Downsizing, getting rid of outside chores, access to a pool and fitness room – there can be many reasons for buying a condo. Many newcomers, of course, prefer condos because they are unfamiliar with the maintenance tasks associated with single family homes.
However, condo living may be very different from what they were used to.
“The major differences between buying a condo and buying a house are lifestyle and financial,” says Chartered Accountant Peter Harris, a partner with Harris & Chong LLP in Toronto. “You may not have to mow the lawn or shovel the snow, but you become part of a community governed by rules and regulations that may restrict your personal freedom. You no longer control what you pay for, or when, regarding the condo’s common areas. You also pay for things you would not if you were buying a house, such as a concierge or pool lifeguard.”
If you are considering buying a condo, make sure you know what you are getting into. Here are some tips:
New vs existing. “Buying a new condo may give you more choices regarding location within the building, a broader range of options and upgrades and new home warranty protection,” says Harris. “However, you won’t see the end result until the condo is complete, your deposit will be tied up, and construction delays can cause uncertainty and may require you to find temporary accommodation. There may also be ongoing noise and dust from construction when you move in.” If the building is a conversion, as opposed to a newly constructed building, new home warranty protection does not apply.
Research the condo’s financial situation. “Obtaining the condo corporation’s status certificate is essential to determining its financial health,” explains Harris. “It will include the most recent audited financial statements, disclosure of any monthly fee increases or special assessments and any contingent liabilities relating to lawsuits, etc.” You should also examine the reserve fund study, which must be updated every three years.
Determine whether the condo suits your lifestyle. “There may be rules concerning smoking, owning pets and use of amenities such as the swimming pool,” says Harris. “Make sure you have enough parking spaces and that the condo can accommodate any physical disability you may have.”
Get specialized help. “Engage the services of a realtor with specific experience in condominium matters,” says Harris. “They can often point out things you have overlooked in your initial assessment of the condo. Their knowledge of the area may be invaluable if, for example, they have learned of a new building going up next door that will block that fabulous view you were sold on.”
Be aware of all the costs. “A number of costs should be considered in advance and factored in to allow you to determine how much financing you will need,” advises Harris. “These include development charges, upgrades, appliance costs, legal fees, land transfer tax, new home warranty program enrolment fees and reserve fund contributions, if these are required in the agreement of purchase and sale.”
“The two biggest mistakes people make when buying a condo are not doing their due diligence in researching the financial and lifestyle considerations and not having the financial resources they need to cover unexpected costs, such as increased maintenance fees or special assessments,” adds Harris. “Doing your homework in advance will help you find the condo that is right for you.”
– Courtesy The Institute of Chartered Accountants of Ontario