A condominium is a type of legal ownership where the property is divided between privately owned units and common elements. Each unit owner owns the unit as well as a proportion of common elements, which includes such things as hallways, lobbies and elevators and there are also “exclusive use common property elements,” such as balconies, parking spaces, and storage lockers, which are outside the unit’s boundaries but are for the exclusive use of the unit owner.
When buying a condo, any offer should be conditional on your lawyer reviewing the Status Certificate. This package generally contains financial statements, budgets, reserve fund audits/balance, declaration, rules and regulations, bylaws, master insurance policy information, a legal description of the unit and management contract if applicable and the condo status certificate.
Ensure your lawyer reviews the Status Certificate so the condominiums financial health can be evaluated. It is important to know how the monthly fees are being spent, whether there is a reserve fund and if your unit’s previous owner is all paid up on their fees. If they are not, you may be liable for this deficit.
What is a Reserve Fund?
A Reserve Fund is set up to fund major repairs or replacements to the condominium’s common elements that might be undertaken. Generally, it is at least 10% of the condominium’s total operating expenses. The Condominium Act sets out that a Reserve Fund Study, which evaluates the condominium’s common elements, estimate their expected lifespans, and estimate any repair or replacement costs, is to be done “periodically” which has generally been interpreted to mean every three years.
Read the condo bylaws, rules, and regulation, and ensure none of these stipulations will be an issue for you. Take special note of any liabilities that might be imposed on you, such as if one of
your guests breaks something, and what you are permitted to do in the common elements, as well as any restrictions.
Some bylaws, rules and regulations can impact your lifestyle. For example: What can you replace? Can you have pets? What can you store in your unit? How many people can occupy your unit? Are there restrictions on noise? Are there restrictions on when certain amenities can be used? Where is smoking allowed? Your attendance might also be required at condominium meetings, or you might be expected to serve on activity boards.
Condo fees generally cover heat and water (not electricity), property-management fees, security fees, daily upkeep of common elements, and the reserve fund.
When you purchase real property in Ontario, you are required to pay a Provincial Land Transfer Tax. If you are purchasing in Toronto, you must also pay Municipal Land Transfer Tax. You may also want to budget for a bank appraisal fee, legal fees, high-ratio mortgage insurance premium, prepaid tax reimbursement and prepaid condo fee reimbursement. Make sure you factor these expenses in your budget.