Condominium Buyer’s Guide
Chapter 1 — Condominium Basics
Condominium living can be an appealing housing option. It’s often affordable and someone else handles much of the maintenance and repairs, such as shovelling snow and replacing the roof. Many condominiums have enhanced security features over those found in single-family houses and offer a wide range of social, entertainment and recreational activities.
However, purchasers should be aware — before they buy — of the many issues and considerations surrounding the purchase of, and the lifestyle in, a condominium. Condominium ownership is very different from owning a home under traditional fee simple tenure. This section of the Guide will help you better understand this unique form of ownership and prepare you for successful condominium living.
What is a Condominium?
A “condominium” refers to a form of legal ownership, as opposed to a style of construction. Condominiums are most often thought of as units in high-rise residential buildings, but they can instead be:
- low-rise residential buildings (fewer than four storeys);
- townhouse or rowhouse complexes;
- stacked townhouses;
- duplexes (one unit over another) or a side-by-side;
- triplexes (stack of three units);
- single-detached houses; or
- vacant land upon which owners may build.
There are even mixed-use condominiums that are partly residential and partly commercial buildings. Condominiums come in various sizes with diverse features and can be found in almost every price range.
Condominium buyers have three choices. They can buy a new condo, a resale condo or a conversion condo.
“New condominiums” refer to units that have not been previously occupied. They can be in the planning stage, under construction or recently completed and are usually purchased from a developer. For many buyers, they’re an attractive option because of their fresh appearance and modern fittings, surfaces and appliances. They also often give purchasers the chance to customize their units.
“Resale condominiums” are units that have already been occupied, typically in older buildings, and are for sale by the current owner. One of the advantages of purchasing an existing condominium is that you get to see the unit, building and grounds before you make your purchase. You also have the opportunity to meet other unit owners, speak with a representative of the board of directors of the condominium corporation and ask questions of the property manager.
“Conversion condominiums” refer to units in a building that was previously used for something else but has been, or is to be, renovated for residential use. For example, many loft-style condominiums are converted from former commercial or industrial buildings. Conversions can also refer to the switching of units from rental units to condominium units.
A Unique Form of Ownership
Owning a condominium differs from owning a conventional home in several ways. Key differences include:
What do you Own?
When you purchase a condominium, you own a private dwelling called a “unit.” Your unit is registered in your name. You also share ownership of the common elements and assets of the building and community.
It’s important to be clear where your unit’s boundaries are located before you purchase. You’ll want to know, for instance, whether you’ll be paying for window washing or repairs to your townhouse’s bricks or whether the condominium corporation will be responsible for this. You can find information about your unit’s boundaries in your condominium’s governing documents.
Some condominium units (called freehold condominiums) include ownership of the land your home is on. If this is the case, your unit may be the entire house including the exterior walls, the roof and the lawn. You may want to carefully review the condominium corporation’s site plan, prepared by a professional surveyor, so you know exactly where your unit’s boundaries lie.
Common elements may include lobbies, hallways, elevators, recreational facilities, walkways, gardens and other amenities. They may also include structural elements and mechanical and electrical services.
Some common elements may be outside the unit boundaries, but are for the sole use of the owner of a particular unit. Balconies, parking spaces, storage lockers, driveways and lawns are common examples.
What will you Pay?
In addition to paying for your unit and a proportionate share of the common property, you also pay monthly condominium fees, along with all of the other unit owners. This covers the upkeep and replacement of common elements — whether you use them or not. The fees may also cover the corporation’s insurance policies, utilities and services such as snow removal.
Part of those monthly fees may be put into a reserve fund to cover the estimated cost of future maintenance and repairs.
Required by law in some provinces and territories, a reserve fund study is often used to tell condo owners how much money should be paid into the reserve fund. Conducted by an engineer or other professional, it involves a detailed examination of all components, an analysis of when repair and replacement are expected, and an estimate of these costs.
