Want To Buy A Condo? Some More Things You Should Know

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Carrying on from 2 weeks ago, as promised.

Q: What kind of recurring costs can I expect?

As you would guess, there are monthly fees to pay. These will include the maintenance of the building and common areas, and reserve fund contributions, which will cover any major repairs or upgrades. In the event of a shortfall in the reserve fund, a “special assessment” may be levied against the owners to increase the fund.

While low monthly reserve fund contributions sound appealing, it may mean that later, when the garage roof or fences need repairing, there won’t be enough in the pot to pay for everything.

On a positive note, getting slammed with a special assessment is getting less and less likely.

“Today, most of the condos with reserve fund studies that I review have all caught up to their past insufficiencies because the new law obligated corporations to put in reserve fund studies,” a condo expert refers to the 2001 change to Ontario law that required reserve fund studies to be done every three years.

“In my personal opinion, when it comes to buying condos, there’s a stigma,” a condo expert says. “In the past, there were big surprises of special assessments that came out of the blue. But that’s going to happen a lot less in the future.”

Owners will also have to pay property taxes and mortgage payments, as well as any amenities and utilities not included in the common expenses. Any maintenance costs related to an individual unit, such as new paint or appliances, are also the responsibility of the owner. There’s also the cost of any personal condo insurance an owner may choose to buy.

The expert adds that even though it looks like an endless list of fees, potential buyers should not be scared.

“When you’re buying a used house, every future expense is yours,” he says. “When you’re buying into a used condo, you’ve got a reserve that covers all the expenses you may have. So that’s a big advantage that you don’t have when you buy a house.”

Q: Should I look into condo insurance for my unit?

While some owners may believe their condominium corporation’s insurance is sufficient, it does not cover everything.

The corporation’s insurance may cover common areas, boilers and other equipment, and some “perils” such as wind or fire damage.

Personal condo insurance isn’t required, but it could cover the owner’s personal belongings and liability. For example, if an owner’s oven catches on fire and damages the unit next door, personal insurance could protect you.

Pete Karageorgos of the Insurance Bureau of Canada says that because special assessments are used to pay for emergency repairs or upgrades, some insurance plans could cover condo owners the same way a homeowner would be covered in the event of wind damage or fire.

“It’s related to the event that caused the special assessment,” he says of personal insurance coverage. “As long as it’s one of these perils, the individual could be reimbursed.”

Condo buyers and owners, Karageorgos advises, should speak to insurance brokers about plans that could cover them in the event of a special assessment and what kinds of repairs would be covered.

“The important thing is to shop around, talk to an insurance broker and find what’s right for you,” he says.

Q: Once I’ve purchased a condo, should I go to my condo meetings?

The short answer is yes.

“I mean, personally, I don’t know if I would. They’re probably pretty boring,” the expert jokes. “But it’s buyer beware, and you should look at your investment.”

He recommends at least reviewing your condominium corporation’s financial statements and budget to make sure there are no red flags that could cause headaches in the future.

Another expert, though, says that being engaged in the financial and physical health of the building is crucial, and that means attending meetings.

“It’s the biggest thing,” he says. “Be involved. Think about what’s important to you.”