Buying a Condo?

This chapter discusses the various issues to consider when buying a condo, whether a new condo or a resale one. It also provides some information specific to resident owners versus investors, as well as townhouse condos and condos in resort areas.

New vs. Resale Condos

New Condos

When buying a new condo from a building or development company, whether from floor plans or as it is just being completed, purchasers should make sure that the real estate lawyer carefully examines the agreement of purchase and sale, the disclosure statement, and the condo declaration.

In fact, some builders add extra charges that are not well specified in the agreement and are certainly not mentioned by the sales staff. These charges can amount to several thousands of dollars that prospective buyers have not included in the calculations of what they can afford.

The condo’s declaration should be examined to make certain that the property is as advertised.

In fact, retaining a copy of the floor plan is essential: You have to make sure that the unit you get is the one you bought and is located at the same place you wanted. Also, the declaration will allow you to know whether the development is strictly residential or if it will also contain commercial and business units (mixed-use condos). (Click here for What’s a Condo Declaration?)

Above all, the disclosure statement and the declaration may contain items that will have to be shared by all owners via their condo fees later (and for many years), thus increasing their fees. These items may not be mentioned by the sales staff and do not appear in the ads. These include some recreational facilities and guest suites that will  have to be repayed by the corporation over a period of time. Others might be equipment that is leased rather than owned by the condo. These leased items range from boilers, furnaces, energy savings equipment, special decorative items, and so on.

So, basically, prospective owners want to know if the condo owns outright everything which is in the building or on the property. This is the best situation.

In addition, purchasers should always let their lawyer know what is important to them so that the lawyer keeps this in mind while inspecting the documents.

The declaration is a thick document that is not always easy to read or understand. In addition, declarations vary from condo to condo, even in a same district, and this may create confusion for persons who are buying units in different developments. For instance, what are exclusive-use common elements in some condos are fully owned in others, such as parking areas or in-suite heating/cooling systems. (Click here for Who Is Responsible for Maintenance, Repairs & Alterations?)

The declaration of townhouse developments will indicate whether patios and backyards are exclusive-use common elements or freehold—that is, individually owned. And the same applies to garages and lockers, where available.

In some cases, even the roof, the outside walls, and the windows are individually owned: Such situations result in more maintenance responsibilities for owners in the long term. However, this should also lower condo fees.

One problem that recurs in condos being sold by agents on behalf of builders is that these agents are not always forthcoming with the full picture. Neither are the ads. For instance, they will not necessarily tell you that another building will soon rise and block your view. Others will tell you that the party room is sound proofed, or that owners of penthouses will have first pick when time comes to choosing a locker, or that your parking space will be on the first level.

None of these things may happen. It’s important to have verbal promises written in the agreement of purchase and sale in order to have legal recourse if they don’t materialize.

There is a 10-day cooling off period during which purchasers can change their mind at no cost when buying a new condo. As well, Ontario purchasers should want to ensure that the builder is governed by Tarion’s new home ownership warranty. 

Resale Condos

For resale units, the purchase agreement may be conditional upon the purchaser being satisfied with the contents of the status certificate.  This "certificate" (actually a very thick document) is very important because it also includes financial information such as fees and special assessments that may be forthcoming. Litigations that a condo may be involved in should also be mentioned--and litigations are never a good sign of things to come (Click here for Why Is a Status Certificate So Important?)

The status certificate also includes the declaration, by-laws, and rules. And, here as well, the same problem applies as described above in the section for new condos.

Lawyers should be informed of what is important to a purchaser’s lifestyle. Lawyers will then verify that rules or the declaration will not interfere. A good example would be rules prohibiting dogs when the purchaser has just acquired a pooch. The advice, then, is: don’t buy!

In Ontario, at least, prospective owners and their agent should make sure that alterations made in a unit (including on balconies and patios) by a previous owner had been approved by the board of directors. 

Some red flags which should lead prospective buyers to check on this situation are: hard wood or laminate floorings, additional A/C systems, tiles on balconies or patios that no one else has, jacuzzis, a wall that has been eliminated or added. Such alterations could create problems later if they were made without a board permission. A board could, for instance, require that tiles be removed or that the laminate floor does not have proper underpadding and is not sufficiently sound proof (after having received justified complaints).

It may be helpful to read parts of Owners’ Money Facts.


