June 26, 2018

By: Jeff Lack, BAcc, CPA, CGA, Director of Internal Operations
From the WB Condo Connection, Summer 2018
Purchasing real estate can be an anxious, stressful, and confusing process. Condominiums with their extra rules, fees, and structures can be an even more intimidating proposition. Here are a few things you should consider when purchasing a condominium:
1. Know What Types of Condos Are Available
Did you know there are different “kinds” of condos in Ontario? For example, a “standard” condo will cover more maintenance items than a “common element” condo, but will likely have higher common element fees. What about building structure? Have you considered freehold, townhome and low-rise condominiums? Not every condominium is a high-rise apartment building type structure.
2. Understand the Costs
Moving in to a condominium can come with great benefits from security services and recreation facilities, to maintenance items like repairs and landscaping service, but there is an associated cost to this by way of monthly common element fees. These fees vary widely from condo to condo, from a couple of hundred dollars a month to a thousand dollars or more. Unlike mortgages – which are paid off – common element fees are ongoing for the life of the property ownership.
3. Consider Inflationary Pressures
Mortgage payments can be fixed for a time period such as a 5-year fixed-rate term to make it easier to budget cash flows; however, common element fees remain variable. The extent of Corporation coverage varies dependent on the specific wording within the property’s Declaration, but condo fees cover maintenance and repair of the common elements, and the many contractual services (plus reserve fund contributions – more on that later) required. As costs of these items rise, so too will common element fees as part of the annual budget.
4. Consider the Benefits
On the plus side, those condo fees are shared amongst all owners, so it is possible that you may be able to get additional features in a condominium that you simply couldn’t afford in a single-family home. Maybe you really want a pool but wouldn’t be able to afford that in a house – a condominium with a shared pool in a recreation centre may be the answer. Also, some condominium features can help you save money in other areas of life – do you really need to pay for a separate gym membership if your condominium has a workout room? Who needs to buy a snow-blower when your home has underground parking?
5. Know the Rules BEFORE Buying
Condominiums have been referred to as the fourth level of government (behind federal, provincial and municipal), and like other governments, there are rules. It is important to understand them fully before you move in. For example, all too often people buy a condo and bring their 100-lb dog through the lobby on moving day only to be told that the building has a strict policy on dogs over a specific weight limit. The number of vehicles you own should also be taken into factor; many owners have a misconception that they can use the Visitor Parking spaces for their own personal use – this is not the case. Owner vehicles can be parked in their own designated spaces only and many properties have clamped down on owners who insist on parking their vehicles in guest parking areas, by enlisting the assistance of parking control services.
6. What is a Reserve Fund?
Do you know what a Reserve Fund is? The short answer is a savings fund for future major repairs and replacements. All Ontario condominiums are required to have a Reserve Fund account, which means owners are required to contribute to it as part of their monthly common element fees. The more important question to ask before buying a condominium is whether the reserve fund is adequately funded. This is where you should enlist expert advice in helping to make your decision (i.e. a real estate agent and a lawyer who specialize in condominium properties).
7. Are There Extra Expenses Anticipated?
Condominium corporations are not-for-profit entities in Ontario, which means they operate on a very lean budget – they typically have very little cash for day-to-day operations outside the reserve fund. If major unanticipated expenses occur, there is only one source of income for the corporation – the owners. Luckily for prospective purchasers, corporations must disclose any potential special assessments (fees charged over-and-above monthly common element fees) in a status certificate, which is a document all buyers should obtain prior to closing the deal.
8. The Status Certificate
In addition to potential special assessments, the status certificate will outline a myriad of other items of interest to prospective purchasers, including any litigation that the corporation may be involved in, and whether the fees for the specific unit being purchased are paid up-to-date. Arrears of condo fees are attached to the real estate unit not the owner, so any unpaid fees transfer to the new owner with the real estate sale.
9. If You’re Purchasing as an Investment, Know What You Can (And Can’t) Do
Many condominiums are now adding restrictions on what a property can, and can’t, be used for. Residential condos generally cannot be used for commercial purposes (this is not new) even if that is something as simple as a “home office”. However, many have now added restrictions specifically related to short-term rental arrangements.
10. Obtain Professional Advice
For many, buying real estate is the single largest purchase they will ever make – protect yourself by ensuring you are fully informed of all the relevant facts before closing on the purchase, including obtaining a status certificate and having it reviewed in depth by a lawyer.

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