What is a condominium?
The term "condominium" applies to a specific type of property ownership rather than to any distinct style of building. A condominium can be an apartment, a townhouse, a semi-detached or even a fully detached complex in which a residential or other type of unit is owned by the individual owner and in which the rest (common elements), including land, is owned in common with the other owners.

Is this a new idea?
The condominium concept has been around for thousand of years but has only applied to North American dwellings since the early 1960's. The concept has evolved to the degree where today, there even exists condominiums for horse stalls and "dockominiums" - condominiums for boats.

How are condominiums created?
Condominiums are created by being registered with the Land Registry Office. In order to obtain registration, condominiums must first pass through 9 significant approval process involving a number of local, regional and provincial bodies.

What is the registration process?
The process begins at the local city council, then progresses to the regional Planning Department, and then to the Ministry of Consumer and Commercial Affairs. Each of these official departments is concerned with ensuring that everything in your condominium is in keeping with the draft plan and is as represented to you in Condominium Declaration.

When does registration occur?
Registration occurs once the Ministry and local and regional municipalities are satisfied that everything contained in the Declaration and Description has been provided. Prior to registration, a thorough inspection of the entire project is completed.

How long does the registration process take?
The developer will guide the condominium project through the registration process as quickly as possible. Delays do not benefit the purchaser or the developer. Developers who are experienced at registering condominiums may be able to obtain registration in a very short period of time, often in under six months from the time the first home is occupied. Check with the developer to see when the company feels the project will be registered.

You may move into your new home before the condominium is registered. If so, you must pay the developer a monthly "occupancy fee". Transfer of title will take place at "final closing" which will occur shortly after the condominium becomes registered.

What priced home can you afford?
Personal factors greatly influence the price of home you can afford. Other debts, your general lifestyle and the amount you have available as a down payment are critical factors in determining an affordable house price. To get a general idea of the mortgage you can afford, take your gross (before tax) annual family income and multiply this figure by 2.5. Under this rule of thumb, a family with an annual household income of $50,000 could consider a mortgage of up to $125,000. The sum of your down payment and mortgage is what you can afford to invest in your home.

How much of a down payment will you require?
For those who qualify, a down payment of just 5% from your own cash resources is the minimum required by lending institutions. Under a federal government sponsored program, first time buyers can now purchase a home with a 5% down payment, provided they meet certain criteria. If you have owned a home before, a 10% down payment is the minimum required. However, it is to your advantage to aim for a down payment of 25% or more. By putting down at least 25% of the purchase price, you will qualify for a conventional mortgage. This is the ordinary or standard type of mortgage and offers the best value.

In addition, the more money you have for a down payment the easier it will be to arrange a mortgage and to carry it comfortably. Obviously, the smaller the size of your loan, the lower your interest will be.

What effect will the GST have on the price of your condominium?
The impact of the GST will be to add an additional 7% of the sale price onto the price of the condominium. However, any condominium purchaser who will be living in a home with a sale price less than $350,000, will be entitled to a rebate equal to 36% of the 7%. (This is equivalent to a total GST of about 4.5%) Most builders currently include the GST as part of the advertised price of their home.

What "extra" costs are there on closing?

In order to properly plan your finances, it is important to know what closing costs you may be required to cover, in addition to the purchase price of your condominium.

Legal Fees:
You solicitor's fees will vary depending on the services provided and the fee schedule of your solicitor. You can identify these amounts in advance by asking your solicitor.

Land Transfer Tax:
The land transfer tax will cost about $1,225 on a condominium that sells for $150,000. Your lawyer or sales representative can give you the exact amount for the condominium you are considering.

GST:
While 7% GST is charged on all new condominiums, the government will rebate to the purchaser 36% of this amount in many situations.

Property Tax:
This amount will vary depending on the condominium, and when final closing is taking place. The developer should be able to provide you with an estimate of property taxes for new condominiums.

Mortgage Insurance Fee:
If you are obtaining a mortgage for more than 75% of the purchase price, you will have to pay an insurance fee. The fee may be added onto the face amount of the mortgage if you are occupying your unit.

Contribution to Reserve Fund:
Two months of common element fees will be required to be submitted into the condominium reserve fund (for new condominiums only).

Ontario New Home Warranty Program Fee:
This amount is based on a formula of the selling price and is currently $639 for a condominium that sells for $100,000 to $150,000 and $696 for one that sells for $150,000 to $200,000.

There may be additional costs which you will have to pay. Ensure that you are aware of all costs that you will be required to pay on closing. Check with the developer, real estate agent and your solicitor for any other costs that might be payable.

What are the costs involved in owning a condominium?
After final closing has taken place, you will have to make payments each month such as mortgage payments, common element fees and utility costs. In addition, property taxes will also have to be paid.

