Think buying a condo is easy? Guess again - buying a townhouse, attached bungalow, or apartment-style condominium in many ways is more complicated and requires more attention to detail than buying a single-family house. In addition to buying the suite, a Buyer is also purchasing common property divided among all unit owners based upon the assigned unit factor (out of 10,000) in the complex. Below are 10 important considerations every condo Buyer should discuss with their REALTOR® in advance before making a condo offer to purchase:
(1). Decide your buying requirements and get pre-qualified for financing. Varying requirements include: price; condo fee; view; size; number of bedrooms and washrooms; elevators or handicap access; parking requirements; age of complex; building construction (i.e. concrete, wood-frame, etc.); location; special needs such as age, pets, and intended usage; desire to have condo association responsible for certain utilities and / or general repairs and maintenance of building exterior and common grounds; and condition / level of upgrades for both the suite and the complex itself. All of these factors affect resale value to varying degrees.
(2). Start being notified of new listings and begin viewing condos with your REALTOR® that closely match your buying requirements. Ask your REALTOR® any questions you may have about the complex or the unit itself. Ask your REALTOR® to provide past sales and volume of sales over the past several months to a year in the complex. Note past sales can be misleading if comparing 1 vs. 2 BDRM units; when comparing units at the bottom of a high-rise vs. the top; when comparing units facing in different directions with different views, etc. so it is important to discuss with your REALTOR® the relevance and impact of each comparable sale.
(3). Some condos have bylaws mandating age restriction (e.g. age 18-plus; 45-plus; 50-plus; etc.), others have pet restrictions, and most condos have some type of intended usage restrictions (e.g. prohibiting use of condo for commercial purposes with general public access, etc.) Next, some complexes are bare land condos (i.e. unit factors based on land) with a Real Property Report and Compliance while most apartment condos are conventional (i.e. with unit factors based on unit living area). Finally, some condos have assigned parking and storage while others have separate titles for parking stalls and storage lockers. Important advice: ask your REALTOR® if the parking and storage is assigned or titled. If they are titled, separate provisions must be made in the purchase contract to include any 'secondary properties' in addition to the unit itself.
(4). For investment Buyers wanting to buy a condo for the purpose of renting to tenants for revenue, rental restrictions are defined in Alberta by the Landlord and Tenancies Act as opposed to condo-specific rental regulations as can be the cases in other provinces (e.g. British Columbia). However, tenants in Alberta who do not follow condo bylaws can be at risk of discipline or eviction by the Condo Board and the landlords can be at risk of losing tenant revenue and other sanctions by the Condo Board while seeking another tenant to replace a condo association ordered eviction. In general, Condo Boards in Alberta can demand landlords disclose the name of the tenant and the amount of rent the tenant is paying but beyond that can usually have limited options to interfere with the landlord if the tenant is following the condo bylaws. [For more information on the Landlord and Tenancies Act, Buyers should consult a Landlord and Tenancy specialist Lawyer.]
(5). Condos often have bylaws against noise, including rules prohibiting installation of certain flooring types (e.g. hardwood) to prevent excess noise from traveling to lower suites and almost all condos prohibit major mechanical, electrical, and structural renovations, demolition, or additions (excluding minor cosmetic such as paint, carpets, fixtures, cupboards, countertops, etc.) without advanced knowledge and expressed written approval by the Condo Board. Major renovations may also require the acquisition of permits and stamped Engineering Reports.
(6). Having a condo offer subject to a property inspection (performed by a reputable certified inspector) is usually a good idea, particularly for first-time owner-occupancy Buyers. However, oftentimes condo inspectors will only inspect the unit itself (i.e. visible plumbing, HVAC, electrical, structure, etc.) and not the entire building unless a larger scale inspection of the complex is ordered. To gain a sense of inspection issues for the entire complex, it is necessary to analyze a reserve fund study report that forms part of the condo documents package. More good advice: ask your REALTOR® to request special access for the inspector to view the basement; boiler room; roof; elevator room; etc. of which may or may not be possible based on the willingness of the Condo Board and Property Manager.
(7). If buying into a condo conversion, oftentimes older buildings can require more maintenance, repairs, and upkeep than new buildings, so it is important to ensure a decent reserve fund amount is in place along with a reputable management company. Also condo conversions are often previous apartment buildings so owner-occupancy Buyers should be prepared that many of their neighbors can be tenants rather than actual unit owners. When buying into a new condo complex or into a condo conversion, make sure the condo plan has been registered with the municipality (or is in process to soon be registered) before you make plans to move in expecting a turnover to be a certain day. If there are delays in condo plan registration there can be delays in your turnover until this is complete.
(8). When buying a brand-new condo being constructed, make sure you understand the schedule limits of the Builder and plan to have an alternate place to stay in the event the complex is delayed several months or longer. If a Builder has delays in selling enough advance units, construction can be delayed indefinitely until the sales pick up and so be prepared for your deposit to sit with the Builder for an extended period of time. Aside from the obvious risk of a desired unit being sold before a buying decision is made, it is always wise (before signing and submitting a deposit) to hire a good real estate lawyer to review any new construction builder contract and documents package to protect a Buyer’s best interests. Also note that GST is applicable for new construction as is Buyer’s remorse - it is currently law in Alberta that Buyers have 10 days to back out of a brand new condo or condo conversion purchase if certain specified documentation has not been provided by the Builder in a timely manner. Buyers are advised to contact a good real estate lawyer for more details about the 10-day Buyers remorse legislation on new condo purchases.
(9). As with any property purchase, if there are any doubts about financing (aside from some rare cases with highly experienced investment Buyers) it is a good idea to make a condo purchase subject to financing to ensure your mortgage broker has time to obtain bank approvals of your financing and to ensure a satisfactory bank appraisal of the unit has been completed. Also part of the financing equation is the monthly condo fees, and note that many complexes that appear to have high condo fees have additional inclusions such as heat, power, cable TV, and other amenities.
(10). Finally, and most importantly, make any condo offer subject to a condo documents review. Condo documents that are normally turned over include (but is not limited to) the following: detailed financial statements; detailed general and board meeting minutes; registered condo plan; titles; insurance certificate; additional agreements; reserve fund study documentation; important 1-page information statement from the management company covering a number of topics; and any other relevant details. This information can provide considerable insight into anything that might be going wrong (and right) with the complex; how well the building is being managed; the types of issues you could reasonably expect to face as a new unit owner; and the financial and legal health of the complex. In addition to Buyers reviewing documents themselves, Buyers should consider the merits of hiring a good real estate lawyer to perform a formal review of the condo documents package to provide any thoughts and insights on the complex from a legal perspective. Additional special documents include RPR / Compliance that would apply specifically to bare land condominiums.
In summary, buying a condo can be a great experience and one that Buyers should not be afraid of. Hiring the right REALTOR® (along with the right mortgage broker, property inspector, and real estate lawyer) and paying close attention to the ten important considerations above will help make sure your next condo-buying experience will be a positive one.
For further information and details of important considerations when buying a condo:
[Article written and ©2009 by Kelly Grant, M.Eng., ABR, NCSO, P.Eng. - REALTOR® at MaxWell Realty in Edmonton, AB]
Disclaimer: for those readers not currently represented by another licensed REALTOR®, to obtain more information on this topic and / or if you are serious about selling or buying in the Greater Edmonton Area, call Kelly at 780-414-6100 (pager) or send Kelly an email to SOLD@KellyGrant.ca to schedule a confidential appointment.