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Buying a Condo

Condominiums can be an attractive option when buying a home. However, there are special considerations that apply to the purchase of this type of housing. Taking the time to look into these things can save money and stress later on.

Unit Boundaries

There are laws designed to help people in buying condominiums. Some of these laws, however, only require that information be available. The purchaser must still do their homework to protect their investment in their new home.

When you purchase a condominium, you are purchasing a particular unit as well as the rights to common areas. To know what you are purchasing, it is very important to know what parts of a complex are considered part of each person's unit. What is included in each unit can vary greatly. It may include:

  • only the interior of the unit
  • some portion of the exterior
  • the land the unit was built on

You will need this information to know what areas you are responsible to maintain, repair and insure.

It is also important to know the unit factor of the unit you are considering. The unit factor determines the share of the common property each unit has. This could affect your condo fees and voting rights. For example, a unit with a higher unit factor could have to pay more in condo fees and also be entitled to more than one vote. The unit factor does not give individual unit owners any additional rights over their share, however.

Condo Fees

When considering the ongoing costs of home ownership, anyone looking at a condo needs to factor in condo fees. The money needed to maintain the common areas and deal with other expenses comes from condo fees. Condo fees may cover things like:

  • building repairs and maintenance
  • lawn care
  • snow removal
  • insurance on the common elements of the building
  • some taxes
  • property management
  • some utilities

Lower condo fees often mean that individual owners are responsible for more expenses.

Condominiums can be self-managed by the owners or they can hire a property manager. If a condominium uses a property manager, condo fees may be higher. On the other hand, a condo that is self-managed places more responsibility on individual owners.

Condo fees are in addition to other costs of ownership. Condo owners still pay their own property taxes and some insurance costs. Condo owners who borrow money for the purchase will also have mortgage payments.

Reserve Fund

When purchasing a unit, you need to be concerned not only about the state of your own unit but also the common areas. If many repairs are required, you will most likely end up paying higher condo fees. Condominiums, just like houses, require maintenance as the years go by. Even new condominium buildings will need substantial repairs at some point.

For this reason, part of the condo fees are kept in a reserve fund. This fund is used for major repairs such as for when a roof needs new shingles. If there is an expense and there is not enough money in the reserve fund to cover it, there may be a special assessment. Special assessments are billed to each owner to cover the cost needed.

As a purchaser, you have access to information about the reserve fund. Depending on the size of the building and when it was built, you may have access to a reserve fund study. This study looks at whether the amount of the fund is adequate. Determining whether a reserve fund is adequate may require the advice of a professional. In the end, however, it can save you money and may prevent problems later. If the reserve fund is inadequate, for example, owners may end up paying a lot for a large repair in the future.

Insurance

If you purchase a unit in a condo, you are responsible for insuring your unit. As mentioned, what is considered part of your unit can vary and should be clarified before you purchase. The condo insures the common property since it is owned collectively by each unit owner.

You will want to make sure you have enough insurance in place for your unit. You will also want to make sure the condo has enough insurance for all the common areas. If there is not enough insurance to cover a loss, the owners of the condo would have to pay the balance of the loss. You may want to get a professional opinion about whether the insurance is adequate.

Estoppel Certificate

The owner of the unit you are purchasing can request that the condo provide an estoppel certificate. The condo can charge the owner a fee of up to $200 for this certificate. The unit owner can then provide a potential buyer with the certificate. This certificate has comprehensive information about the condo and the unit you are looking to buy. It should be reviewed carefully before you decide to purchase.

Information contained in the certificate includes:

  • the amount of monthly condo fees for your unit
  • whether the seller is up to date in paying condo fees
  • what condo fees cover
  • the balance of the reserve fund
  • designated parking spaces for your unit and if there is any guest parking
  • parking rules, including whether parking things like boat trailers is prohibited
  • permitted uses of balconies and exterior porches, including whether storing things likes bikes or using barbeques is prohibited
  • pet restrictions
  • details of the insurance coverage the condo has in place
  • whether a property manager manages the condo
  • the current bylaws
  • minutes of meetings of the condo for the previous year
  • the most recent annual return

The certificate also refers to additional information that can be requested for a fee such as:

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