Condo Gardens

Factors to Consider When Buying a Condo

This section is intended to provide an overview. Additional details written by legal experts can be found elsewhere and in the Links section. Several new sections have been added as a result of concerns expressed in letters received from owners.

Location is as much a prime factor to consider when buying a condo as it is when buying a house. And the same applies for what a person or a family can afford.

A condo is big business: It is in owners' best interest to pay close attention to what is happening concerning their property. At the very least, attendance at the Annual General Meetings or AGM is a must.

Since this website has first been posted, many readers have sent letters detailing some issues that are specific to condo townhouses. These are discussed in one of the new sections below.

Physical Factors to Consider

  • proximity of suite to party room and other amenities that can create noise concerns;
  • party room hours as well as hours of other amenities (often found in the declaration);
  • hours of use for garbage chutes if unit is near one;
  • how quiet elevators are if unit is adjacent to one: An evening visit is informative in this respect;
  • street noise varies with the elevation of a suite: Some noise from distant high-ways may be more evident on higher than lower floors;
  • noise from adjacent suites. Here again, an evening visit should be informative;
  • Is the condo metered for electricity? Meters are an advantage because fees should be lower and owners don’t pay for neighbours’ extravagant use of energy!

Finally, there is the matter of condos that have two or more buildings and may also include a townhouse complex. These condos may or may not share amenities. For instance, some share a common “pod” or a clubhouse where pools, party rooms, guest suites and other amenities are located.

Each building or complex may have its own or a shared declaration and a separate board of directors or a shared board. These boards may meet occasionally in order to deal with issues pertaining to the facilities they share. Or members of each board are delegated to form a board for the purpose of administering these facilities.

Multi-building condos may or may not have the same management company. However, when they share one management company from the outset and one of the boards of directors is not satisfied with the management’s performance, the situation becomes complicated—especially when the declaration stipulates that there has to be unanimity among boards in order to change management or to have separate management companies.


Administrative Factors to Consider

We already started looking into administrative factors above. In addition,

  • when buying a resale unit, please consider the fees and how they compare with those in similar buildings for a unit of comparative size. (Click here for Condos’ Financial Structure)
  • size of the reserve fund. (Click here for Reserve Fund)
  • be wary of condos that have had special assessments in the recent past;
  • if possible, visit the management office with a prepared (short) list of key questions that are paramount to you. However, be very nice about this because most managers have enough work without having to deal with potential buyers;
  • a visit to the management office will also provide a good indicator of the helpfulness and knowledge of the person in the office; in turn, this will give you a better idea of how well the condo may be functioning;
  • read the condo’s bulletin boards;
  • ask about energy efficiency and energy savings retrofits that might have been done or may be planned; (click here for Energy Savings Measures)
  • it's a good idea to talk to a few owners before buying a re-sale condo and ask them about the board of directors and the management or anything else that is important to a prospective buyer.

Human Factors to Consider

  • When this is a resale unit, as you ride the elevator and examine the amenities or wait in the lobby, look at the people you see: Are they loud? Polite? Are they the kind of persons you’d like to have as neighbours? 
  • If you are a retired person, do you see other persons your age?
  • If you have a family, are there other families? (Click here for Are Condos Family Friendly?)
  • A balanced age structure is always best. It is a good indicator of the quality of a condo and of its wide appeal when the entire age spectrum is represented and when families as well as singles live side by side.

A condo that caters mainly to retired persons or to young singles functions differently compared to one with a different population mix in terms of age and family composition. The choice that a prospective owner makes much depends on what he or she is looking for in terms of lifestyle.

Resident Owners versus Investors?

It is very important to try to find out what percentages of the units, in re-sale condos, have resident owners. In many of the downtown condos in Toronto, for instance, anywhere from 45 to 70% of residents are tenants.

What are the consequences for full-time resident owners when their condo has more tenants than owners?

      1. neighbours will change often

      2. there will be a lot of moving in and out, which also means a lot more wear and tear in terms of corridors

      3. because of this high rate of moving, it will be more difficult to have a feeling of community

      4. if problems arise in the condo, owners who want to do something about the situation will have great difficulty communicating with each other, getting a petition signed, or even  requisitioning a meeting, and getting the needed votes (click here for Owners' Meetings and Voting)

Non-resident owners rarely attend AGMs and rarely participate in requisitioned meetings. Only a few bother to send in proxies. This often results in a lack of quorum at a meeting or, with dishonest boards or managements, this situation constitutes a temptation for fraudulent proxies. (Click here for Issues with Boards for such examples.)