Condominium fees may have to be adjusted from time to time to reflect the changing costs of goods and services and the state of the building’s reserve fund. Look for these adjustments in the next year’s budget.
Don’t expect a refund if the board overestimates the common expenses. Refunds are not commonly given to unit owners. Instead, surpluses are typically either applied to future common expenses or paid into the reserve fund.
If a unit owner sells a unit before the end of the condominium corporation’s fiscal year, the owner cannot obtain a refund for any prepaid common expenses but should provide for adjustments for prepaid expenses in the purchase or sale agreement.
Did you know?
Even though condominium owners often pay the same municipal taxes as other homeowners, they don’t always receive services covered by those taxes, such as garbage pickup, road repairs and snow removal. This is because condominiums may be considered (by the municipality) to be private communities, some with limited access. Before you buy, ask what municipal services the condominium corporation receives and what other services are carried out by independent contractors — and reflected in your condo fees.
What can you do?
Three of the most common causes of annoyance to condominium owners are pets, people and parking — the “three Ps.” That’s why condos have rules and restrictions around them and other issues, such as noise and the number of people who may live in a unit. It’s essential that you review the condo’s rules, bylaws and declaration before you make an offer.
Before buying, find out what common property elements are for your use only and what restrictions apply. For instance, restrictions may prevent you from parking a boat, RV or commercial vehicle in your parking spot or there may be restrictions on what you may place on your balcony.
Your Role in a Condominium Community
When you become a condominium owner, you become a member of a condominium corporation and have certain rights and responsibilities. One of your key rights is the right to vote at general meetings on matters that affect the condominium. You are also eligible to help elect the board of directors.
The board of directors takes responsibility for the management of the corporation’s business affairs. The board is generally made up of individual condominium owners.
As an owner, it’s your responsibility to participate in the governing of the condominium. You can do this by attending general meetings and information sessions, serving on the board of directors or on a committee and voting. It’s also important to read the minutes of meetings and other information sent to members, such as the condo newsletter, as well as the corporation’s budget and financial statements.
You are now part of a community with shared responsibilities. If the parking garage in your development unexpectedly starts to crumble and there aren’t enough funds on hand to repair it, you — along with all of the other owners — must pay the increased condominium fees or a lump-sum payment to cover its repair.
Did you know?
Condominium corporations are legal entities. You and all of the other owners can be sued for matters for which you’re collectively liable. Likewise, you and all of the other owners have the right to sue for damages to the common property.
Condominiums Across Canada
Condominiums across the country have many similarities and are generally run along the same principles. For example, condos in all provinces and territories are corporations whose units are privately owned and whose common elements, such as elevators and hallways, are owned by all of the condo members.
But there are a number of differences. In British Columbia, for instance, the legal term for condominium corporation is “strata corporation;” in Quebec, it is “syndicate” or “syndicate of co-owners.” In some jurisdictions, a purchaser can ask the condominium corporation for vital information about a particular unit and the corporation as a whole, such as whether the current owner (in the case of a resale unit) has defaulted in paying his or her common expenses and if there are any outstanding lawsuits against the corporation; depending on the jurisdiction, this is called either a “status certificate” or an “estoppel certificate.”
It’s not only condominium terminology that varies from place to place. Some jurisdictions have detailed rules addressing condominium reserve funds, which cover the costs of major repairs and replacement of the common property over time; in other jurisdictions, reserve funds are not mandatory.
Chapter 2 — Condominium Governance
Chapter 2 — Condominium Governance
Condominiums are communities and some run more smoothly than others. Before buying a unit, ensure you understand how condominium corporations make decisions about finances, common property, rules and regulations.
This section outlines the role of the board of directors, your voting rights and responsibilities, common rules and restrictions as well as the differences between “self-managed” condominiums and those that hire property management firms to handle their daily operations.
Who Makes up the Board of Directors?
The board of directors (or “council” in B.C.) is generally elected by, and made up of, individual condominium owners. Their number, qualifications, election, term in office, pay (if any), removal from the board and other related matters are outlined in provincial or territorial legislation and/or the condominium bylaws.
