THINGS YOU NEED TO KNOW BEFORE BUYING A CONDOMINIUM

Buying a condominium is somewhat like buying stock in a new company; you shouldn’t invest your lifesavings in either unless you are satisfied that it is a sound investment and that means asking questions.

1. ARE YOU READY FOR THE CONDOMINIUM LIFESTYLE?

Moving into a condominium involves trading some of the privileges you might enjoy by owning a ordinary home, such as choosing the colour of paint for your front door, for the benefits of condominium living, (somebody else has to paint  the door!). While some people may be concerned about the restrictions that sometimes apply to the condominium lifestyle there are many advantages, including:

relief from  maintenance and repairs; enjoyment of recreational facilities; security; a sense of community that, all too often, is not present in normal subdivision developments; the comfort in knowing that the condominium has certain rules that will ensure your enjoyment of your unit and the common elements, which are not available in normal subdivisions; and the ability to exercise some control over your living environment by utilizing your voting privileges.

2. GET GOOD HELP

Start by talking to a realtor who is experienced in condominiums and explain what it is you are looking for, (e.g. a downtown loft close to the subway or a town house near a school). Retain a real estate lawyer who is also familiar with condominiums before you make an offer.  You will only have a matter of days to firm up a conditional offer and you can waste precious time searching for one who can help you

3. KNOW WHAT KIND OF CONDOMINIUM ARE YOU BUYING

Up until the time the current Condominium Act came into force, all condominiums were treated the same, regardless of whether they were a high rise tower or a townhouse or bungalow unit. The new Act now recognizes five (5) different types of condominiums which are briefly described as follows:

1.       Common Elements Condominium: this is a condominium where there are no “units”. Instead an interest in the common elements is attached to an adjoining, piece of land referred to as a “Parcel of Tied Land” or “POTL”. The POTL is usually a freehold detached home.

2.       Vacant Land Condominium: a vacant land condominium is a condominium in which there are both common elements and “units” however, the units are actually created as a piece of vacant land, similar to buying a vacant lot in a subdivision, upon which the owner will have a house constructed. The “unit” would then include all of the land in its boundaries as well as any dwelling units or other structures constructed on it.

3.       Leasehold Condominium: this is a condominium in which the ownership of the land upon which the condominium buildings are constructed will remain with a developer or be owned by investors. The owner then leases the land and buildings to the condominium corporation for a minimum initial term of forty (40) years. Purchasers will then acquire a leasehold interest in their unit. The corporation will pay rent to the owner from the common expenses.

4.       Phased Condominium: a phased condominium is a condominium corporation that is built in stages. When stage one is complete, a condominium corporation is then registered to include the units that have been constructed. The developer can then build the next stage. Once it is completed, it is then merged into the original corporation and so on until all of the condominium units are completed.

5.       Standard Condominium: essentially, a standard condominium refers to all condominiums other than the ones noted above.

These are the legal terms used to describe the type of condominium that you might be purchasing. However, there are many different “styles” of condominiums such as, high-rise, low-rise, loft, townhouse, bungalow, detached home, work/live (i.e. commercial unit on ground floor with residential living space above), recreational (e.g.. cottages), commercial and industrial, as well as combinations thereof.

4. GET A STATUS CERTIFICATE – EXISTING CONDOMINIUMS

You can find out a great deal of information about a condominium by purchasing a “Status Certificate” from it. You should buy one before you firm up your offer. The simplest way to do this is to have your agent make the offer conditional for 10 days to allow you to obtain the certificate, review it with your lawyer and be satisfied with its contents and attachments.

These certificates contain, among other things:

confirmation of the amount of the reserve fund; whether the unit you are buying is up-to-date for common expense payments; whether there are any large increases in monthly common expenses being considered; whether there are any special assessments being considered; whether the corporation is a party to any legal actions; a copy of the current budget; the most recent audited financial statements; and copies of the condominium’s Declaration, By-laws and Rules

(Tip: Read the rules carefully: if you don’t think you can abide by them look somewhere else but also keep in mind that all condos have rules.)

5. THE AGREEMENT OF PURCHASE AND SALE – OLDER CONDOMINUMS

Local real estate associations have developed standardized forms specifically designed to be used when purchasing a condominium. Make sure the offer you are making is the one used locally for condominiums. Ensure your offer contains a condition allowing you time to get a status certificate and get it to him/her promptly so they have time to review it and discuss it with you. Watch out for standard clauses that are crossed off when the offer is returned and discuss them with your lawyer.  If you are borrowing money from a bank for your purchase make sure you know how much you will be able to borrow and are pre-qualified for the loan before you make an offer.

6. DISCLOSURE STATEMENT- NEW CONDOMINIUMS

A Disclosure Statement is a package of information about a new condominium that is to be built or is under construction. It contains much of the same information as the Status Certificate. When buying a new condominium unit from a developer, a purchaser is guaranteed a 10-day “rescission” period, within which they can review the disclosure package, preferably with your lawyer. If you don’t like what you see, you can rescind your offer to purchase and receive your deposits back if you do it within the ten day rescission period.

7. THE AGREEMENT OF PURCHASE AND SALE – NEW CONDOMIUMS

In a seller’s market, it is often difficult to negotiate any changes to the sales agreement being offered by the developer, however, there is no harm in asking. As an example, most agreements contain provisions setting out what additional costs may be charged back to the buyer at the time of final closing. These are called “adjustments”. It may be possible to negotiate some of these charges. These provisions must be read carefully as they can easily add several thousand dollars on to the purchase price. Make sure you have your lawyer review the Agreement; he or she may have additional recommendations.

You will also be asked to make additional deposits, so make sure that you have funds available to meet all deposit requirements before you firm up your offer.

In a new condominium, it is not unusual for you to be asked to take occupancy of the unit months before the developer is in a position to transfer the ownership of the unit to you. During this “occupancy period” you must pay an occupancy fee, (similar to rent), to the developer. When budgeting for your purchase, you should ensure that you have at least three – six months’ worth of occupancy fees available.

For more information, visit www.condlivingphil.com