Common element fees will cover the operating costs of the common elements and are subject to readjustment if expenses increase or decrease. Your unit will be charged a certain percentage of the project's total operating costs. This is established in the condominium declaration.

What should you look for in a sales representative?
Because the purchase of your new home is so important, you should deal with a sales representative with whom you are comfortable. Certain condominium projects are promoted and sold through the builder's own sales staff, while others are handled by representatives of an independent brokerage firm.

A developer's sales representative or an independent sales representative retained by the builder to market his project should have an in depth knowledge of the particular condominium. He or she should be able to answer all your questions and concerns.

An independent sales representative who is assisting you in your new home search should have a general knowledge of the project and be able to help you find out more details. This sales representative will know how to work with the developer's sales staff to ensure you receive proper service.

Should you check out the builder?
The reputation of the developer and builder is of extreme importance. Has the developer built other condominium projects or is this the first? Visit past projects and speak to some of the owners if possible.

The Ontario New Home Warranty Program's Home Buyer's Guide to Ontario Builders may give you additional information too. It lists builders and tells you the number of homes they have built, how long they have been enrolled in the program and if they have an "Excellent" or other type of rating with buyers for after sales service.

How important is after sales service?
After sales service is extremely important. In any new home regardless of the expertise and care of the builder, there are sure to be items that will require repairs or retouching.

In order to determine the service level you are likely to receive once you have moved in, find out whether the builder has any established service policies, whether he has a rating with the Ontario New Home Warranty Program and whether you will be provided with emergency telephone numbers.

Who runs the condominium?
Once the condominium is registered and more than 50% of the units have been sold, the affairs of the condominium corporation will be turned over to an owner-elected Board of Directors. The Board will carry out its responsibilities as designated in the Condominium Act, the Declaration, the Bylaws and the Rules and Regulations.

Because you are an owner, you have a vote and a voice in the running of the corporation. You may choose to run for an elected position on the Board or simply cast your vote for someone. Start your tenure as a condominium owner off right by attending all owners' meetings and staying informed. You will find the small amount of time it takes is time well spent.

What does the Board of Directors do?
In general, the Board of Directors manages the common elements of the condominium by setting the policy and procedures for running the Corporation. It directs the property management company in managing the day to day operations of the condominium Corporation.

What is professional property management?
As the management of a condominium project requires expertise in landscaping, finance, construction and administration, most condominiums employ the services of a professional property management firm. Professional managers have many systems and procedures for efficient operation of their support function. This would include computerized accounting procedures and management systems, experienced staff, access to suppliers who can provide bulk-buying discounts and good service, and careful selection of competent tradesmen. One of the key benefits of using a professional management company is that due to the periodic turnover of board members, such a company will provide the continuity of management to ensure a consistent level of quality in the condominium development. The responsibility of the board would be one of providing instructions to the management company and monitoring the company's performance.

What is a disclosure package?
Around the time of signing your agreement of purchase and sale, you will be given a disclosure package by your sales representative.From your point of view, this package is important as it ensures that you are familiar with your rights and obligations. The package also explains the procedures of running a condominium corporation and outlines the boundaries of your future home.

The disclosure package contains the disclosure statement, together with copies of the proposed declaration, description, by-laws, resolutions, rules, insurance trust agreement, management agreement, and budget statement for the condominium.

The following is a brief outline of each part of this package.

i.) The Declaration:

The declaration sets out the proportion of the common interests that are associated with each unit, the proportion of common expenses associated with each unit and describes the exclusive use areas.

ii.) The Description:

The description will be composed of two elements. The first is the pictorial description of the boundaries of the units and the common elements. The second element consists of the structural plans of the building(s).

iii.) By-laws, Resolutions and Rules:

The bylaws, resolutions and rules are formulated to ensure the successful operation of the condominium. They are concerned with the use of the common elements, the conduct of the members of the condominium (the owners) and provision for changes to the project and its rules.

iv.) Insurance Trust Agreement:

The insurance trust agreement, made with an insurance trustee, it to protect each and every owner. The agreement states that in the event an insurance claim is made, all insurance proceeds (if greater than a determined amount) are to be paid to the insurance trustee. The role of the insurance trustee is to make sure that any payments will be made fairly and for the benefit of the owners.

v.) Management Agreement:

Up until the time of the turnover meeting, the condominium complex will have been managed by the developer. The management agreement is included for the protection of the owners in order to ensure that the common elements are maintained without interruption.

vi.) Budget:

The budget, prepared by the developer, details the approximate monthly expenses the condominium can expect to experience.

 

What do common element fees cover?

