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Investing in Toronto condos for life
by Denise Lash
In the same way a chameleon changes colour to suit its surroundings, a well-thought-out condo purchase will adapt to its owner’s changing circumstances. A realistic assessment of your needs, a modest amount of investigation and planning, and a bit of luck are all that are required to make your condo a multi-purpose living space and a sound investment for years to come.
My friend’s son recently started university in Toronto. Faced with the realization that his rent was going to form a substantial part of his bill, she bought a two-bedroom condominium for him. The “rent” he pays is just enough to cover the mortgage and monthly common expenses, but is still below market rates. He can put his savings towards other expenses and she can use the rent to pay down the condo, effectively keeping the money in the family. As her other children graduate and enter the workforce, the condo may see double duty as an affordable first home for them.
The choice of the unit was made with an eye to her own future. She hopes to travel in her retirement and the condo will give her the security and peace of mind to remain absent for extended periods. My friend is also realistic. She loves her current home, but knows there will come a time when it will be too much for her to handle. At that point, with the nest empty, she can downsize into the condo. In the years in between, she plans to rent the condo and use that income to pay down the mortgage.
What factors should you look for if you’re considering this strategy? First, since you’re in for the long haul, look for a unit built by a reputable developer. Speak to other owners and search the Internet. And don’t overlook the obvious: examine the construction materials and finishings in the unit. You don’t have to be an expert to recognize quality at this level.
Next, look for an active board of directors and management. Are the grounds and common facilities maintained? Is the parking garage in disrepair? Regular and attentive maintenance can prevent owners from being faced with potentially crippling special assessments to carry out major structural repairs down the road. Consult with your lawyer or agent to ensure that the condo’s rules and regulations will be appropriate for your needs.
You also require a building that will suit your needs and those of your children over time. If you plan to live in the unit in your retirement, you may place a premium on a building that offers guest suites and has adequate guest parking. Is having handicap access likely to be an issue for you in the future? You may also want to have 24-hour security and indoor parking.
Another factor you need to consider is location. If the condo is going to serve as student housing for your children, proximity to the college or university is important. Try to get a sense of the local community. Is the character of the area likely to remain the same or is it changing? If you are counting on an unobstructed view from your balcony, avoid purchasing in a building where other properties in the immediate vicinity are likely to be developed.
Of course, life doesn’t always go according to plan, so be realistic about whether you want the financial commitment of a second home. You also have to be prepared to take on the time-consuming duties of a landlord—or pay someone else to perform that role for you. But a condo can offer many years of varied use to all members of your family.
Denise Lash is a condominium lawyer at Miller Thomson LLP and host of the television show MondoCondo.
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Buying a New Toronto Condominium from a Builder
The Purchase and Sale Agreement and Cooling-off Period
A condo owner’s rights are more restricted than other homeowners.
The Purchase and Sale Agreement
Before you sign the purchase and sale agreement, check with your real estate lawyer to know your rights and protect them.
Get it in writing. If you have specific needs for how you want your unit completed, set them out in the agreement of purchase and sale. Never rely on statements made by the salesperson.
The 10-day Cooling-off Period
You may cancel your contract and receive a refund of your deposit with interest within 10 days of the time you receive a copy of the signed purchase and sale agreement or the disclosure statement (whichever comes later). In some cases, you may have more time to cancel the contract if there has been a material change as defined in the Condominium Act.
Your Builder’s Obligations
The builder must provide you with a disclosure statement, which contains a table of contents and specific information including:
* a general description of the property
* any pet restrictions
* the budget statement
* the number of units the builder intends to lease
* the estimated completion date for the construction of amenities
* the existing or proposed Declaration and By-laws.
The table of contents helps buyers find information quickly and easily in the Declaration, By-laws, or Rules. You should review the disclosure documents with your lawyer.
Your Closing Expenses
At the time of closing, you should expect to pay the following expenses:
* mortgage payment
* land transfer tax
* lawyer’s fees
* adjustments and other taxes
* the Ontario New Home Warranty Program fee.
Other financial obligations will include:
* monthly common expense (maintenance) fees
* the down payment (paid when you sign the agreement of purchase and sale)
* utilities (if not included in the maintenance fee).
The Tarion New Home Warranty Plan
The Tarion Warranty Corporation (Tarion) delivers the Ontario New Home Warranty Plan on behalf of the Government of Ontario. Tarion protects buyers of new condo units, if the builder is registered with them.
For example:
* Deposits or down payments (up to a maximum of $20,000 plus interest) will be returned if the builder goes bankrupt. (Note: Condo purchasers are also protected for deposits over $20,000 by the trust and excess deposit provisions of the Condominium Act.)
* Units and common elements are insured against defects.
Between six and 10 months after your new condo is registered, an architect or engineer must conduct a performance audit on your new condo. The common elements must be part of this inspection so that any deficiencies are identified on the year-end warranty claim form that’s submitted by the condo corporation – as the owner of the common elements – to Tarion. The performance audit also includes a survey of owners, asking them about any damage to their units caused by defects in the common elements.
Tarion will not accept warranty claims submitted by individual unit owners with respect to common elements. The warranty claims process involves specific steps – steps condominium corporations must take to submit a warranty claim; repair periods for builders to perform work on warranted items; and steps Tarion will take to become involved if necessary.
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Contact the Jeffrey Team for more information - 416-388-1960
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Condo boards need more regulation
Mark Weisleder – Yourhome.ca
I have received a growing number of complaints since writing about how condominium boards operate.
These include:
Inexperienced property managers who keep poor records, are delinquent in collecting common expense payments or enforcing condominium rules and procedures.
Systems falling apart because they were not maintained properly.
Budgets not being prepared in a timely fashion.
A small group of owners who fight any attempt to raise the common expenses, even if it means that systems fall into disrepair.
Unfortunately, there is very little government regulation as to who can be a condominium property manager. Yet the property manager, in most cases, has a tremendous impact not only on the condominium building being properly maintained, but on the actual resale value of the inside condominium units.
For example, if reserve funds are depleted to deal with unanticipated repairs and replacements, this will make any potential buyer wary of investing in that building.
The Condominium Act of Ontario requirements for a condominium director are that you be over 18 years of age, not be bankrupt and not be declared mentally incompetent.
That is hardly sufficient qualifications for the responsibilities of being a director who will be overseeing and approving budgets that could total millions of dollars and affect hundreds of unit owners. There are no other real educational or financial requirements.
Many condominiums look to retired accountants, who are owners, to appoint as directors. But not all buildings have these types of resource people who both live in the building and have the time to devote to being a board member.
The good news is that there are some things boards can do immediately to assist themselves.
They can join the Canadian Condominium Institute and attend educational programs that are offered during the year, to remain up to date on industry developments and obtain referrals for reputable professional managers.
There is also an interesting website called www.condoinformation.ca, which offers useful practical tips for condominium owners, such as how to deal with bicycles, bike racks and security – given that bikes are usually not permitted in the elevators, dealing with the number of pets in the building and preventing owners from endangering others by throwing things off their balconies.
Don’t just wait for the government to get involved because that may take years. Every unit owner needs to take some responsibility as to how his or her building is being run. The decisions made not only impact your rights to enjoy your common area facilities, they will also have a large impact on the resale price that you can expect to get.
For potential buyers, find out who is managing the building you are interested in. How many years have they been in business and do they manage multiple buildings or just this one?
What is the business background of the directors of the condominium corporation and how long have they been in the position?
Ask all of these questions in advance so that you are not surprised after closing.
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Contact the Jeffrey Team for more information - 416-388-1960
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