Are you ready for communal living?

Condo 7I have many people who buy condos because they are affordable. A very important consideration, however, is whether you can handle the condo lifestyle.

I have a client who recently put an offer on a condo. Fortunately, he had me review the status certificate and related documents before his offer became firm, because in with all of the rules and regulations was a ban on dogs – cats were permitted, but no dogs. He has a dog, so this was a major problem. Because we found it early, he was able to make a decision about whether to go ahead with the purchase without losing any money if he decided to back out.

Condos have some very particular rules. If you’re okay with them, they can be a great option, but it’s critical to be sure that you can live within the rules before you go ahead and buy.

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Should you skip a home inspection in a competitive market?

Magnifying glassThe short answer: no.

The long answer: In Ontario, if you had the option of a home inspection and chose not to have one, the seller is not responsible for anything a home inspector could have found. Simply because a home is popular doesn’t mean that it is in good shape, and skipping a home inspection to get the house could end up costing you thousands of dollars in repairs and needed upgrades days, weeks, months or even years after closing. If you are truly concerned about missing out on a house you love, have the home inspection before you put in your offer. It might cost you several hundred dollars, but you will know what the house is like before you are tied into it. Ultimately, it’s not worth the small savings to miss a big issue.

Does your lifestyle suit condo living?

Condo 7I have a lot of clients who purchase condos, often in towers. Buying a condo can be a great way to enter the real estate market – they are often less expensive than houses, even townhouses or semi-detached homes, and can be easier to care for. However, there are aspects of condo living that you need to be sure you are comfortable with before you take the plunge, such as restrictions on pet ownership and renovations, and communal living. Check out this video for more, and be sure to have the full picture before you make that offer.

Another use of Powers of Attorney

Condo 6I’ve written before about using powers of attorney to sign documents if you will be away for a closing. Here’s another good use: dealing with your condo while you are away. Often people choose condo living because of a high-travel lifestyle. Condos can be complicated, and sometimes require work to be done on a short timeframe. Having a power of attorney in place means that your home is taken care of, even if you’re on the other side of the planet.

The importance of the status certificate

Condo 6If you are buying a condo, you are always given the option of getting a status certificate before your offer becomes firm; usually, this is paired with a condition of your lawyer reviewing that status certificate.

The status certificate itself is only a small document; it seems much bigger than it is because it usually comes in a package with all of the by-laws and rules of the condo, as well as financial statements and the original declaration from when the condo was built. The status certificate will usually be about 3 pages long, but it contains very important information about the unit. It will say whether the current owner has been paying their condo fees; whether there are any lawsuits against the condo building as a whole; and whether the condo complies with the relevant legislation. Without this document, you can’t know what is truly going on in the building. For this reason, they are only good for three months; after that time, you would have to order a new one.

If you are buying a condo, this is one document you do not want to close without.

Some concrete consequences of the tightening of the mortgage rules

Condo 5There have been a lot of casualties of the tighter mortgage regulations, but the hardest hit have probably been those who purchased condos pre-construction as much as five years ago, and are trying to close on them now.

Several years ago, you could buy a condo with 20% down, even if you were self-employed or had somewhat impaired credit. With the way the rules have changed, many lenders now require much higher down payments, and have made it much more difficult to qualify if you are not employed by a third party, with good credit. Many buyers have been left scrambling, a matter of weeks before the closing date, because the bank that had approved them several years ago now cannot because of the changes. Some have had to get loans from private lenders at considerably higher interest rates; some have had to borrow significantly from family, or against another home if this was to be an investment; and some have had to simply walk away from a high deposit because they can’t close.

If you are thinking of buying anything pre-construction, but especially a condo in a tower that could take years to build, you should prepare for every possible outcome. Walking away from a $20,000+ deposit is never an attractive option.

Buying a condo? Start here.

Condo 5The Canada Mortgage and Housing Corporation is Canada’s national housing agency. The primary reason the average person would come into contact with CMHC is because they offer mortgage insurance on many high-ratio mortgages for Canadians; if you are buying a house with less than 20% down, you are required to get default insurance, and usually it will be through CMHC.

Another thing CMHC offers is guides and information on many aspects of the home buying process. One of their guides is for people buying condominiums. It is an excellent overview of what condos are and what you need to be aware of. I would encourage anyone buying a condo to look at this guide as a great starting point.

How low should you go?

Condo feeCondo 4s are a big part of the cost of owning a condo. If they are too high, they can make monthly expenses unaffordable, and can affect your resale value. What happens if they are too low?

I was reading this great post over on the Toronto Realty Blog about how low you should expect to see fees. Granted, the prices are for Toronto condos, and it might be acceptable to have lower condo fees outside of a major city – but even then, certain things simply cost money. David Fleming notes that you really can’t run a building at less than 50 cents per square foot. Often, condo fees are posted low pre-construction. If the fees are lower than 50 cents per square foot, expect them to go much higher, very soon. Sometimes too good to be true, really is.

Fees, fees and more fees

Buying a condo? Then you should be extra careful about what the monthly fees will be.

Generally, the status certificate will show what the current fees are. It will also state whether the condo board anticipates any special assessments in the near future. Most realtors will ensure that your lawyer has a chance to review the status certificate before either the conditional period ends, or the title search date, so that you can be sure that you know what will be happening while there is still a chance to change things if you want.

Monitoring abusive condo owners

Back in August, a decision was released on York Condominium Corporation No. 137 v. Hayes, which involved a condo owner who was verbally and physically abusive to other residents in the building.

The condo board was attempting to have Hayes removed, and had applied to the court to have her forced to sell her unit (which is very rare, as I have posted about here). Ultimately, the court decided that, in this case, it would not order her to vacate and sell her condo, because there were other remedies. You can read the entire case here.

A condo is a shared space, and is by its nature a form of communal living. Obviously most condo buildings do not have abusive residents, but generally being comfortable living in close proximity to others is a necessity of condo life.