As aging baby boomers enter retirement, many are opting for the hassle-free lifestyle that condominium living offers. The condo owner no longer has to worry about mowing the lawn, shoveling the driveway or the maintenance issues that come with owning a home.
Indeed, based on the new construction starts for condominiums in the GTA, it appears builders have the same bullish mindset.
However, owning a condominium also has its own set of problems that differ from home ownership.
As a condo owner you literally own only the air space between the walls of the unit. The rest is owned jointly by the residents of the building. It is imperative prior to entering into a binding agreement to know:
- If there are any restrictions on the use of the unit.
- The percentage of owner-occupied units vs. rental units.
- If there are any special assessments being contemplated for major repairs. Special assessments arise where there isn’t adequate money in the reserve to fund a project. The unit owners are required to make a one-time payment to cover these costs.
- If there are any environmental problems.
- The financial health of the condo corporation. This is best determined by the Status Certificate provided by the condo corporation. It is typically reviewed by the buyer’s solicitor when an o er has been accepted.
A very important aspect of condo living is the monthly condo fee you are being charged. Condo fees vary widely but usually so does the level of service. It is important to recognize that one has to look beyond the condo fees to get the “true picture”. For example, if two neighbouring buildings have a difference in condo fees of $100 per month, the initial inclination would be to favour the lower cost building. However, there may be reasons for this fee discrepancy. One management company may be projecting future capital expenditures and hence charging a higher monthly condo fee so when the need arises there will be adequate cash on hand to carry out the work. If these expenses weren’t budgeted for, then the unit owner may be faced with a potentially significant special assessment to cover these costs. Today, because of the many mismanaged buildings, recent condo legislation makes it mandatory for each condo corporation to do a periodic reserve study analysis and set their budgets based on the future projected capital expenditures. For many buildings, this has meant a significant increase in maintenance fees because the building initially was under funded. The aim in these cases is to build up the reserve fund so that there will be adequate money available in the fund to finance future projects.
If the condo complex has few or no amenities (i.e.: pool, tennis court, etc.) then it stands to reason that the monthly condo fee will be lower. A buyer needs to assess whether these conveniences warrant paying the incrementally higher condo fees.
Traditionally, condominium town home maintenance fees are lower than those of condo apartments. The reason being is twofold:
1. Maintenance fees for a town home are exclusive of utilities (heat, hydro and occasionally water).
2. The reserve fund doesn’t need to be as hefty for town homes because the potential capital expenditures aren’t as costly.
In summary, when exploring the condo option there are many aspects of this pur- chase one needs to consider. To make a good informed decision, a buyer must look at both their wants and needs and be satisfied the condo project meets their requirements.