Looking at potential homes to buy can be an exciting experience. First, you need to figure out what you can afford and how much of a mortgage you’ll need. Then, once you find a condominium that matches your financial and personal criteria, you’ll want to ensure that it’s well managed and in good physical, financial and legal condition.
There are significant distinctions between buying a new condominium and a previously owned, or resale, unit. This article highlights what you need to look for, whichever route you choose. It will also tell you, how buying a condominium differs from purchasing a “fee simple” home and help you determine what you can afford and which experts to consult.
Developers often put new condominiums up for sale before their construction has been completed or even begun. You may be selecting your unit from a floor plan. This has advantages – you may be able to ask for changes – and risks – the as-built result may differ from the plan or what you had envisioned and the completion date could be later than promised.
When considering a new condominium, you should have a close look at your unit’s specifications and the building’s plan and other governing documents to ensure that your unit is acceptable and that you’re fully aware of regulations and the corporation’s budget.
You’ll want to find out from the developer what work must still be done on the project and check that your purchase agreement specifies a completion date and under what conditions the developer may change it. The developer should also be able to give you details about the property manager who will hold the key responsibility for the day-to-day running of the condominium.
Tips for buying a new condominium
Look over the unit’s drawings and specifications so you’re clear about the floor measurements. Do they reflect the actual floor area of the unit or do they include the exterior and interior wall floor space areas as well? Verify where the unit’s boundaries are and that your unit factor is reasonable.
Find out whether or not you can have changes made to the placement of walls, windows, doorways and types of doors (such as a pocket door) and what the costs would be.
Inquire whether the building and/or your unit will be accessible to someone with limited mobility. What universal design features will the unit include?
Find out if there are plans to reduce the ceiling height anywhere in the unit to allow for ductwork and other mechanical and electrical services. This can have an impact on the esthetics of the unit and the eventual location of lighting fixtures and furniture as well as wall decorations and fittings.
Check the future location of heating and air-conditioning equipment, ventilators and hot water heaters. Again, this can affect how much space you’ll have and the attractiveness of your unit.
Ask the developer key questions about construction quality, such as:
* Have any special steps been taken to limit noise between units?
* How are the units heated, cooled and ventilated?
* How are odours controlled?
* Is the building energy-efficient? If so, what special equipment or systems would need to be maintained?
* Has water efficiency been incorporated into the unit’s fixtures?
* Who operates and maintains the heating and air-conditioning systems?
* What options are there for suite wall and floor finishes, cabinets, and plumbing and lighting fixtures?
* How has the building construction taken into account environmental considerations?
Check with the developer and municipality about construction plans in the neighbouring area. Is the building part of a larger complex? What are the plans to build other structures, such as a high-rise, nearby? Could new buildings change the view from your unit significantly?
Be clear about what is and isn’t included in the purchase price so you can compare overall costs with other condominiums. For example:
* Are there amenities, such as pools and parking, and how are they paid for?
* Are finishes in the units included in the purchase price?
* Are there other charges over and above the purchase price you should be aware of?
* Are utilities (gas, electricity and water charges) covered in the monthly condominium fees or are they separately metered? (You don’t want to end up paying part of your neighbour’s utility bills.)
Verify, as best you can, that your monthly condo fees are realistic. Condo fees often increase after the condominium’s first year of operation because the developer may have agreed to pay for certain expenses in the first year, such as a concierge’s salary, but not in the second year. Fees can also increase after the first reserve fund study has been completed.
Investigate whether there are any “hidden” costs. For example, some developers take out long-term leases on building fixtures, such as furnaces, to save on capital costs. These costs are inevitably passed along to owners.
Check if the unit comes with a new home warranty, which ensures that the building is properly constructed and meets legal regulations. You should know what the warranty covers and for how long. Coverage on major components can run for as long as five to seven years after a building is completed.
Evaluate the current state of the construction project. Is it likely that the project will be completed by the date set out in the purchase agreement from the developer? It’s important to assess this before making your moving and financing arrangements. There can be an unexpectedly lengthy wait before a new condominium project is completed and you can move in.
Request a “disclosure statement” from the developer in those jurisdictions where legislation stipulates a developer must provide you with one before the sale agreement is binding. A disclosure statement will give you some indication of the rules, regulations and financial situation of the condominium corporation before you buy and includes, among other things:
* a summary of the condominium’s features and amenities;
* the condominium’s governing documents; and
* the condominium’s budget for the first year after registration.
Find out if your purchase agreement lets the developer extend the occupancy date. This is especially important if you are making arrangements to vacate your existing home by a specific date based on the original closing date. You should also check your provincial or territorial homeowner protection legislation to learn your rights if your agreed-upon occupancy date is missed.
Consult with your lawyer before signing any documents.
It is always better if you can seek the assistance of an experienced Condominium Realtor, when you first start discussing the purchase of a unit with the developer or developer’s in-house Sales staff. As mentioned before buying a condominium differs from purchasing a “fee simple” home and help you determine what you can afford and which experts to consult.
The documentation for a new condominium project will probably look like a short novel, but read like a complex drama. The documentation package consists of many pages and the lawyers may not have the time to read all these details. The in-house Sales People are working for the developer. Some purchasers think that if they go direct and discuss about a sale with the developer’s Sales Staff, the developer will reduce the commission payable to an agent from the sale price. It is not the case that money goes to the developer’s pocket in most cases.
Checklist for Buying a New Condominium
* Verify the unit’s floor area and boundaries and that your unit factor is reasonable.
* Find out if you can have changes made to the placement of walls, windows and doors and what the costs would be.
* Inquire whether the building and/or your unit will be accessible to someone with limited mobility.
* Find out if there are plans to reduce the ceiling height anywhere in the unit.
* Check how the units will be heated, cooled and ventilated and the location of heating and air-conditioning equipment, ventilators and hot water heaters.
* Ask the developer about noise- and odour-reduction measures, environmental features and options for suite finishes, cabinets and fixtures.
* Check with the developer and municipality about planned construction in the area.
* Be clear about what is and isn’t included in the purchase price so you can compare overall costs with other condominiums.
* Find out if your monthly condo fees are realistic, what they include, and when they’re likely to increase.
* Investigate whether there are any “hidden” costs, such as long-term leases on building fixtures, which will be passed along to owners.
* Check if the unit comes with a new home warranty and the extent of the warranty.
* Assess, as best you can, whether the project will be completed by the date in the purchase agreement before making moving and financing arrangements.
* Request a “disclosure statement” from the developer in jurisdictions where a developer must provide one before the sale agreement is binding.
* Find out if your purchase agreement allows the developer to extend the occupancy date and check your provincial or territorial homeowner protection legislation to learn your rights if your agreed-upon occupancy date is missed.
* Consult with your lawyer before signing any documents.
(The writer is a Condominium Specialist, Independent Consultant. He is a former member of the Canadian Real Estate Association and Ontario Real Estate Association. He was also a member of the Realtor Political Action Committee in Canada. E-mail : firstname.lastname@example.org)