. This is an incredibly exciting time in your life, but also a time when important decision-making and key investigating is both necessary and encouraged. Here are a few things to consider before you even start looking at condos for sale.
Buying a condo, which is short for condominium, is a popular choice for many home buyers at different stages in their lives as it can be a relatively carefree housing option. You have the advantage of ownership, without the hassles of maintenance, repairs and security concerns. For singles, couples and families, owning a condominium offers the freedom to enjoy the good things – and time to concentrate on the important things.
In many booming areas, purchasing a condo is now becoming the easiest and most affordable way for first time buyers to get into the real estate market.
Is the condo lifestyle right for you?
Condo living can be an appealing housing option. It’s often affordable and someone else handles much of the maintenance and repairs, such as shoveling snow, cutting grass and most of the exterior maintenance of the building. Many condominiums have enhanced security features over those found in single-family houses and offer a wide range of social, entertainment and recreational activities.
Many condo developments cater to specific groups -- like young professionals, families and older adults. Make sure you are working with a Realtor who knows the area and more specifically the buildings you would like to live in. Your social life can depend on their knowledge!
If you're easing into retirement, it might not be a great idea to buy in a condo building full of hipsters who will use the party room to play beer pong. On the other hand If you are a young single professional you don’t want to end up in a building with aqua aerobics classes and bridge games going on 7 days a week.
What is a condo or condominium?
A “condo” or "condominium" refers to a form of legal ownership, as opposed to a style of construction. Condos are most often thought of as units in high-rise residential buildings, but they can also be:
■ low-rise residential buildings (fewer than four storeys);
■ townhouse or rowhouse complexes;
■ stacked townhouses;
■ duplexes (one unit over another) or a sideby-side;
■ triplexes (stack of three units);
■ single-detached houses; or
■ vacant land upon which owners may build.
There are even mixed-use condos that are partly residential and partly commercial buildings. Condos come in various sizes with diverse features and can be found in almost every price range.
While not always available in every market condo buyers generally have three choices. They can buy a new condo, a resale condo or a conversion condo, otherwise known as a Loft.
“New condos” refer to units that have not been previously occupied. They can be in the planning stage, under construction, an assignment deal or recently completed and are usually purchased from a developer. For many buyers, they’re an attractive option because of their fresh appearance and modern layouts, surfaces and appliances. They also give purchasers the chance to choose the colours and styles of various finishes.
“Resale condos” are units that have already been occupied and are for sale by the current owner. One of the advantages of purchasing an existing condo is that you get to see the unit, building and amenities before you make your purchase. You also have the opportunity to meet other unit owners, to get a feel for the lifestyle of the building.
“Conversion condos or Lofts” refer to units in a building that was previously used for something else but has been, or is to be, renovated for residential use. For example, many loft-style condos are converted from former commercial or industrial buildings. This is very common when these older buildings have some sort of historical designation attached to them by the city. Instead of destroying a piece of history, the city and the would be developer work together to breathe new life back into these old buildings. (These are some of my personal favourites!)
How Condo Ownership Differs From Home Ownership
Owning a condo differs from owning an everyday home in several ways. Key differences include:
What you own
When you purchase a condo, you own a private space called a “unit.” Your unit is registered in your name. You also share ownership of the common elements and assets of the building and community.
It’s important to be clear what you own and what you don’t before you purchase. You’ll want to know, for instance, whether you’ll be paying for window washing or repairs to your townhouse’s exterior or whether the condo corporation is responsible for this. You can find information about your unit’s boundaries in your condo’s governing documents.
Some condo units (called freehold condos) include ownership of the actual land your home is on. If this is the case, your unit may be the entire house including the exterior walls, the roof and the lawn. You may want to carefully review the condo corporation’s site plan, so you know exactly where your unit’s boundaries lie.
Common elements may include lobbies, hallways, elevators, recreational facilities, walkways, gardens and other amenities. They may also include structural elements and mechanical and electrical services.
Some common elements you own may be outside the unit boundaries, but are for the sole use of the owner of a particular unit. Balconies, parking spaces, storage lockers, driveways and lawns are common examples.
You Have To Pay Condo fees
On top of paying for your unit and a proportionate share of the common elements, you also pay monthly condo fees or a maintenance fee, along with all of the other owners in the development. This covers the upkeep such landscaping, snow removal, pool maintenance, security personnel, general repairs to the building and replacement of common elements — whether you use them or not. The fees may also cover the corporation’s insurance policies, utilities for common areas and services such as snow removal and landscaping.
Part of those monthly fees is usually put into what’s called a reserve fund to cover the estimated cost of future maintenance and repairs of the building and common elements.
Required by law in some areas, a reserve fund study is often used to tell condo owners how much money should be paid into the reserve fund. It involves a detailed examination of all of the buildings components, an analysis of when repair and replacement are expected, and an estimate of these costs.
Condo fees may have to be adjusted from time to time to reflect the changing costs of goods and services and the state of the building’s reserve fund. Look for these adjustments in the condo status certificate under the next year’s budget. If there is an adjustment in the near future you need to find out why? Depending on the reasons you may or may not want to buy a unit in that building.
Don’t expect a refund if the board overestimates the common expenses. Refunds are not commonly given to unit owners. Instead, overages are typically either applied to future common expenses or added to the reserve fund.
If a unit owner sells a unit before the end of the condo corporation’s calendar year, the owner will not receive a refund for any prepaid condo fees but should have their lawyer make said adjustments with the purchasers of the unit before closing.
You Have Rights And Responsibilities As A Condo Owner
When you become a condo owner, you become a member of a condo corporation and have certain rights and responsibilities. One of your key rights is the right to vote at general meetings on matters that affect the condo. You are also able to help elect the board of directors.
The board of directors is responsibility for the management of the corporation’s business affairs. The board is generally made up of individual condominium owners.
As an owner, it’s your responsibility to participate. You can do this in many ways, attending the general meetings and information sessions, serving on the board of directors or on a committee and voting. You don’t have to participate at all if you don’t want, but you can’t complain about the decisions made if you choose not to.
Keep in mind you are now part of a community with shared responsibilities. If the elevator in your development unexpectedly stops working and there aren’t enough funds on hand to repair or replace it, you — along with all of the other unit owners — must pay the increased condominium fees or a lump-sum payment to cover the cost.