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Wednesday, February 23, 2011

What should you consider before buying a condo?

What should you consider before buying a condo?

Want to buy a condo? Are you enticed by the idea of being an owner without having too much maintenance to worry about? Before a visit to the notary, there’s plenty to consider. After all, buying a condo means becoming a co-owner. You must be comfortable with the ideas of not managing your investment on your own and cohabiting in accordance with certain rules of operation and conduct.
Acquiring a portion of a whole
When you buy a divided co-ownership, commonly called a condo or condominium, you first become the owner of a private area for your exclusive use. This refers to a housing unit – your apartment – and also, in many cases, a parking spot and a storage space. You also become the owner of a fraction of the common portions, such as the roof and windows, along with the hallways, elevators and balconies. Some of these portions, the balconies, for example, may be defined as being “for restricted use.”  
Being bound by the “declaration of co-ownership”
When you become a condo owner, you’re bound by the co-ownership agreement, also called the “declaration of co-ownership.” Among other things, this sets out the co-owners’ rights and obligations.
Use and enjoyment of the premises
The co-ownership agreement governs the use of the premises. What sort of floor coverings are allowed in the individual units? Is it possible to keep a pet? What restrictions apply to your outdoor activities, such as using a barbecue?
Condo fees and contingency funds
All co-owners must contribute to common expenses, better known as “condo fees,” which cover ongoing administrative costs and maintenance of the common areas. The amount to be paid may vary between co-owners since it is proportionate to the relative value of each fraction. It is set according to the annual operating budget and the reserve that must be set aside for the contingency fund.
The contingency fund is intended exclusively for major work affecting the commons areas: replacement of windows, repairs to the roof or exterior cladding, etc. The amount in this fund should be justified by a preventive maintenance plan or by a building evaluation report prepared by experts.
The law says at least 5% of the amount collected in condo fees must be placed in the contingency fund. Some specialists find this inadequate for covering a building’s long-term needs, especially since this 5% is based on condo fees that are often kept very low.

Before concluding the transaction
In addition to the indispensable pre-purchase inspection, some checking is required before you sign a purchase offer. This could save you plenty of headaches in the future.
  1. Read the co-ownership agreement
    This will help you determine whether the lifestyle of joint ownership and its form of management and administration really suit you.
  2. Read the minutes of the general meetings
    Don’t be shy about asking for documents from previous years. This will give you an idea of the co-owners’ concerns. You may discover problems with the building’s management, administration or condition, or with the neighbourhood. Does maintenance seem minimal? Is there a dispute with the builder? Do some co-owners – perhaps even your future immediate neighbour – violate noise regulations? It’s better to have this information before buying!
  3. Assess the financial health of the condo syndicate
    This precaution is extremely important to avoid inheriting serious budget problems stemming from mismanagement by the directors. You’ll want to know if there’s a big debt or if there are problems collecting condo fees. Also, is the contingency fund adequate? If major emergency work has to be done, an inadequate contingency fund may result in special assessments amounting to thousands of dollars. This type of situation could throw some co-owners off balance financially. Think about it!
Questions? Planning to have work done?
Consult our bank of Approved Residential Suppliers, which lists more than 700 reliable businesses. If you are a CAA-Quebec member, you can call the professionals at our Residential Advisory Services, free of charge, as often as you wish. They are there to help you make informed, objective choices, whatever project you plan to undertake.