The board of directors meets regularly to handle the business affairs of the condominium corporation, including policy and finances, and makes decisions about the upkeep and repair of the common property.
How are Voting Rights Determined?
The board of directors makes many decisions for the condominium but certain decisions must be made by unit owners. Each unit owner has voting rights at meetings.
Your voting rights will be determined by:
- the condominium legislation in your province or territory; and/or
- your condominium’s governing documents (such as its declaration and/or bylaws); and
- your financial standing with the condominium corporation. If you’re in arrears with your contributions, you risk losing your voting rights.
Some condominiums assign one vote per unit. Others weight the vote based on ownership of the common elements. This ownership interest is often called a “unit factor,” “proportionate share” or “percentage of ownership.”
The unit factor for any particular unit will generally be calculated in proportion to the unit’s value in relation to the total value of all of the units in the condominium corporation. For example, a tenth-floor, three-bedroom corner suite with a rooftop garden will typically have a greater unit factor than a two-bedroom basement unit.
Your unit factor is also used in calculating the monthly fees you must pay toward the upkeep and renewal of the common elements.
Must I Attend Meetings and/or Serve on Committees?
You may have to, depending on what your condominium’s rules or other governing documents require. Whether it’s compulsory or not, you have a responsibility to yourself and to other owners to become involved in your condominium community.
Meetings are a forum for owners to discuss the running of the condominium and to vote on changes to the common property, bylaws and other matters. For a vote to take place, there must often be a minimum percentage of owners present (called a “quorum”), so everyone has a responsibility to attend.
Did you know?
If you can’t attend an owners’ meeting, you may have the right to send someone in your place. This person is called a “proxy.” When owners will be voting on important matters, such as changing a bylaw or electing a new director to the board, you can send your vote via a proxy. Typically you would need to appoint your proxy in a signed document.
Am I Bound by Decisions if I didn’t Attend Meetings or Vote?
Yes. Your board of directors holds regular meetings and has the right to make certain decisions that affect the corporation at those meetings, whether or not you are present.
Decisions that require the approval of unit owners are made at annual general meetings or special meetings. You should be notified about these meetings well in advance and plan to attend or appoint a proxy. If you don’t cast your vote and a motion passes, you are bound by that decision.
What’s the Difference Between Condominium Bylaws and Rules?
A condominium’s bylaws govern how the condominium corporation is run. They often address matters such as the election and practices of the board of directors, the collection of common expense contributions and how rules are passed.
Rules focus on day-to-day concerns of condominium living and vary from condo to condo. They may be very strict or very relaxed depending on the nature of the corporation, but they help ensure that the condominium is a safe, pleasant and attractive place to live. Rules also spell out what your rights and obligations are as an individual owner.
Rules frequently cover:
the maximum number of occupants per unit;
when you may use certain amenities, such as the pool or exercise room; and
the appearance and/or alteration of the unit space.
Carefully review and consider all rules and obligations prior to purchasing a unit. You can get a copy of the rules from the seller, the property manager or the board of directors. Make sure your copy is up to date.
Provincial and territorial condominium legislation sets out what matters can be covered by bylaws, and sometimes rules. All bylaws must be consistent with both this legislation and the condominium corporation’s declaration. Rules should not deal with matters covered by bylaws otherwise they could be struck down if challenged.
Condominium legislation in some jurisdictions doesn’t differentiate between bylaws and rules.
Before you buy, ask current residents if they’ve experienced problems with noise, pets, parking, smoke or odours from other units and how they were handled. This is particularly important if you’re moving from a single-family home to a multi-unit condominium.
Property Management Firms Versus Self-Managed Condominiums
Most condominium corporations hire a property management company to handle their day-to-day operations, under the leadership of their boards of directors. These tasks often include:
collection of monthly fees and any special fees;
cleaning and maintenance of common areas;
payment of common area utility bills;
operation and maintenance of heating, air-conditioning and other building systems; and
snow and garbage removal.
