Condo challenges: The particulars of the condominium market
Condominiums are a different beast from other types of real estate. Two seasoned Ontario REALTORS®, both with more than 25 years of experience in this unique market, discuss the specific challenges of working with condos. They share their insights and experiences to help you navigate a market that is distinct from the usual residential sales.
Understanding condo sales
“When you buy a condominium, you’re buying part of a corporation,” says Charles Sezlik, an Ottawa Realtor with 25 years’ experience in condo sales. “It’s unlike other residential purchases in that you have full ownership rights to the dwelling but you’re also part of a larger community.”
Buying a condo should be viewed as similar to purchasing stock, he says, and the best approach is to research the corporation thoroughly before investing. “There are many things buyers must review before they purchase a condo,” says Sezlik. “First, there’s the status certificate, which is a summary of the building’s current status. It’s a general overview that outlines the condominium corporation’s budget, any pending legal actions and any special assessments for which the owners may be responsible — to name a few.”
Realtors will typically include in an offer a condition that allows the buyers and/or their lawyers to review and accept the status certificate. The status certificate is usually reviewed once an offer has been made and accepted. However, the certificate may be obtained earlier in the process if desired.
“Buying a condo should be viewed as similar to purchasing stock, and the best approach is to research the corporation thoroughly before investing.”
Usually, the Realtors or owners order and obtain the status certificate from the property management company, which normally has 10 days to supply that document. If the lawyer is satisfied with the status certificate, he or she then notifies the buyer to recommend waiving that condition.
Linda Pinizzotto is a Toronto Realtor and the founder and president of the Condo Owners Association of Ontario (COA). She has worked with condo buyers and sellers for 35 years. Pinizzotto says the status certificate also confirms that the building has an insurance policy and solid reserve funds. In addition, it gives the prospective buyer information about the individual unit and whether the maintenance fee payments are up to date. The buyer’s lawyer will confirm legal names of ownership and level description of the unit, as well as parking and locker details.
“With condos, you’re not buying an individual property — you’re buying into a corporation with a lot of other owners and you will have restrictions,” says Pinizzotto. “People must understand what they’re buying. I always advise clients to learn as much as they can beforehand.” She notes that if people want to buy a place that increases in value, they should pay attention to the maintenance fees. “If maintenance fees are too high, that will affect the value of the property and will limit their ability to move up to a different property in the future if they wish.”
She also advises Realtors and buyers to learn more about the COA. “It helps clients keep an eye on their condominium boards and investments.”
Do some reading
Realtors are advised to learn as much as possible about the Condominium Act, 1998, the law that governs condominiums in the province. This legislation continues to be in effect today. However, since the act came first came into force, the condo sector has changed greatly in size and complexity. For that reason, the government intends to overhaul the act and update it in ways that address modern issues and complexities, addressing concerns such as dispute resolution and better access to information for condo owners.
Proposed changes to the act are currently being reviewed by the provincial legislature. Bill 106, Protecting Condominium Owners Act, 2015, aims to amend and update the original act. Realtors are advised to follow the news in the months ahead as these updates are discussed. Watch for more details in the Realtor Edge newsletter.
When dealing with a specific offer, reviewing the reserve fund study is crucial, Sezlik says. It’s a technical audit of the building that is “extremely relevant.” Details of the reserve fund are available as part of the status certificate package, and going through this thoroughly ensures that buyers have a complete financial picture before a deal is finalized. “In Toronto, the seller usually pays for it, but in Ottawa it’s the buyer who usually orders and pays for it. Different markets have different nuances, so you need to be aware. It’s simply a matter of local protocol.”
Ask about amenities
In purchasing a condominium, buyers should look beyond the individual unit, Pinizzotto says. “You can always change your own unit at a reasonably low cost, but you must know that you’ll like and enjoy the building too. You’re buying into a lifestyle.”
Buyers are advised to take a close look at a building’s common elements and make sure they understand what is covered in the common elements, as well as any restrictions. “If you paint the walls of your balcony and it turns out they’re a common element, you may get a bill for the cost of restoring the balcony to its original colour,” Pinizzotto says.
Realtors who work frequently in condominium sales are advised to get out and see as many as possible to learn the differences between various properties in their area. For example, buyers in a new building may own their own parking spaces, but in older buildings, they may not have a designated spot. Some buildings also have restrictions about pets, and buyers should be aware of all of these details.
“Buyers are advised to take a close look at a building’s common elements and make sure they understand what is covered in the common elements.”
“You can find three 20-storey towers located throughout the city, each with two-bedroom units being 1,000 square feet, but they’re all unique,” Sezlik says. “Each building will be different in terms of age, amenities, floor plan, rules and regulations.”
Buyers should think clearly about how often they will use amenities such as a swimming pool, they advise. Properties with more amenities can be expensive to keep up and the maintenance fees will likely be higher.
Determine what is important to your buyers and what they are willing to pay for, Sezlik advises. Focus on your clients’ needs and learn the features of various properties in order to find the best match. For instance, if your buyers plan to rent out their unit, they may want a building with fewer amenities. All buyers need to know whether expenses such as utilities are included in the maintenance fees.
With the boom in condo development over the past seven years, says Pinizzotto, many buyers are choosing condo units from plans, which can be a tricky proposition. She notes that some consumers who bypass Realtors altogether choose to deal directly with a developer. However, these buyers may be unaware of potential pitfalls that an experienced Realtor will notice.
“For instance, when a builder quotes square footage, he may be talking about the inside perimeter of the unit, not the living space,” she says. If Realtors have been working with a client interested in a new condo, it is advisable to accompany those clients on their initial visit to the condominium sales office or you may not get paid for your assistance, she says. Realtors have a valuable role to play in new construction sales, because they can read plans and know the correct questions to ask, she notes.
“Buyers should know if they’ll be living next to the elevator shaft or the trash room where there may be a smell, or what kind of mechanical system the building has,” adds Sezlik. “Some consumers work directly with the developer and when they move into their own unit, they’re surprised or disappointed. The finishes are different or other elements aren’t exactly what they expected.”
“Realtors have a valuable role to play in new construction sales, because they can read plans and know the correct questions to ask.”
Condo buyers should be informed of the issues that can arise within this unique market before they buy, he says. A seasoned Realtor can point out potential problems or discrepancies in advance. “This is a big investment and there is much to consider. Working with someone with a lot of experience goes a long way.”
Tips for working with condos
- Make sure you know the ins and outs of the Condominium Act, 1998. Watch also for news on Bill 106, a proposed update to the original act that is currently being discussed and debated by the provincial government.
- Get information about the Condo Owners Association to provide to your clients so they can learn more. The COA has 26 divisions across the province and represents 18,000 condo owners who have registered to be part of the association.
- Understand the various types of condominium properties, including apartments, townhomes and work/live properties.
- See as many condo properties as you can since they are all different.
- Remember that all renovations to a condo must be approved by the condominium board.
- Check that maintenance fees are no higher than 1.5 per cent of the value of the unit in order for the investment to appreciate properly.
Story by Elaine Smith.
Sources: Linda Pinizzotto, Charles Sezlik