The payments for the common elements are usually made to the Condominium Corporation and should cover the following items:

i.) Maintenance and Repair of Common Elements:

This covers costs for building repairs, maintenance and landscaping, recreational facilities (if any) and service equipment. Each owner is responsible for the cost of normal maintenance and repairs inside his unit. If you are looking at a high rise condominium, you will either own your parking spot(s) or it will be a common element that is for your "exclusive use". In either case, your common element fees will usually cover the maintenance on your parking spot(s) as well.

ii.) A Reserve or Contingency Fund:

Money out of this common fund will provide for the replacement or major repair of common elements that become obsolete or wear out (e.g. exterior painting, roof replacement, etc.).

iii.) Management Costs:

These are payments made to professional management firms or private individuals hired to administer all or part of the day-to-day functions of the condominium.

iv.) Insurance:

Find out what is covered by the policies of the condominium and arrange your own insurance accordingly. The condominium corporation normally carries public liability insurance and fire insurance for the common elements. Individual owners are responsible for ensuring personal belongings and any improvements made to the unit after the registration of the condominium.

v.) Will the fees increase?

Experienced condominium developers are familiar with the costs associated with operating a condominium. They will set the fees at a level that will enable the Corporation to pay all reasonable operating costs and put some money into a reserve fund.

 

For budgeting purposes, count on the fees increasing at the rate of inflation.

How are common element fees set?
Monthly maintenance fees are initially set by the developer for a term of one year from the date of registration. From his experience in operating other properties, the developer outlines all the costs involved in the services being provided, the recreational amenities offered, the staffing requirements etc., and apportions the maintenance fees among the owners from the total operating costs.

After the first year, the monthly maintenance fee is established by estimating the operating costs for the projected year, based on historical costs, contracts in place and anticipated future costs. The Board of Directors approves the budget, which will be the basis of the maintenance fee for the coming year.

The maintenance fees will vary from condominium to condominium depending on the level of services and amenities offered. The key thing here is to know in advance what you will be paying for. Ask you sales representative to show you the operating budget. You will know then exactly what you are paying for.

How do you find out about the different condominiums available?

There are several ways to find out about the availability of new or resale condominiums.

Real Estate Agents:
Real Estate agents are an excellent source of information. As service is their business, they will be pleased to do a lot of the legwork for you. They are knowledgeable in both new and resale projects and their advice should be taken seriously.

Newspapers:
Most projects will be advertised in the local newspapers, especially on Saturdays. In addition, a limited amount of resale condominiums are advertised in the classified section under "condominiums for sale". A free publication, the Real Estate News, also carries many new and resale condominiums. It is available in many supermarkets, convenience stores, banks and drug stores.

Driving Around:
Provided you have an area in mind, driving around is an excellent method of identifying condominiums for sale. Both new and resale condominiums should have signs with telephone numbers for more information. Most new condominium projects will have a sales centre with convenient hours for you to "drop by" and browse.

What is the Ontario New Home Warranty Program?
The Ontario New Home Warranty Program was established in 1976 to administer the Ontario New Home Warranties Plan Act. The Act had a dual purpose. First, to ensure that new home purchasers in Ontario are treated fairly by builders, and second, to encourage improvement in the quality of residential housing in Ontario.

The program ensures that buyers of new homes and condominiums are protected from financial loss due to defects in workmanship or materials, or major structural problems. It also protects buyers' deposits up to $20,000, in case the builder goes bankrupt or cannot complete the sale for some other reason.

Any questions concerning what the Act covers or for a free copy of "What every New Home Buyer Should Know" contact the O.N.H.W.P. at: 1-800-668-0124

What legal terms might you need to understand when buying a new condominium?

Closing:
The actual exchange of money and papers that transfers ownership of the new home from the builder to you is called the "Closing" and is conducted by the lawyers for each party. When the Closing is over, you receive keys to your house. Sometimes, with new condominiums, there are two closings, one for occupancy (Interim Closing) and one for registration (Final Closing).

Disbursements:
These are expenditures (usually by your solicitor) which relate to the purchase of your condominium.

Easement:
An easement is a right of way or a right to access given to utility companies which allows them to come onto the property to do repairs.

Estoppel Certificate:
An estoppel certificate is a statement issued by the condominium corporation as of a particular date with regard to the common expenses of the owner and to any default or lack thereof.

Final Closing:
The date on which ownership of you unit is transferred to you.

Interim Occupancy:
This is the period of time between occupancy and the date that transfer of title occurs.

Occupancy Closing:
This closing date applies to new, unregistered condominiums only. It is when possession of your unit is provided to you. It is the starting date of your interim occupancy.

Requisition:
A requisition is a request for information and clarification about the title to your property or a request for a problem to be solved.

Reserve Fund:
A reserve fund is a special account set up by every condominium corporation to provide for the ultimate replacement of common elements and assets of the corporation.

Survey:
This is a diagram showing the legal boundaries of the property as well as the location of the suite or unit on the property.

Title Search:
This is a review of the history of the ownership of the condominium. It is undertaken to ensure that nobody can claim ownership of it. (Obviously, this is a simple job for new condominiums!)