Condo buyer’s checklist

Condos have real appeal, especially for people just getting started and those looking to downsize

By Institute of Chartered Accountants of Ontario –

With convenient locations, affordable prices and minimal upkeep, condos have real appeal, especially for people just getting started and those looking to downsize.

But all the pluses come at a price, and condo living is not for everyone. You can save yourself a lot of time, money and upset by making sure you know the facts and understand the lifestyle before you sign that offer.

Here, Chartered Accountant Stephen Chesney, a partner with Parker Garber and Chesney LLP in Richmond Hill, and Chartered Accountant Denham Patterson of Woodbridge share an eight-point checklist for those considering a condo buy.

1. Know why you want a condo – These higher-density dwellings are often ripe with access – to transportation, shopping and restaurants – and replete with conveniences, like concierges, delivery services and exercise rooms. But the flip side is monthly fees, less privacy, little or no green space, and far more restrictions than a private home.

2. Brush up on Condo Management 101 – The day-to-day operation of a condo complex is the purview of the property manager hired by the condo corporation. Ask to meet him or her, and for a list of the board members – usually owners who are elected and volunteer to oversee the corporation’s operation, policies and business dealings.

3. Get the by-laws – In Ontario, all condominiums are governed by the provincial Condominium Act. Additional do’s and don’t’s are specified by the corporation’s declaration, by-laws and rules – in that order. Two important ones, Patterson says, are the Insurance Deductibility By-law and the Standard Unit By-law, which protects the corporation from expenses that can result from an owner making changes to his or her unit. He strongly recommends you carefully review the status certificate, which will be provided when you purchase a condo. It should include audited financial statements and outline any special assessments on the horizon. Ask your lawyer to review them, too.

4. Live by the rules – While these vary from one condo corporation to another, none can contravene other levels of regulation, like the Condominium Act itself. You’ll still have to pay property taxes, and most likely electricity, gas and cable. Condo living is all about sharing, so expect rules about parking, the party room and the other common elements.

5. Understand the fees – Monthly fees increase often, to keep pace with inflation if nothing else. Additional common-assessment charges are sometimes levied, usually after planning for and justifying them in the annual budget. But new condos can be especially tricky, Chesney says. The builder sets the budget for the first year – sometimes deliberately low to attract buyers. After that, it’s the owners’ responsibility to collect enough money to maintain the place, and the real costs often don’t show until the third year or later.

6. Know the fund factors – Condos have both operating and reserve funds. Deficits in either come back to haunt owners in the form of special assessments. Before you make an offer, check that the operating funds are at least sufficient to break even. Reserve funds must be kept at a high-enough level to pay for that new roof in five years, or any other structural repair or upgrade that’s needed. By law, an engineering study must be conducted at least every three years to assess the building’s physical state and determine what improvements, repairs or upkeep will be needed in the future.

7. Check out the mix – Tenants don’t always care for a place the way owners do, so ask what portion of the complex is being rented. While the landlord (owner) is responsible for making sure tenants follow the rules and by-laws, enforcement can be tough if the rental rate is high.

8. Don’t go it alone – A good lawyer will alert you to potential pitfalls and make sense of all the legalities for you. New condos, particularly, have complicated rules concerning the developers’ declaration with the land registry office, taking possession and how these affect fees, insurance and taxes. Make sure that your Chartered Accountant and your lawyer consider any condo purchase you make a joint venture