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6/9/12

Buying a Condo

Q - I am planning to buy a condo shortly.  How is buying a condo different from buying a house?


A - When you buy a home, you are aware that, over time, some repairs will be required and that you will be responsible for the expenses of such maintenance.  An additional expense is the home insurance.

When you buy a condo, such a property is also subject to maintenance over time.  However, unlike a home where you are solely responsible for the maintenance costs, in a condo the costs are shared by all the owners.  Building insurance is also a shared cost.  Condos are managed by the Strata Council.  Owners are elected to the Strata Council and in some instances simply volunteer to take on such responsibilities.   The Strata Council can manage all elements of the building or hire a Property Management company to do so.

When you purchase a condo, you have to examine the history of the condo building.  You can do this by obtaining the Strata Council minutes of the regular meetings as well as minutes of any special meetings.  It is best to have at least 2 years of minute history.  Financial statements are a critical component in assessing whether a condo has been well managed.  Obtain at least 2 years or more if possible.  The current year's budget is also a vital piece of information.  Financial information will indicate if there is a reserve fund that has been building.  It is very important for the Strata Council to build a reserve fund to handle financial necessities such as a new roof or other expenses that occur over time.

There may also be an engineer's report assessing the soundness of the building envelope.  Be sure to ask if there is one and, if so, obtain a copy.  Be sure to obtain a copy of the by-laws as well.

You also have to inquire whether parking and storage lockers are part of the common property or whether  you have some entitlement to these areas.

Your real estate agent generally obtains such information for you.  Usually the information is quite substantial and your real estate agent may not have reviewed it all.  Be sure to review all the information yourself and consult a lawyer/accountant if you have questions that cannot be adequately answered.

If you cannot obtain satisfactory information or you have any concerns about the history of the building, move on and check out other condo buildings.  The financial consequences can be quite severe if you make an uninformed decision.  For example, financial building requirements which have not been planned for can result in assessments amounting to thousands of dollars for each of the owners.

Most condo buildings are well managed and all information is available to make an informed decision.  You simply have to recognize when a condo building is lacking in good management and planning so that you do not incur any future financial burdens.

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