Buying a Condo?
What You Should Know
Buying a Condo? Here are Some Great Condo Buying Tips.
A condominium, or condo as it's usually called, is a form of residential housing (it could also be commercial or industrial). A specified part of a piece of real estate (usually an apartment building or townhouse complex) is individually owned, while the use of the common element, along with its facilities like halls, elevators, heating system, exterior areas, is executed under legal rights associated with the individual ownership and controlled by the association of owners, by way of a board of directors, that jointly represent ownership of the entire building or complex.
Wow - that's a mouthful. Let me simplify that a little bit.
Basically, a condominium is a multi-unit dwelling where each unit is individually owned, and the common areas are jointly owned by all the unit owners in the building or complex.
The term 'condo' is often used to refer to the unit itself in place of the word 'apartment'. A condominium may be simply defined as an apartment that the resident owns as opposed to rents.
The difference between a condo and a rental apartment is ...
How Legal Ownership is Held
A condo is a collection of individual home units along with the land they sit on. If you're buying a condo, you'll have individual home ownership within a condominium, meaning ownership of only the air space within the walls, floor and ceiling of the unit. This includes all fixtures like cabinets, toilets, sinks, tubs, heating units and flooring. These details are specified by a legal document called a Declaration.
When buying a condo, as a homeowner, you'll usually be allowed to make interior modifications as long as the changes do not affect the common area. Anything outside the boundaries of the unit is held in an undivided ownership interest by a corporation established at the time of its registration with the government. The corporation holds this property in trust on behalf of the group of homeowners since the condo corp itself cannot own property.
Condos Can Take Different Forms
They could be the traditional form of a condo apartment in a high or low-rise building, or they could be a conventional or stacked townhouse, sometimes referred to as a townhome. Though rare, you might even find detached or semi-detached condos.
When an owner has more control and possible ownership (as in a "whole lot" or "lot line" condominium) over the exterior appearance, it's called a site condo. These structures are preferred by some planned neighborhoods and gated communities.
If you're buying a condo apartment with underground parking, you may own the parking spot, or you may hold exclusive use to it. Ditto for a townhouse when it comes to 'your' backyard or terrace. These areas are usually designated as exclusive use. This means that no one else can use it, but typically, it's maintained by the property management under contract to the condo corporation.
Besides your mortgage payment and municipal property taxes, owners must pay a ...
Monthly Common Element Expense
... which is used to pay the common element expenses.
These may include repairs to the building structure, landscaping and snow removal, service to the recreation facilities, underground parking, elevator maintenance, security service, common utilities, condominium municipal taxes, insurance, accounting, cleaning, renovations, regular maintenance, and of course, property management. A portion is credited to the reserve fund, which must be maintained at a certain minimum under the Condominium Act, and is maintained mainly for future significant expenditures.
Some condos include the cost of all major utilities and building insurance (especially older buildings) in the monthly condo fee, while others do not. When so, the fee will obviously be higher. So, be sure you're aware of what you're buying and what's included. In newer buildings, you'll often find separate metres for utilities for your unit, but lower monthly condo fees.
It's the same for buying a condo townhouse, except the monthly amount is usually smaller because each unit owner is invoiced separately by the heating fuel and electricity providers. The only utility often included in the condo fee is water.
Keep in mind that when I refer to insurance here, I mean insurance premiums on the common element, which includes the building. When buying a condo, you'll be responsible for paying a premium on your own unit. It'll be a ...
Condo Insurance Policy
... which is different from a rental apartment policy. The former covers everything in the unit, including fixtures, flooring, etc, whereas a rental policy just covers chattels like furniture, appliances and personal effects. A policy on a freehold home usually includes everything, building and contents.
Occasionally, the condo fee is quite low, but you may also be responsible for grounds and driveway maintenance. Before buying a condo, it's a wise idea to inquire prior to submitting an offer regarding what's included in the fee.
Buying a Condo vs Buying a Freehold
Freehold refers to the ownership of real property which is the land and all immovable structures (buildings, trees, fences, etc) attached to it. (While we're on the subject - it's a leasehold if the property reverts back to the owner of the land after the lease period has expired.)
As a condo owner, you're still subject to easements, rights-of-way or restrictive covenants that may be registered on title.
Besides using a slightly different contract form to buy a condo, you have different ...
Mortgage Qualifying Considerations
...to deal with. Your condo REALTOR® will explain that the condo fee is usually factored into the mortgage approval process. Typically, a lender will include at least half of it, as well as the monthly estimated property taxes, when calculating your gross and total debt service ratio on which, in part, a lender decides on your loan application. These service ratios represent the percentage of your gross combined annual income which must be spent to carry the mortgage loan and property taxes - and, if applicable, a certain percentage of the condo fee.
In your ...
Offer to Purchase
... prepared by your condo REALTOR®, it's wise to include a condition upon your lawyer receiving and approving what was once called an Estoppel Certificate, but is now referred to as a Status Certificate.
This certificate, along with a package containing several other documents pertaining to the corporation, is prepared by the property management company, and reports on the financial and legal health of the corporation.
The last thing you want to do when buying a condo is to assume any pending litigation, or outstanding judgments or executions against it. You'll also want to know if the corporation is financially solvent, and that there are no unpaid condo fees or special levies registered against the individual unit. You'll also learn the rules and regulations of the condominium.
Buying a condo and have a pet? They may not be permitted. Beware.
Know What You're Buying
In Ontario, the property management company is responsible under the Condominium Act, to prepare the Status Certificate documents for you, and have up to 10 business days to comply. The request can be made by anyone, must be in writing and be accompanied by a bank draft or certified cheque for $100 inclusive of HST.
Your condo real estate agent has the option to phrase the clause in your agreement to buy a condo, asking the seller to provide, at his or her own expense, the Status Certificate, or that you must make the request and pay the fee. Of course, your condo REALTOR® usually makes the formal written request on your behalf and asks you for the payment.
Here's another condo buying tip - be aware that the monthly condo fee is sometimes adjusted on closing. If you close mid month, for example, that pro-rated portion of the condo fee during which you own the unit, will have to be credited to the seller. So, this will add to your closing costs.
After your purchase is unconditional, don't forget to inquire about moving policies and restrictions. Sometimes, you may be prohibited from moving in on certain days, and you may have to submit a refundable damage deposit.
Depending on the building, you may also have to inform the utility companies of your contact information and move date.
And don't forget to reserve the elevator with security, the superintendent or property manager. It would not be a pleasant experience to arrive at the front door of the building, only to find that you're not permitted to move into your own home.
So, Buying a Condo?
There's lots you need to know.
Contact me using the tab on the upper left of your screen if you have any other questions.
If you want to search the Canadian MLS® system, and plan on
buying a condo, start here.
And your search for American MLS® listings can begin
Return to Buyer Questions
Return to Home Page