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Condominium Ownership
Condo living can offer a prospective buyer many advantages, including affordability, low maintenance requirements and enhanced security.
What is a “Condominium”?
Condominium refers to the type of ownership rather than the style of building. While condos are often thought of as apartment-style high-rises, condominiums can also apply to townhouses, duplexes, low-rise buildings, and even individual houses and land.
Condominiums consist of two parts. The first part is referred to as “units”, which are the areas owned by and registered to the purchaser of the unit. The second part consists of the “common areas” of the building and premises that may include lobbies, hallways, recreation facilities, elevators, walkways, structure, mechanical and electrical services. The ownership of these “common areas” is divided among each individual owner, as is the cost to maintain and repair.
Each unit owner has an undivided interest in the common areas of the building, which is referred to as the “unit factor”. The unit factor will tell you what your ownership percentage is in the common areas and is used to calculate the monthly fees (condo fees) that you must pay towards their upkeep.
What part of the condominium do I own?
When you purchase a condominium, you own your unit as well as a percentage of the common property allocated to the unit.
There may be some parts of the condo complex that are designated as “exclusive use common property”. These elements are outside of the unit boundaries, but are for the exclusive use of the owner of a particular unit. Examples of such include balconies, parking stall(s), storage lockers, driveways, etc. There may be restrictions pertaining to these elements so it is important to be aware of these elements and what it means to you.
Condominium Rules and Restrictions
Every condominium is governed by its own set of rules and regulations known as “by-laws”. These are used to ensure that condominiums are properly operated and maintained, and to define the rights and obligations of individual owners.
Ensure you carefully review and consider all rules and obligations before waiving conditions to purchase a condominium.
Who takes care of what?
Owner responsibilities may include:
· Heating, plumbing and electrical systems contained in and serving only that unit
· Appliances
· Window surfaces accessible from inside unit
· Cleaning of common areas that are assigned to or for the exclusive use of the unit owner, i.e. patios, storage areas, etc
Condominium corporation responsibilities may include:
· Common heating, A/C, plumbing, and electrical systems
· Roof and wall repairs
· Windows and doors (check to ensure which party is responsible for repairs and replacements)
· Grounds keeping (including lawn maintenance and snow removal)
· Recreational facilities
· Parking areas and structures
· Any common areas that are not part of a unit
Condo fees – What’s included?
Unit owners pay a monthly condominium fee to cover their portion of the operating expenses of the common property. A portion of this fee is allocated to the reserve fund that is created to ensure there are sufficient funds available for the maintenance, repairs and replacements of major components necessary throughout the life of the building. Fees are usually calculated from the annual operating cost of the entire building and divided by your percentage of ownership (unit factor). These fees may include:
· Regular maintenance and care of the common areas, i.e. snow removal, landscaping, cleaning, etc.
· Reserve fund contributions
· Professional condominium management fees
· Building repair and maintenance
· Mechanical and electrical system maintenance
· Amenities
· Utilities
· Condominium corporation’s insurance policies
· Salaries of condominium employees
These items should be outlined in the operating budget of the condominium.
Extra expenses
If the condominium corporation experiences a shortfall in their operating budget or reserve fund, there could be an increase in your contribution. This is called a special assessment. The additional amount owed by each owner may be added to the next month’s payment or if it may be spread over a longer period of time, increasing condo fees for a specified time.
This is why it is important to review all condominium documents in depth and to include this review as a condition of purchase.
Getting help from your Realtor®
A Realtor® experienced in condominiums can save you time and money. You can choose to deal with the seller’s real estate representative, but you should have someone who will act only on your behalf.
Be specific with your Realtor® when discussing the type of property you are looking for. Tell them about the features you would like, the location and your budget; also discuss your plans for the future with regards to the property. Are you planning on staying in the property indefinitely or are you building equity to upgrade to a larger home? Is this property going to be your primary residence or are you using this purchase for investment purposes? These criteria will allow your agent to show you only those properties that are of interest to you.1
Is the condominium in good financial condition?
Because you are part owner in the condominium, the financial well being of the corporation is an important consideration. Buying into a corporation that is insufficiently funded to operate and maintain common elements is a risky proposition. The documentation that the corporation in required to keep, (i.e. annual budgets, statements, reserve funds, and reserve fund studies), will help you determine the overall financial health in the condominium.
The Reserve Fund
The purpose for a reserve fund in to budget monies required for the repair and/or replacement of major components; as well as the revitalization of the condominium over its lifespan. The reserve fund ensures that the condominium will be maintained and in good repair over the life of the project. The amount required in the reserve fund should relate directly to the condition and life expectancy of the common elements with in the building and the estimated cost to replace them. This information will be detailed in the reserve fund study.
Important criteria to consider when purchasing a condominium…
· Where do I want to live? (Location)
· What rules & regulations can I live with? (i.e. Does the building allow pets? Can I rent out my unit?)
· Affordability (What is covered in my condo fees – can I afford this expense on top of my mortgage payment every month?
· The Building (Is it clean, attractive, the right size, well-maintained?)
· The condominium corporation (Is it in good financial health; are the documents accessible, clear and concise; is there any legal action pending against the corporation?)
· Community and Lifestyle (Do other owners in the building appear to match my lifestyle; are there amenities in the building or nearby that would be of use to me?)
Buying a home is quite possibly the largest investment you will make, it is important to be thorough in order to make the best decision for you and your future. If you would like more information about condominium ownership please contact us.
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