Issues Specific to Townhouses

A special section on townhouses has been added because a disproportional number of owners from townhouses are writing with serious problems--and some of these problems are specific to this type of condos.

1.  Many of the problems reside in the fact that smaller developments seem to be at a disadvantage in terms of the quality of the services they receive from management companies. This issue stems in part from the fact that companies get paid more or less according to the number of "doors," which means that they are paid less when they take on a smaller condo than a larger one--and they do less work.

2. As well, townhouse condos too often do not have a management office on site.

3. Conseqently, owners as well as board memberts have difficulty getting in touch with their manager, accessing documents, and getting information.

4. Thus, overall, townhouse owners are at greater risk of not receiving as much information from managers and boards as other condos.

5. It is, therefore, even more imperative that townhouse owners attend the AGMs and other owners' meetings.

6. Very small developments often have only 3 directors on the board, which is probably too small a number for diversity in terms of perspectives to be presented at board meetings. As well, fewer directors often mean that there is less oversight regarding finances, etc.

On the positive side, in reasonably stable and affluent areas, townhouses have the advantage of having a greater proportion of owners who live on site. We know that resident owners have a greater vested interest in the well-being of their small community and in the soundness of its financial stability. It is then easier for such owners, when a serious issue arises, to organize requisitioned meetings and get the required number of votes necessary to pass a motion.

Issues Specific to Resort Condos

Only a minority of owners are full-time residents in resort condos. Therefore, some of the issues raised in the section above on Resident Owners versus Investors apply particulary well here. These are difficulties in getting owners together when a problem arises, when a requisitoned meeting is necessary, and in getting a quorum for AGMs.

In addition, resort condos often have shared facilities with a particular board structure that may limit the power and duties of the individual boards in the various condos that own these facilities together.

For instance, in some resorts, there may be 12 condos of about 20 to 50 units each, in the form of low-rise buildings or townhouses. Each condo has its own board of directors, budget, declaration, and even rules. But they all share one set of facilities, such as pools, other recreational facilities, paths, boat slips, etc. These shared facilities in turn have a board of directors which is constituted of one representative from each of the individual condos. This means that boards of shared facilities can be very large--probably too large.

Another issue resides in that, for instance, the shared facilities may have 8 pools that are spread throughout various condos (rather than in one place, as is generally the case in cities, such as in a pod). The board for these shared facilities then determines the pool hours, including hours for adults only. This means that residents in condo X may have a pool in front of them but their children may not be able to go in this particular pool at certain hours; rather, the children have to walk to another condo and use another pool. Hence, parents cannot supervise their children, as they had expected when they bought, from their front yard.

Or, to give another example, walking and biking paths may wind  throughout the shared property, often too close to some of the buildings belonging to one condo, at the cost of constant noise and traffic for these owners. Even if the path has an alternate, other residents still prefer this one. This particular condo's board can be helpless because, in order to make rules regarding this path, it depends on the board of the shared facilities and this board is more powerful.

Hence, in many resort condos with shared facilities, the individual boards and the individual condos do not have as much power over their environment for the well-being of their own residents as is the case in condos that do not have such a structure of shared facilities.

Another issue with condos that have shared facilities is management. Generally, the management company is the same for all condos and the shared facilities. In order to change the management, some condos require in their declaration that over 50% agree to a change while, in other condos, 75% are needed to agree before a change of management company can occur.

Other condos with shared facilities allow each individual condo to make its own decisions regarding its own management company. But, at this stage, other issues arise and they are the same as those mentioned in a previous section on townhouses: Small condos often cannot afford as much management care as a larger condo. Second, it may not have an office in which the manager can come on site. And, finally, the manager might have difficulties with the main management company in the shared facilities and the other condos in the development.

Resort condos with a majority of owners who are seasonal or week-enders experience many problems when such part-time owners constitute the board. Indeed, because they are largely absent, such directors are often unaware of many of the problems experienced or observed by full-time resident owners, do not have as much time to devote to their duties, and may not be able to attend board meetings, or even shared facilities board meetings. In these situations, managers may do as they please, with no board oversight.

Such condos might want to pass a by-law to the effect that boards should include at least one of three or two of five directors who live primarily on site. Resident owners are better able to serve the best interest of the corporation, to supervise management, and to attend to problems.