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Buying a Condo

Condominiums can be an attractive option for anyone from people buying their first home to older adults looking to downsize. 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.

There are laws designed to assist people buying condominiums but these laws simply require that information be available. The purchaser must still do their homework to protect their investment in their new home.

Unit Boundaries

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. Sometimes only the interior belongs to the unit owner, other times the unit will include the exterior as well and sometimes even 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. It does not give individual unit owners any rights over their share but generally it does determine how fees are calculated 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.

It is important to understand what the condo fees in the condo you are considering cover. Condo fees may cover things like building repairs and maintenance, lawn care, snow removal, insurance on the common elements of the building, taxes and property management. Some utilities may also be covered. Generally speaking, lower condo fees mean that individual owners are responsible for more expenses.

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.

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 have also mortgage payments.

Reserve Fund

When purchasing a unit you need to be as concerned about the state of the common areas as you are about your own unit. If there are a lot of repairs required you will most likely end up paying higher condo fees. Even if the building is new or in a good state of repair, condominiums – just like houses – require maintenance as the years go by and even newer condominium buildings will eventually need substantial repairs.

For this reason part of the condo fees are kept in a reserve fund. This fund is used for major repairs, for example if a new roof is needed. If there is an expense and there is not enough money in the reserve fund to cover it there may be a special assessment which then must be paid by all owners to cover the cost of the repair.

As a purchaser you have access to information about the reserve fund and, depending on the size of the building and when it was built, a reserve fund study that looks at whether the amount of the fund is adequate. Determining whether a reserve fund is adequate may require the advice of a lawyer or other professional, but in the end it can save you money and possibly prevent problems later. For example, if you want to sell new buyers will also want to know that the reserve fund is adequate before purchasing.

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 parts of the condo that are not included in the units, such as common areas and in some cases things like the exterior of units, are insured by the condo with money from condo fees.

You will want to make sure there is enough insurance in place for these parts of the condo. If there is not enough insurance to cover a loss, the balance of the loss, as well as the deductible, has to be paid by the owners of the units. Purchasers 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 provide a potential buyer with the certificate. This certificate has comprehensive information about the condo and the unit you are looking to buy and should be reviewed carefully before you decide to purchase.

Information contained in the certificate includes:

  • amount of monthly condo fees for your unit
  • whether the seller is up-to-date in paying condo fees
  • what condo fees cover
  • balance of the reserve fund
  • designated parking space(s) for your unit and if there is any guest parking
  • parking rules (parking things like boat trailers may be prohibited)
  • permitted uses of balconies and exterior porches (storing things likes bikes could be prohibited)
  • pet restrictions (they may not be allowed or only certain types may be allowed)
  • details of the insurance coverage the condo has in place
  • whether the condo is managed by a property manager
  • current bylaws
  • minutes of meetings of the condo
  • most recent Annual Return

The certificate also refers to additional information that can be requested for a fee such as a reserve fund study report (if one has been done), the most recent Financial Statements of the condo, the condo's current budget and a copy of the condo's insurance policy.

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