Resale vs New Build Condos

Tuesday Oct 11th, 2016

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I've modified a previous snippet to now include information on new developments and the terms one often comes across.

A “condominium” refers to a form of legal ownership, as opposed to a style of construction. Condominiums are most often thought of as units in high-rise residential buildings, but they can also be:

  • low-rise residential buildings (fewer than four storeys);
  • townhouse or rowhouse complexes;
  • stacked townhouses;
  • and more - but for now, we will only consider these.

Condominium living can be an appealing housing option. It’s often affordable and someone else handles much of the maintenance and repairs, such as shovelling snow and replacing the roof and external windows. Many condominiums have enhanced security features over those found in single-family houses and offer a wide range of social, entertainment and recreational activities.

However, purchasers should be aware — before they buy — of the many issues and considerations surrounding the purchase of, and the lifestyle in, a condominium. Condominium ownership is very different from owning a traditional freehold home.

First, it is important to understand what one owns in a condominium.

When you purchase a condominium, you own a private dwelling called a “unit.” Your unit is registered in your name. You also "share" ownership of the common elements and assets of the building, and the complex, with other owners of units.

Common elements may include lobbies, hallways, elevators, recreational facilities, walkways, gardens and other amenities. They may also include structural elements and mechanical and electrical services.

Some common elements may be outside the unit boundaries, but are for the sole use of the owner of a particular unit. Balconies, parking spaces, storage lockers, driveways and lawns are common examples.

Maintenance of all these is paid for by a calculated "maintenance" fee for each unit, depending on its size and what is included with the unit. For instance, if the unit has one, or two, parking spaces and a locker, the maintenance fee will also be adjusted accordingly. It is important to note that these maintenance fees are paid by each unit owner whether the facilities are used or not.

It’s important to be clear where your unit’s boundaries are located before you purchase. You’ll want to know, for instance, whether you’ll be paying for external window washing or repairs to your townhouse’s bricks or whether the condominium corporation will be responsible for this. You can find information about your unit’s boundaries in your condominium’s governing documents which is also known as the Estoppel Certificate (or more commonly known as the Status Certificate).  This document also tells you how much money is in the reserve fund that is managed by the Condominium Corporation. This is very important because should there come a time when a major, foreseen or unforeseen, renovation project is needed to be carried out, it is from these "reserve funds" that the project is paid for. If the funds are insufficient, the Corporation then turns to the individual unit owners to fund the shortfall. This divided amount is called a "Special Assessment" which could even run into thousands of dollars per unit owner as a one time (or installment) payment to fund that particular project. The Status Certificate also indicates whether the individual unit owner has any lien on the property for defaults in payment of the maintenance fees for example. It also indicates whether there are any legal cases against the Corporation. When one purchases a condominium unit, one of the normal conditions is that the Buyer's Agent asks the Seller to provide the latest Status Certificate that the Buyer's lawyer then reviews and advises the Buyer according to his/her findings.

Three of the most common concerns of condominium owners are pets, people and parking — the “three Ps.” That’s why condos have rules and restrictions around them and other issues, such as noise and the number of people who may live in a unit. It’s essential that you review the condo’s rules, bylaws and declaration before you make an offer, or at least before you waive the condition of the Status Certificate For example, in a condo-townhouse complex parking is only allowed in designated visitor parking spots and if there aren't too many available, one can get ticketed for parking in the lanes. One would have to go outside the complex and park. Of, if one is a "party person" you have to ensure that there's no loud music or dancing on hardwood/laminate floors that might disturb the neighbours around and below. Others may not allow any pets or have restrictions on their size.

Condominium fees may have to be adjusted from time to time to reflect the changing costs of goods and services and the state of the building’s reserve fund. Look for these adjustments in the following year’s budget.

Don’t expect a refund if the board overestimates the common expenses. Refunds are not commonly given to unit owners. Instead, surpluses are typically either applied to future common expenses or paid into the reserve fund.

If a unit owner sells a unit before the end of the condominium corporation’s fiscal year, the owner cannot obtain a refund for any prepaid common expenses but should provide for adjustments for prepaid expenses in the purchase or sale agreement when the property is being sold. The Seller's lawyer normally does this.

This is just a brief on condominium ownership, just to give you an idea of this style of living. It works for some, but may not be suitable for all.

Just for information, nowadays, one of the popular forms of condominium is a Loft. What is a loft?

A loft apartment is one that is traditionally built into former industrial buildings and reside on a higher floor above a business on the main floor. Today developers incorporate this concept into loft condominiums which are characterized by a higher than standard ceiling height with a large adaptable open space (open concept) and visible ducting on the ceilings which would, normally be covered by false ceiling in a conventional apartment. Lofts have the same legal style of ownership as a condominium.

When you purchase a unit from a developer/builder, either pre-construction, or otherwise, you will often come across words that you may not be familiar with and it's a good idea to get familiar with these terms. When you take possession of your property purchase, that is known as the closing date/final closing (ie. when title is transferred to your name). However, there is another term that you will hear when it comes to new builds: Occupancy Date/Interim closing.

With newly constructed condos, there is a two stage process on closing with an interim closing and perhaps a few months later, a final closing. The interim closing date is commonly referred to as the occupancy date, and the final closing or registration date is the date when title is transferred, or legally registered, from the builder to you. On the interim occupancy date, the building is deemed to be completed though some or all of your unit finishes may not yet be complete. Your contract will require that you pay monthly interim occupancy payments until the final closing date regardless if you have moved into the unit or not. This is called a "phantom mortgage". The amount of this mortgage is equal to the difference between your deposit and the purchase price (balance due on closing). The amount of the monthly interim occupancy payment is calculated as the total of:

  • monthly interest on the phantom mortgage;
  • an amount estimated by the builder for municipal taxes attributable to your unit on a monthly rate; and,
  • the monthly common expense contribution for your unit.

The monthly interim occupancy payments are treated as rent and are not refundable, nor are they credited to the mortgage payments on closing. On the interim closing date, the developer may require several months of post dated cheques for the monthly interim occupancy payment. You may also be required to pay the final deposit installment on the interim occupancy date. An example deposit schedule is given below:

5% - upon execution of the Agreement of Purchase and Sale
5% - in 120 days
5% - in 210 days
5% - in 300 days
5% - on interim closing


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