Other condominiums are “self-managed.” Their boards of directors — and in some cases, volunteers who are residents or owners — carry out the day-to-day operational tasks.
Self-management can save money as well as give owners a greater sense of control and community. But it has several challenges including:
finding volunteers who have knowledge of building maintenance, budgeting, insurance and legal issues and who can devote enough time to the condominium’s day-to-day business;
lack of continuity (due to volunteer turnover); and
a weak system of checks and balances.
When considering the purchase of a particular condominium, ensure that you are comfortable with its management, whether the condo contracts out this responsibility or takes it upon itself. There may be implications for both your condo fees and any obligations you may have toward the building’s operation and maintenance.
Self-managed condominiums can work well, but it’s important to have strong support from a lawyer and an accountant who are experienced in condominium operations.
Chapter 3 — The Pros and Cons of Condominium Ownership
Chapter 3 — The Pros and Cons of Condominium Ownership
Wondering whether or not condominium living really is the right choice for you? You may love the idea of ditching your snow shovel and lawn mower when you move into a condo, but you might not be so happy about leaving your satellite dish behind to comply with a bylaw.
Like most types of accommodation, condominiums have their advantages and disadvantages. Carefully consider all of these pros and cons when deciding whether or not a condo fits with your lifestyle, personality and financial situation.
Pros of Condominium Ownership
- Fewer maintenance and repair responsibilities.
- Access to on-site amenities, such as a sauna or swimming pool, which you otherwise might not be able to afford.
- Enhanced security features in some condominium units. You’ll also have peace of mind while you’re on vacation knowing that your neighbours are close by.
- Monthly maintenance or condo fees are usually predictable.
- You have a say in the running of the condominium corporation. As an owner, you have voting rights and can be elected to the board of directors.
- A community that may have a wide range of social, entertainment and recreational activities sometimes geared to a specific lifestyle (seniors, for example).
Cons of Condominium Ownership
- You may not be able to decide when maintenance and repairs get done
- You may have to pay for amenities that you might never or rarely use
- Less privacy in some condominium units and possibly more noise
- Possibility of special assessment charges for unexpected repairs
- Like most communities, a condominium attracts individuals with a variety of personalities. It can sometimes be a challenge to reach a consensus
- Less space in some condominium units
- Possible restrictions on things like noise levels, parking, pets, smoking and even the style and colour of things like doors and window coverings.
- Evaluation Checklist: Is Condominium Ownership Right for me?
If you answer “yes” to most of the following, then buying a condo may be a smart move for you.
For all Condominium Dwellings
I like the fact that a condominium is an “instant community” and my neighbours won’t be far away.
I want to participate in the running of the community with other condominium owners.
I don’t want the hassle of shovelling snow, cutting grass and other outdoor chores.
I’ll use some of the condominium’s amenities.
I understand that I will pay monthly fees for maintenance and repair of the condominium and will budget accordingly.
I know there may be restrictions on the number of occupants in my unit, pets, noise, parking, etc.
I’ll read through the condominium’s documents before I buy so there’ll be no surprises.
I understand that a board of directors can make decisions on my behalf.
Also, for Condominium Apartment Units
I’m an empty nester or single and would be satisfied with the space provided in a condominium apartment.
I’m reassured by the building’s security measures, such as entry buzzers and video surveillance cameras.
Chapter 4 — Buying a Condominium
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 section 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.
Buying a New Condominium
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.
For more information on what to look for when buying a new unit, see Tips for buying a new condominium.
When you buy a new condominium, be prepared to pay occupancy fees — sometimes called “phantom rent” — to the developer. Occupancy fees cover the period between the time you take occupancy of your unit and the time you take ownership of it (once the unit is registered).
Buying a Resale Condominium
When you purchase a resale unit you have the advantage of seeing what you’re buying. It’s clear how much space you’ll have, what the layout is like and where the common elements are. But you’ll also want to find out about less obvious aspects, such as what steps have been taken to limit noise between units and how odours are controlled.
