How to Buy a Condo in Toronto: A Concise Guide

I Introduction

This guide outlines the distinctive features of condos, and special considerations when you buy a condo in Great Toronto Area (GTA), Ontario 

For the condo buyer who doesn't have much knowledge in real estate transactions, please refer to the home buyer guide, which covers comprehensive information on mortgage calculation, pre-approval, how to identify the right property, the related laws and regulations, the whole process of home buying, closing cost, agreements, and some specific topics.

Pre construction condo buying and condo assignment are different in the process compared to the regular condo resale market, which is outlined respectively in the different pages. 

II Basic Knowledge on Condos

What is a Condo

Residential condominiums are divided into 2 parts: units and the common elements.  A condo unit is a space that the owner holds sole ownership of. The common elements are jointly owned with other owners.

What is a townhouse condo

Condo townhouse appears like a townhouse but in essence, it is a condo by township since the condo townhouse buyer has the individual ownership of unit but shares the common areas with other owners

Common elements 

Those common areas include elevators, hallways, facilities, etc. The costs of maintenance and repairs of the common elements are shared among the owners. 

In addition to the common elements shared by all owners, some of the common elements may be for exclusive use. For example, exclusive use of the balcony, parking, storage, and locker, etc.

Types of Condos

Though the high-rise buildings are most popular, the condo actually covers a wide range of building types like apartment buildings, house condos, townhouse condos.

Therefore the determination of condominiums is more based on property ownership rather than the building types.

III Pros and Cons of Buying a Condo

Pros

• Location: Condo is mostly better located with easy public transit. It is more reflecting the lifestyle you are living.
• Affordability: Condo price is comparatively lower in the total price, which appears more affordable to the first home buyers and investors
• Less maintenance concern: The property management takes care of the major repairs, common area maintenance, and cleaning. 
• Security System: Comprehensive security systems are installed, which may include 24-hour front desk security personnel as well.
• Amenities and Facilities: Gym, swimming pool, game room, party room, conference room, etc
• Less insurance premium: Compared to house insurance, condo private unit insurance premium is much lower. The corporation also has a master insurance policy paid for by the condominium fees.
• Possible utilities covering: Though condo monthly maintenance fee is high, many condos cover one or more of the utilities such as water, heat, electricity.

Cons:

• Less privacy: Living close to others may cause discomfort for someone.
• High monthly expense cost: Condo goes with a high monthly maintenance fee. Those fees increase every year. The aged condo may request a prohibitively high fee. 
• Special assessments: Sometimes, condos unit owners may encounter unexpected high expenses for unbudgeted special maintenance and repairs.
• Regulation, bylaws, and restrictions: Unlike detached house, condo owners are under more regulation of rules, bylaws, and use restrictions.

Typical impacts on owners

• The obligation to pay the maintenance fee no matter if you use the amenities.

• The requirement and approval of the condo corporation for any changes except minor interior decorations.

• The sale of the unit may even need condo corporation's approval

• Restriction on smoking, pet, parking, etc.

IV Key considerations for condo buyers

Maintenance fees

• Maintenance fees (also called common expenses) are expenses that are paid by unit owners proportionally based on square feet.
• The fees cover insurance, management, administration, security system, repairs and maintenance, electricity, gas, security, etc.
• A portion of the fees is allocated to the reserve fund, used solely for future major repairs and replacements.

Comparison of amenities and fees to other condominiums

Different condos offer different services at different charges. Buyers can confirm this fee with the property management company and put a condition clause in the contract.

Conditions of the common elements

You could judge the performance of the condo property management by common elements conditions. It implicates the possibility of a need for the special fund.

Any changes made by a  condo seller  

• Any interior alterations and renovations 
• Any change in his exclusive common elements
• Are those changes approved by the board of directors of the condo corporation?

Tenant-to-owner occupancy rates

If you invest in a condo or have the potential possibility of renting out, you would consider the ratio. If over 25% of the occupant are tenants, you may think twice since the condo value may be impacted

Reserve fund

In addition to the monthly expense, the unit owners will be required to pay an additional monthly fee in case that the special fund reserve is not adequate.

Status certificate

• The status certificate is a very important document during the condo purchase, normally it is put as a condition clause to protect the buyer's interest.
• This document provides crucial information such as rules and regulations, the physical and financial condition of the condo. The certificate of status is provided within 10 days by the corporation upon request with a100$ fee.

Shared facilities

It mainly happens in a mixed-use building of residential and commercial units. Some utilities and facilities are shared, the residential unit owners may pay a disproportionate share of expenses.

Impacts on mortgage

• Any reserve fund inadequacy and Any special assessments may cause the lender’s concern.

• Lenders assess the tenant-to-owner ratio and prefer the higher percentages of owner-occupied units.

• Lenders use gross debt service (GDS) to calculate mortgages and include 50% of the monthly maintenance fee.

• A condominium’s value can be influenced by its view. The view may be blocked by potential new development in the vicinity.

Condo Agreement of Purchase and Sale Form 101 vs Form 100

• Form 101 requires a more detailed description of the property, such as type of unit, apartment, townhouse, suite or unit

• The legal name of the condominium corporation

• Parking and Locker 

• Common expenses 

• Status certificate.

• No special meeting warranties from sellers. This clause is to protect the buyer's interest from unexpected adversarial happenings.

• Condo corporations could say no to the deal, though it does not often happen.