Buying a Condo?
What You Should Know


If you're planning on 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 (or 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 facilities such as halls, elevators, heating system and exterior areas, is executed under legal rights associated with the individual ownership and controlled by the association of owners through a board of directors that jointly represents ownership of the entire building or complex.

Wow - that's a mouthful. Let me simplify that a 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 instead of leases.

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 unit, meaning ownership of only the air space within the walls, floor and ceiling. This includes all fixtures such as cabinets, toilets, sinks, tubs, heating units and flooring. These details are specified by a legal document known as a Declaration.

When buying a condo, as a homeowner, you'll usually be allowed to make interior modifications as long as the changes don't 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 government registration. Since the condo corp itself cannot own property, the corporation holds this property in trust on behalf of the group of homeowners.

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Condos Can Take Different Forms

They could be the traditional form of an apartment in a high or low-rise building, or 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 over the exterior appearance, such as in a "whole lot" or "lot line" condominium,  it's called a site condo. These are the preferred choice by many planned neighborhoods and gated communities.

If you're buying a condo apartment with underground parking, you will likely own the parking spot or 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.

Monthly Common Element Expense

Besides your mortgage payment and municipal property taxes, owners must pay a monthly 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 under the Condominium Act, must be maintained at a certain minimum, mainly for future significant expenditures.

Some older condos include the cost of all major utilities and building insurance in the monthly condo fee, while others - usually newer buildings with separately metered services - do not. Hence, older units will obviously have higher fees. Know what you're buying and what's included.

When buying a condo townhouse, the monthly payment amount is usually smaller because each unit owner is typically 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.

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Condo Insurance Policy

Condominium insurance policies differ from those for a rental apartment. The former covers everything mechanically attached to the unit, including fixtures such as flooring, cabinetry and plumbing fixtures, whereas a rental policy covers only chattels such as furniture, appliances and personal effects. A policy on a freehold home usually includes everything - building and all contents, whether attached to the property or not.

Occasionally, when the condo fee is quite low, you may also be responsible for grounds and driveway maintenance. Before buying a condo, inquire prior to submitting an offer about 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.

Mortgage Qualifying Considerations

Besides using a slightly different contract form to buy a condo, there are different qualifying considerations to deal with. Your condo agent will explain that the condo fee is usually calculated 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 a loan application. These service ratios, which represent the percentage of your gross combined annual income, help a lender decide whether or not a borrower has the financial capability to carry the mortgage loan and property taxes - and if applicable - a certain percentage of the condo fee.

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The Status Certificate

When buying a condo, whether an apartment, townhouse or other style, the last thing you want to do is buy into an unhealthy corporation. It should be financially solvent and have no unpaid condo fees or special levies registered against the individual unit.

Thus, it's prudent to include a condition clause in your offer that will permit your lawyer to receive and approve what was once called, in Ontario and elsewhere, an Estoppel Certificate, but is now referred to as a Status Certificate (SC).

In Ontario, under the Condominium Act, the condominium property management company is responsible for preparing the SC documents within 10 business days of the request. The written request can be made by anyone and be accompanied by (at the time of writing) a bank draft or certified cheque for $100 inclusive of HST. It's no longer necessary when buying a condo for the SC to be ordered in the name of the buyer for it to be legally reliable to them.

Your condo real estate agent has the option to phrase the clause in the offer to buy a condo to demand that the seller provides the SC at his or her own expense, or that the buyer must make the request and pay the fee. Of course, your agent usually makes the formal written request on your behalf and asks you for the payment.

Nevertheless, who pays the fee is negotiable. To be fair, though, since the buyer's lawyer might have to order an updated one if the closing is longer than 60 days, the seller should consider paying for the first one.

Included in a SC is information such as arrears or planned increases in the monthly condo fee, any major work planned for the building and if the reserve fund balance is sufficient for the planned work. Also included is information on any outstanding legal judgments or executions against the condo corporation, and whether it's currently involved in any legal proceedings. If any major claims exist, and its insurance is insufficient, management and the board of directors can either increase the common expense fee or levy a special assessment against the individual unit owners.

A package of documents that normally accompanies the SC will include its financial statements, declaration and by-laws. The financial statements offer a good indication of its fiscal stability, with actual and estimated costs. They'll also show expenditure trends and include receipts from previous years. The current budget identifies corporate income and reserve fund balance. The declaration details the structure, rules and regulations and the by-laws explain corporate functioning.

It must also include a list of all contracts to which the condo is a party, such as management and maintenance contracts. A buyer may request copies of these contracts.

Also, an insurance certificate is included, along with a statement declaring the number of known leased units in the complex. This may affect a buyer's decision whether they wish to continue with the purchase. A high owner-occupied ratio is usually more attractive to a buyer than a lot of transient renters.

After the buyer's lawyer reviews the SC and all accompanying documents, they'll advise their client whether to proceed with the purchase or abort it.

When an owner lists their condo for sale, since any buyer will be requesting one anyway, a prudent listing agent should immediately order a SC. An added advantage to such preemptive action is the seller can save valuable time after accepting an offer. If there's an objectionable issue contained in the preemptive certificate, the seller or their agent will have the early opportunity to seek clarification of any issues from the property manager. By doing so, they'll be better equipped to offer an explanation to a prospective buyer or their agent.

Know What You're Buying


Buying a condo and have a pet? They may not be permitted.

Here's another condo buying tip - 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 who has already paid it. 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 or after particular hours of the day. Or you may be compelled 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. Imagine arriving at the front door of the building, only to learn you're not permitted to move into your own home. Hey - it happens.

Buying a Condo?

There's lots to know. Contact me if you have any other questions. If you plan on buying a condo, begin your search at REALTOR.ca. For a search of American MLS® listings, check out REALTOR.com. 


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