On the financial and legal side, you should review the corporation’s annual operating budget, financial statements and estoppel or status certificate. The estoppel or status certificate is a package of legal documents that may include the declaration, bylaws, rules and information about the corporation’s insurance, reserve fund, property management contract and any outstanding judgments. You may have to pay a fee to cover the corporation's costs of providing these documents, but it will be well worth it — so much so that you should make any offer to purchase conditional on a satisfactory review of these documents.
For more information on what to look for when buying a resale unit, see Tips for buying a resale condominium.
The Pros and Cons of New Versus Resale
When deciding whether to purchase a new or resale condominium, you’ll want to consider the advantages and disadvantages of both.
Some Pros of Buying a New Condominium:
- A lower purchase price (depending upon market conditions).
- A greater choice of locations within the building (if applicable).
- A broader range of options and/or upgrades.
- Less risk of having to undergo costly, noisy and intrusive repairs and renovations.
- New home warranty protection.
Some Cons of Buying a New Condominium:
- If construction has not been completed, you cannot “see” what you are buying and must rely on artist sketches and floor plans (which may change). Be sure to have the unit’s boundaries, location, finishes, materials, chattels, etc. clearly specified in the purchase agreement.
- Your initial deposit will be tied up for the duration of construction.
- Financial institutions may not give you a mortgage on an unregistered condominium.
- Construction of your unit may not be completed by the expected date.
- You may move into your unit while construction continues in others, which can be noisy and disruptive.
Some Pros of Buying a Resale Condominium:
- You get what you see.
- There are no lengthy waiting periods before you can move in unless provided for in the condition of sale.
- Deposits are often much lower for resale purchases and typically there is no GST/HST. In some exceptional situations the GST or federal portion of the HST applies.
- You can check out the condominium “community” in advance to see if the corporation is well run and the people who live in it are compatible with your needs and lifestyle.
- Older condominiums sometimes have larger units.
Some Cons of Buying a Resale Condominium:
- Fewer options with regard to choice of unit (within the building), decorating or upgrades.
- Older resale condominiums may require more maintenance and repair than new ones.
- The amenities that you may find desirable (for example, a workout room, whirlpool, security features) may not be available.
- Older resale units may not be as energy-efficient as newer units.
- Major repairs may be coming due that will require extra charges to the unit owners if the reserve fund is underfunded.
- You will receive only the portion of the new home warranty that has not yet expired.
Affordability — How Much will it Cost?
It’s important to know how much money you should set aside to purchase — and live in — the condominium you are considering. Additionally, when you are shopping around and comparing different condominiums, it’s important to compare the purchase prices and monthly fees for each unit.
Ensure you can afford your mortgage and your new monthly expenses. Your bank, mortgage broker or financial advisor can help you tailor your mortgage to suit your financial goals and needs. CMHC’s online guide Homebuying Step by Step can also help you to determine what you can afford.
There are many different types of mortgages, including conventional, high ratio and second mortgages. Take the time to discuss your current financial position and future goals with your financial advisor and be sure that you are comfortable with your purchase.
Know What you Can Afford
If you are presently renting and are looking at purchasing for the first time, here are some important points to consider when assessing what is affordable for you. Canada Mortgage and Housing Corporation can help you to determine what you can afford with an online calculator available free of charge at CMHC’s online guide Homebuying Step by Step – Step 2: Are you financially ready?
The more of the purchase price you can afford to pay initially, the less interest you will pay over the course of your mortgage.
Consider the type of mortgage, rate of interest and term. Consult with your financial advisor or bank loans officer to decide what works for you, and what would be your financial position if mortgage rates were to rise. Be sure to factor in the costs of mortgage loan insurance if applicable (required if the down payment is less than 20 per cent of the unit’s purchase price). Life insurance may also be desirable but ensure that the costs are also factored into your monthly budget. The more frequent your payments, such as every two weeks instead of monthly, and the shorter the amortization period, the less interest you pay over the course of your mortgage.
