Investing in a home can be a scary proposition, and there are things homeowners are not aware of before they take the plunge into the condo market.
According to a survey by the Ontario Real Estate Association in July, 28 per cent of Ontarians who are thinking of buying a home in the next two years plan to purchase a condo. In Toronto, 41 per cent of respondents said they plan to buy a condo.
When buying a new condo, the Ontario Ministry of Government and Consumers Affairs advises prospective buyers to review the condo declaration, bylaws and rules with their lawyer, real estate agent or accountant. If it’s a resale condo, buyers should also look at the condo board’s budget and the status certificate.
The ministry offers the following tips below on what people should look into before they buy a condo, as well as buyer protections and developer obligations.
Items to consider before buying
How are the monthly fees determined? What services and operating costs are included? Do certain costs need to be paid in advance?
Condo fees can cover costs of operating fitness facilities, party rooms, swimming pools, as well as security, cleaners, gardens and a concierge.
It’s also important to ask if all utilities are included in the condo fees.
If you are buying a new condo, how much will the fees increase in the second year? Also, are there any differed costs?
A portion of your monthly condo fees goes to the corporation’s reserve fund, which is in place for major repairs like the roof, exterior of the building, sewers, heating, electrical and plumbing.
If you are buying a resale condo, is there enough money in the reserve fund? This will determine the financial health of the corporation and what the condo fees will be.
Unit repairs & insurance
Are the repairs and maintenance in the units the responsibility of the buyer or the condo corporation?
In terms of insurance, what does the corporation’s standard insurance cover? Will you need to get extra insurance?
Is the condo budget in a deficit or surplus? How much has it increased over the past years, and were the increases due to inflation or utility costs? This will determine how your condo fees are affected.
Some other questions to consider:
- If you are looking to rent your unit, are there any restrictions for owners?
- How many rental and/or mixed-use units are there? Are there any commercial units?
- How many parking spaces and locker units come with the unit?
- Is the corporation involved in any lawsuits?
Click here for more information on what other questions to ask.
Protection for buyers
If you are buying a new condo, the Ontario Ministry of Government and Consumers Affairs says a buyer has the right to cancel his/her purchase within 10 days, “which starts from the time you receive a copy of the fully signed purchase and sale agreement or the disclosure statement (whichever comes later).”
A buyer also has the right to cancel the sales agreement within 10 days if a “significant change” has been made to the disclosure statement.
If a buyer wishes to cancel, the developer must refund the deposit (plus interest).
When a buyer makes a deposit, the developer needs to ensure “it is held in trust.”
Without a buyer’s consent or a court order, a developer cannot terminate a buyer’s purchase and sale agreements.
New condo units are covered by the Ontario New Home Warranties Plan Act, which is overseen by Tarion Warranty Corp. Click here for more information on Tarion’s warranty.
Part of that warranty includes deposit protection on homes and condo units. Deposits paid for new condo units are protected by Tarion up to a maximum of $20,000 and only for residential units.
Obligations for developers
A developer needs to ensure the condo is completed on time, and if the condo closing is “unreasonably delayed,” the buyer has a right to receive compensation.
The developer also has to set up the condo corporation by registering the required legal documentation and provide a disclosure statement. Click here for more information on what the statement includes.