When we hear the word condominium, we may at first envision an apartment unit in a high-rise building, or perhaps a townhouse.
The definition is actually much broader than that. According to the Condominium Authority of Ontario (CAO), the word condominium denotes a type of property ownership that encompasses shared property features along with community decision making.
Condo ownership can come in many shapes and sizes.
A condominium also refers to a type of corporation. An elected board of directors is responsible for making decisions on behalf the condo corporation and its unit owners.
Depending on the type of condo you are looking to buy, the common elements may be significant or not. What is shared amongst owners could be limited to a road, park, or ski hill, such as in a condo townhouse.
Alternatively, the common areas could resemble what most people imagine when they think of a condo: a large high-rise building with common areas including everything from hallways and elevators to gyms and patios.
Regardless of the type of condominium you are considering, common influences exist among them that prospective owners should consider investigating.
Let’s take a look at four important questions to ask before buying your next condominium.
1. What is the Condition of the Condo Reserve Fund?
A condominium corporation’s reserve fund is comparable to a savings account that holds collected funds from all condo owners over a period of time. Each month when owners pay their share of maintenance fees, a portion of these fees is set aside and held in a reserve fund.
The purpose of the fund is to cover the cost of repairs, maintenance and replacement of assets of the condo corporation. These assets may include things like elevators or roofing in a high-rise building, or simple road maintenance and repair for condo townhomes.
Condo buyers will often include a condition in an offer to purchase that allows time to review something called a Status Certificate, which incorporates details about the condition of a condo’s reserve fund. This document is given to the buyer’s real estate lawyer to review and ensure the fund is satisfactory, and appropriately managed.
2. What Are The Common Expenses?
Common expenses are also known as maintenance fees, or common element fees. This is the monthly amount that condo owners pay towards the operation of the condo corporation.
The more amenities that are provided by a condo corporation, like in-building gyms or pools, the higher the common expenses tend to be. The lowest common expenses are usually found in condo townhomes because the shared elements are limited to a road or park.
As you plan your budget in preparation for the mortgage payment and property taxes, remember to factor in the common expenses as well. Even if you don’t plan to use the gym or pool, all owners are responsible for paying these monthly fees.
3. Are There Lawsuits Against the Condo Corporation?
If an operating fund is not sufficient to cover costs relating to a lawsuit against a condo corporation, owners will be collectively responsible for covering those expenses.
In cases like this, a special assessment may be needed to cover the costs. This would result in a special one-time charge added to an owner’s common expenses. This is one of the things your lawyer will look for when reviewing the paperwork from a condo corporation.
To avoid this potential scenario, prospective buyers should be aware of any potential litigation pending.
According to the CAO, the condo corporation's status certificate will include information about legal issues that may impact the condo corporation. Your real estate lawyer will review this at the same time as the reserve fund details to ensure all is well.
4. Is The Tarion Warranty Still Active?
If the home is less than seven years old, the Tarion new home warranty may still be active on the property. There are three different warranty periods covered by the new home warranty, with the structural warranty in place for a full seven years.
You can check the status of the warranty by contacting Tarion directly either by phone at 1-877-9-TARION, or by email at firstname.lastname@example.org.
Read more about the Tarion Home Warranty.
Before buying your next condominium, take some time to perform your due diligence.
Speak with your REALTOR® about what other documentation may be needed for your specific situation and be sure to enlist the services of a real estate lawyer who is familiar with condominium ownership.
Reference: Condominium Authority of Ontario (CAO) (2021). Condo Buyers' Guide.
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