As a condominium owner, you will pay a monthly fee that is your share of the operation and maintenance of the common property elements. A portion of this fee will typically be set aside for the corporation’s reserve fund, which covers the costs of major repairs and replacement of the common property elements over time. You will need to know exactly what is and isn’t included in the fees for any condominium you consider, and how much you can expect to pay.
When you rent a place to live, the property tax is usually a part of your rent. When you own a condominium, you are responsible for paying your own property taxes. For a new condominium, the municipality in which your condominium is located should be able to tell you how much you can expect to pay. For existing condominiums, this information can be provided by the real estate agent or the vendor. Ask for a copy of the most recent property assessment and tax bill.
These may or may not be included in your monthly condominium fee. You will want to know what you can expect to pay for utilities such as natural gas, water and electricity.
Did you know?
Any costs over and above the basic unit purchase price should be clearly outlined in the agreement of purchase and sale. You should budget for these charges when you are considering buying.
See Condominium purchase and recurring costs to help you with your budgeting.
You’ll want to be crystal clear about the following when making an offer on a condo unit:
A condominium’s declaration sets forth fundamental information about how the condominium is organized and operated, such as the proportion in which owners are to contribute to the common expenses, and it may have restrictions on pets, home-based businesses, what can go on a balcony and many other issues. (Some provinces don’t use the term “declaration;” instead this “constituting” document is included as part of the condominium “plan.”)
A declaration can be difficult to change so you’ll want to read it over very carefully to ensure that it does not contain unacceptable terms or restrictions.
Find out exactly where your unit ends and the common property begins. Is the door to your home part of your unit, for example, or is it part of the common elements? You should have a good look at the condominium’s plan so you know precisely what you’ll be responsible for maintaining. For more information on unit boundaries, see Where are my unit’s boundaries.
Your unit factor (sometimes called “proportionate share” or “percentage of ownership”) tells you what percentage of the condominium’s common property you own. It’s a key piece of information because it determines how much you will pay in monthly maintenance fees and sometimes your voting rights.
You’ll find your unit factor listed in the condominium’s declaration (or other governing documents, depending on where you live). Don’t expect it to be equal to your neighbour’s, but it should at least be similar to those of other units that are comparable in size and location.
Your unit factor is usually based on the size and location of your unit. Before you buy, verify what your unit factor will be with your lawyer. For more information on unit factors, see How are my voting rights determined?
A portion of your condo fees will likely go toward the building’s reserve fund. (Your province or territory may have another name for this, such as contingency fund or capital replacement reserve fund.) A reserve fund ensures that the condominium has enough money to pay for the major repair and replacement of the common elements over the life of the building. These may include the roof, roads, sewers, sidewalks, elevators, plumbing and other building systems. For more information on reserve funds, see Is there enough money in the reserve fund?
New condominiums are often protected by third-party new home warranty programs. Warranty programs ensure that the condo is properly constructed and meets building specifications. If you’re buying a new condominium, find out what is and is not covered by the warranty. If you’re purchasing a resale condominium, find out what warranty coverage remains on the unit, if any. For more information on home warranties, see How do new home warranties work?
Did you know?
New home warranties may protect the deposit you place on your new condominium, up to a maximum amount, in case the developer cannot, or will not, complete your unit through no fault of your own. Check with your provincial or territorial government to find out more about warranty programs as coverage varies across the country. See also the Homebuying Step by Step guide
There are special considerations when insuring a condo as opposed to other forms of housing tenure. You’ll want to check that your individual unit and the condominium corporation as a whole are sufficiently insured. For more information on insurance, see What property or general insurance coverage should I look for? in Frequently asked questions.
Check that your unit factor (also called “proportionate share”) has been assessed accurately so that you’re not overpaying monthly maintenance fees. Unit factors are rarely assessed incorrectly but an error can be difficult to rectify because it means changing the corporation’s declaration (or other governing documents).
