Condos come in all shapes, sizes and types—and there’s more to these residences than meets the eye. Simply put, condo owners hold the title to their own respective units and share ownership and responsibility of and for the operating costs of the balance of the property, including common elements such as lobbies, hallways, recreation areas, pools, gyms and parking lots. A monthly maintenance fee is paid by each unit owner. This fee generally includes water, building insurance, common element maintenance, upkeep, security, concierge and property management salaries. Rarely, hydro and cable fees will also be included in the monthly maintenance payment.
Here are the main categories of condo dwellings:
The Condo Apartment
A condo apartment consists of one unit within a larger building. Owners hold title to these units, and also pay monthly maintenance fees towards the care of the building and its elements. A condo apartment comes in many styles, including suite, two-story and loft-style. Some condos are very luxurious, with sweeping balconies and plenty of space, while others are fairly small and may only consist of one or two rooms.
The Condo Townhouse
The interior of a condo-style townhouse is owned in the same way a condo apartment is owned. The exterior of the condo townhouse is shared, and monthly fees are paid towards upkeep of exterior and other common elements. Rather than gyms or recreation rooms, an amenity of a condo townhouse may include a playground or small park.
With a co-op, shares are bought in a corporation which then leases the buyer an apartment or townhouse style unit. Often with a co-op, a down payment between 30 and 50 per cent is required. Co-ops are not as popular as condos because it can be more difficult to garner a comparative return on investment in the end.
Amenities, Maintenance & More
The concept of maintenance fees is a mysterious one for prospective condo buyers and seasoned condo dwellers alike – but it’s actually rather simple. Fred Moneta, a Sherwood Park property manager who oversees the prestigious Morgan condominium in downtown Toronto, explains: “Maintenance fees are determined by budget of the building. The board is charged with producing this budget annually, which covers all of the expenses of the building. Once we have a gross budget number, we simply split that up between the percentage that each owner has of the building. The percentage each owner has is fixed in a declaration that was developed around the time the condo was built, when a survey was done to determine exactly how much percentage of the building each unit made up. We collect this fee in twelve equal installments. It’s not magic, but confuses a lot of people. When buildings are sold, ‘marketing budgeting’, which doesn’t explain things clearly, but is often used to attract potential buyers.”
These maintenance payments go towards the upkeep of the basics, including lobby, parking lot and exterior. Other amenities, including recreation rooms, pools, saunas, jacuzzis, gyms, media rooms, party rooms, rooftop common areas, barbecues and more are also covered by this fee. In general, the more amenities a building has, the higher the fees will be. Property managers, concierges, security guards and cleaning staff must also be paid through the annual budget, and provision must be made for special jobs such as window and garage cleaning and elevator maintenance.
Although maintenance fees may seem like an unnecessary expenditure and make buying a home independently seem more attractive, many do not take into account the realities of paying to keep up a home. Cleaning equipment, landscaping, lawnmowers and snow blowers are expensive – and there’s certainly something to be said for not having to do the job yourself! Plus, when you live in a condo, you can be assured that providing the building is well managed, every detail will be taken care of and the integrity of your investment will be respected and maintained year after year.
How Condos Function
Purchasers of pre-build and brand-new condominiums face a unique two-step closing process. The reason for this is that new condos are generally ready for occupation before the legal title can be given to the owner. Two steps have been introduced to deal with the fact that closing dates often take place after a building is legally registered.
The first stage is the interim closing. This takes place on or around the date the unit is ready for occupancy. On this date, the purchaser pays the balance owing under the contract of purchase, and this money is then held in trust until the purchaser receives legal title. Legal title is transferred on the final closing date.
Between the interim and final close, the purchaser must fulfill all of the agreements laid out in the Agreement of Purchase and Sale, such as abiding by the rules and regulations of the condo and paying a monthly occupancy fee. The final closing takes place when the condo corporation is registered. This is when the purchaser is required to pay the balance of the purchase price, and the deposit money is released from trust. The developer will then provide the purchaser with a deed for his or her unit.
Generally, a builder will warranty all final finishes for a certain period of time following the completion of the building. During this time, the builder is responsible for all repairs and amendment of deficiency. The builder works with the board and property manager to get any necessary work done. Once the warranty period runs out, all repairs and maintenance become the responsibility of the condo corporation and its residents, and are paid for by the annual maintenance fees.
When the need for general repairs arises, the property manager and condo board begin reviewing potential service providers, and generally ask for a range of service bids. “We don’t always necessarily choose the lowest bidder, but make the decision based on quality and value,” says Fred Moneta, a Sherwood Park property manager. The cost of any repairs are taken from the annual budget.
A condo corporation will generally have a blanket policy for the building, but unit owners must still purchase their own home insurance. Homeowners insurance for condo dwellers is slightly different from general homeowners insurance, given that a condo unit owner does not own the entire building. This insurance will protect a condo owner’s personal property from fire, storm, explosion, smoke, theft and more. Improvements and balconies are also generally covered under this insurance. When purchasing insurance for your condo, go with a reputed insurance agency and be sure you are clear on what is covered. Next, make an appointment to meet with a property manager or board member to learn exactly what is covered in the building’s general insurance plan.
By Marissa Ponikowski www.hgtv.ca