What is a Condo?

Condos first appeared in North America’s real estate markets in the mid 1960s. A condo is a form of communal housing where a portion of real estate (usually referred to as a condo “unit”) is individually owned. Ownership is limited to the unit itself and to the undivided pro-rated portion of common areas such as hallways, elevators, underground parking, the outside building envelop, and all other common property, including the land on which the condo complex is erected.

Condo complexes are controlled, managed and governed by their homeowners association, also known as a Condo Corporation.

What is a homeowners association?

A homeowners association is a corporation that is initially formed by the real estate developer which built the condo complex. Homeowners associations, through their elected Board members, hold yearly meetings of all unit owners and often hold meetings among Board members on selective issues on a more frequent basis.

Some homeowners associations hire outside property management companies. Board members are responsible for the supervision and retention of such management companies.

What is the major role of a homeowners association?

To govern and enforce the rules and regulations that apply to a specific condo complex.

What are Condo maintenance fees?

As a condo owner you are required to pay mandatory monthly maintenance fees. These fees are separate from your monthly mortgage payments. Maintenance fees go toward paying for the overall upkeep of the common areas in a condo complex.

Some examples of what maintenance fees include are as follows:

  • Landscaping for the common areas
  • Snow removal
  • Maintenance of elevators, parking, pool, gym and patio areas, common hallways, common mechanical and electrical elements, etc.
  • Insurance for commonly owned elements
  • Paying a condo management company
  • Security personnel
  • Legal, accounting and administration

What is the difference between a Condo and a rental apartment?

The difference between the two lies primarily within the ownership structure. A condo complex has units that can be purchased and owned individually. In rental apartment buildings, the owner of the building maintains the ownership of the rental units.

Condos tend to be built to a higher quality standard than apartment buildings, because condos are not only a living space, but also a potential investment for the buyer. Renters tend to be less concerned about maintaining common areas. Renters usually have no long-term stake in rental apartments.

What is the difference between a Condo unit and a Condo townhouse?

The condo unit is usually an apartment-like unit in a medium or high-rise building. Those buildings have elevators, whereas, condo townhouses are usually built on street level, and without elevators.

From their physical appearance, condo townhouses may resemble freehold traditional properties. However, they have common foundation connections to qualify for condo status. Therefore, their outside upkeep and maintenance is mandated by monthly maintenance fees, just like the condos in high-rise buildings.

What do I need to know as a Condo home owner?

You are bound by the rules and regulations, contained in the condo’s Declaration and by-laws. These by-laws tend to have restrictions, such as not allowing pets or otherwise, not allowing a commercial business to operate from your unit.

The overall decision-making process of the condo complex is made by the majority of the unit owners and executed by their Condo Corporation’s Board members or elected Association.

How do I ensure I’m making a wise investment?

You should check the Status Certificate of the unit you intend to buy and have the certificate analysed by a lawyer. Also, check the comparative sales of similar units in the same area that you wish to buy into and make sure that the maintenance fees of the unit you intend to buy are not disproportionately higher.

What are the warning signs I should look for as a Condo buyer?

Disproportionately high maintenance fees are usually a good sign that some major repairs had been done to the common elements, and that the condo complex had passed a Special Assessment fee onto the unit owners on a prorated basis to cover the cost of such repairs. Otherwise, the Association or Condo Corporation was forced to take a Common Loan to cover for such expenses, which increases the unit owner’s monthly fees and lessens the value of the unit, until such loan is repaid.

What part of the Condo do I actually own?

In most instances, you own everything inside your condo unit, including the half-thickness of the walls which separate you from neighbouring unit owners. In addition, you own a proportionate and prorated share of all common elements and the land on which the condo complex is built.

How much can I afford to pay for a Condo?

Not more than one third of your household income should be used to support mortgage payments and condo maintenance fees. For example, if your earn $30,000 per year, then $10,000 per year is all you could afford to carry your mortgage payments and maintenance fees. If you earn $60,000 per year, then $20,000 is all you can afford for carrying costs.

While interest rates are low, the affordability factor may be reasonably good, and you can afford to purchase a higher priced condo unit. But, if interest rates go up, you may find yourself struggling with payments. If more than one third of your household income goes towards mortgage payments and maintenance fees, your quality of life may be seriously compromised.

When is it a good time to buy a Condo unit?

From a purely financial perspective, during a depressed market, with a multitude of unsold condo units. This gives you leverage in terms of bargaining for the best possible price.

What is a Co-op?

A co-op, short for co-operative, is a similar arrangement to a condo, save for the fact that a co-op owner does not own their unit, but rather has investment in shares of the corporation that owns the property. Practically speaking, as long as the co-op members, i.e. shareholders, pay their maintenance fees, they possess the right to occupy their co-op units in perpetuity.

Is it better to buy a Condo unit or traditional home?

A traditional home is a better choice if you are planning to have a family. For example, having extra space with a backyard for your children is more advantageous than having them stuck in a condo unit. On the other hand, childless couples or retirees, tired of daily house choirs, may find that condos provide a more suitable living arrangement.

Condos may be built close to amenities, such as theatres and shopping malls. They may also have attractive amenities, such as swimming pools, gymnasiums, and conference and party rooms, etc.

What is my responsibility as a Condo owner?

The main responsibility is to pay a mandatory monthly maintenance fee. From time to time, there may be other fees imposed for which you are responsible, such as Special Assessments and payments on a Common Loan.

The condo owner is required to live according to the rules and regulations, as defined by the Association or Condo Corporation’s Declaration and by-laws.

Is buying a Condo unit better than renting?

If the market is on an upswing, buying a condo unit would make better sense for the fact that it could be sold for a higher price and create a profit when re-sold.

However, when the market is slow and stagnant, renting seems to be the better option for the fact that the renter is not stuck with condo ownership and its perpetual maintenance fees. Upon termination of the lease, the renter is free to move into another building.

Is buying a Condo a good investment?

It may be if the market is on an upswing. For the past 30 years or so, the market has experienced oscillating trends, making it very difficult to determine exactly the right time to buy. A condo may not be such a good investment as advertised by condo developers during depressed market conditions.

What are the costs associated with buying a Condo unit?

Down payment is the main consideration and it should always be 25% of the condo’s price, notwithstanding the developer or bank offering you financing of up to 90 to 95 percent.

In fact, the smaller the down payment, the greater your chances of losing your condo should the market turn on you. Other costs involved closing costs – that is, paying for the land transfer tax, insurance fee, mortgage arranging fee, and legal fee.

How do I assess the value of my Condo unit?

By checking recent sales in your condo complex, and comparing them to others in the area. If your condo complex experienced problems that required extra repairs, or anticipates such repairs, the maintenance fees may become disproportionately higher compared to similar units in the area. In this case, it will be much harder to sell your unit as buyers are looking for a safe investment.

What happens if I don’t pay my Condo fees?

The Association or Condo Corporation puts a lien on your condo unit, and after a few months of continuous defaulting, your condo unit may be put up for sale. You may end up with much less money from the proceeds of such forced sale, than if you sold the unit on your own.

What are some Condo buying tips?

Some of the best tips are included in “The Ten Commandments of Condo Buying,” included in The Condo Bible, which can be purchased separately in PDF and e-book formats.

What is the process of buying a home?

The process is pretty much the same as buying a condo unit. You select the area. You carefully check the neighbourhood. You obtain a house inspection report on the house before you close the transaction and move in. Your down payment should also be at least 25% of the purchase price. You will also be obligated to pay the land transfer tax, mortgage arranging fees, and legal fees.