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What do I need to know before buying a condo

As the housing market in Ontario stays active, many Ontarians are looking to either jump into the fray for the first time or are considering selling their family homes in order to move into something more manageable. While detached and semi-detached homes may still be the dream for many, over 2 million Canadians live in condominiums, or “condos” – thousands of them right here in the Cambridge, Kitchener, and Waterloo region.

Condos can take many different forms – some may take the shape of a glamorous high rise skyscrapers, whereas another may be a collection of town homes in a complex. No matter what the size or shape of your condominium property, there are key differences to note when buying a condominium vs. buying a house.

How is the process of purchasing a condo different from purchasing a house and what do buyers need to know before taking the plunge?

How The Buying Process Differs With Condominiums 

There are many similarities in the process of buying both a home and a condominium. Both are real estate purchases that will likely require a deposit upon signing and, if the buyer is planning to obtain a mortgage, will also likely require a down payment. 

There are, however, key differences to note. For example, If a purchaser is buying a condo as part of a new development (i.e. they have signed an agreement to purchase a condo that is still being built or will be built in the future), owners will generally be given an opportunity to move into the condo before title of the condo is vested in them (i.e. before it actually becomes their owned property). This is known as the interim occupancy period. During this period, the developer will usually charge the owner what is known as the interim occupancy fee; but in many ways it is a lot like rent. The interim occupancy fee is usually a combination of interest on the unpaid balance of the purchase price, an estimate of the municipal taxes for your condo, and a projected common expense contribution for the maintenance and upkeep of the common elements. There is no analogous scenario in buying a new build detached home.  In that case, the purchaser(s) will take title at the same time that they move into the dwelling. 

There are perks to purchasing a new build condo, such as knowing that everything you’ll receive, from the floors to the appliances, will be brand new and you may be able to make decisions about upgrades. Yet purchasing a new condo may involve a prolonged deposit structure, usually over many years, that will tie up your funds. It is also very common for occupancy in new builds to be significantly delayed, as was the case during the COVID pandemic. Also, since construction on condo buildings does not have to be fully completed when your interim occupancy begins (i.e. when your unit is habitable), your condo may look more like a construction site than a home.  Alternatively, when buying a used condominium, you have the benefit of knowing exactly what you’re purchasing, instead of having to interpret floor plans and managing a move in date. 

In both a new build and a used condo purchase, your ownership of the condo comes with being a part owner of the condominium corporation. This is one of the main features of condominium ownership that deviates from owning a detached home. The condominium corporation elects directors who govern the affairs of the corporation on behalf of all the residents. The directors make important decisions about the condominiums shared property, such as common elements like parking lots, hallways and landscaping. 

Before buying or signing any agreement to purchase a condo, you or your lawyer should always review the condominium status certificate, which will include the condominium’s declaration, bylaws, rules, and information about legal judgments or actions against the condominium corporation (which you will become a part of as an owner). You should also take the extra effort to review the corporation’s operating budget and financial statements. If the corporation does not have enough money in its reserve fund to cover the cost of major capital repairs, the condo corporation may declare that a “special assessment” is needed and a financial contribution from each owner is required. Too often, new owners of condominiums take possession of a condo only to find a short while later that they are required to pay thousands, or tens of thousands more…leaving those owners in dire financial straits. If there is not enough time to review the status certificate before signing the Agreement of Purchase and Sale, you should consider specifically instructing your realtor to at least make the closing contingent on receiving and reviewing the status certificate (and if possible, upon approval by your lawyer or financial advisor). It is also possible to address for the possibility of a declaration of a special assessment between the time an agreement is signed and the actual closing by inserting specific clauses in the Agreement of Purchase and Sale. Thus, it is critical for prospective condo owners to discuss a condo purchase with a knowledgeable realtor and/or their legal and financial advisors before signing on the dotted line. 

Those Pesky Condominium Fees

While you may have heard of condo fees as one of the realities of purchasing a condominium, there is more to it than a static monthly fee. Broadly speaking, condo fees are the fees used to pay for the upkeep of the condominium – such as property maintenance, snow clearance, cleaning of common areas, improvements, etc. They do not necessarily cover any repairs within your unit (broken appliances, etc.) but are generally meant to cover repairs for everything outside your door (new hallway carpeting, for example). 

Condo fees are calculated based on the size of your unit, and they are not fixed – they generally increase over time as the building gets older. They are also not the only fees that you will be paying as a condominium owner. Just like a detached home, condos are subject to municipal property taxes. 

How To Handle Your Condo Board

When you purchase a condominium, you are agreeing to be governed by a condominium association, which is the governing body of the condo corporation that manages the property. The condo board sets the rules for the condominium and can control everything from pets in the building to satellite dishes on balconies. They may also supervise or instruct a property management company that will assist the condo corporation with ensuring that premises are well taken take care of, and the corporation follows applicable laws.  

While a great condo board may cause you, as an owner, no issues, a condo board with challenges can make your living situation that much more difficult. You are agreeing to be bound by the corporation’s collective rules, and if those rules do not align with the way you live, there may be a little tension. If you are consistently breaking the condo rules, the board can issue fines, or even force you out (if serious enough). 

Final Thoughts

Buying real estate is a major investment in one’s life.  When it comes to buying a condo, one needs to be prepared for the different nuances.  Along with your real estate team, it is important to have a real estate lawyer who is familiar with condo purchases and can help you navigate what you need to know before your transaction goes through.

We have helped residents throughout the Cambridge, Kitchener, and Waterloo region buy and sell their condominium properties for decades. We are well-versed in the nuances involved in buying a condo, and take the time to explain to our clients the finer details that they need to know. Contact us today if you’re ready to get started on your buying journey.