Did you know?
A developer may own units (model suites, for example) that have a disproportionately low unit factor. This is uncommon but it can happen because it is the developer who decides which unit factors are assigned to units when the condominium is registered.
The last thing you want is to move into your new home only to discover that the reserve fund is underfunded and major repairs are required. This could mean a big jump in your monthly condo fees or a lump-sum payment.
Whom Should I Consult About Buying a Condominium?
There are a number of professionals you should turn to when buying a condominium. Real estate agents, lawyers, developers and property managers — who ideally specialize in condominiums — all play an important role.
Here is an overview of how each professional can help. See Questions to ask advisors and condominium experts for a list of things to ask before finalizing your purchase decision.
Real estate agents: Buyers typically contact real estate agents when purchasing resale condominiums. If you’re buying a new condominium, you’ll usually deal with the developer directly though it can be a smart move to work with an experienced agent who may be able to help you secure upgrades and better terms from the developer. A skilled agent can help save you time and energy and provide advice about what to include in the purchase offer to protect your interests.
Property managers: Unless a condominium is self-managed, it’s the property manager who handles the day-to-day running of the condominium, such as the hiring of staff, maintenance and repairs. The property manager is under contract to the condominium corporation and plays a pivotal role in ensuring the building operates safely and effectively.
Condominium’s board of directors: Before you make a decision to buy in a particular building, it’s worth taking the time to speak with the owners who sit on the board of directors if you have the opportunity. They have a “bird’s-eye view” of the corporation and may be able to alert you to potential problems.
Lawyers and notaries: A real estate lawyer (or notary in Quebec) who is knowledgeable about residential condominiums will protect your legal interests. He or she should help you understand the condominium documents and will review your offer to purchase and the purchase and sale agreement. A lawyer will also be able to tell you whether or not there are legal actions against the condominium corporation.
Home inspectors: A qualified home inspector can evaluate the condition of the interior of your unit as well as the exterior elements of typical low-rise housing types, such as single-family homes, duplexes, triplexes, row houses and small apartment buildings. For larger apartment buildings, you may want to hire more specialized professionals, such as an architect or engineer, who regularly conduct condition assessments of larger buildings
Did you know?
If you’re purchasing a condominium in some jurisdictions, you can make the agreement-to-purchase offer conditional upon the satisfactory review of the condominium documents and financial statements by a provincial condominium document review specialist.
Use all of the investigative tools at your command to help you avoid serious problems. These tools can include property disclosure statements, professional property inspections, condominium corporation minutes and engineering reports.
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Does HST Apply To A Seller Of A Condo Assignment (Flip)?
LISTING AGENTS BEWARE!!
Inevitably, an offer to purchase an assignment property (often on an OREA form 140 or 141) by a buyer's sales representative will state that, if applicable, HST is included in the purchase price (as we typically see in any offer to buy resale residential properties). The sales representative who represents a seller of an assignment (and who is advising the seller) MUST be aware that according to the Canada Revenue Agency, there are sometimes situations where HST will, in fact, be applicable and payable by the assignor/seller who is assigning a contract to buy a newly constructed unit/residence.
When applicable, HST will be payable by the Assignor (buyer #1 from the builder) on the portion of the assignment sale price related to the return of deposits (paid to the builder by the assignor/seller) PLUS the gross profit (the difference between the builder price and the assignment price).
The confusing question is whether or not HST is, in fact, applicable to the assignment and, since realtors should not undertake the responsibility to advise a seller on such a matter, MAKE SURE (as a listing sales rep advising a seller/assignor) THAT AN ASSIGNMENT SALE WHICH STATES HST IS INCLUDED IN THE PRICE IS CONDITIONAL ON ASSIGNOR'S/SELLER'S LAWYER'S APPROVAL so that the lawyer for the assignor/seller will be responsible to advise a seller whether or not HST is applicable to the assignment/sale. The idea is to shift the burden of responsibility from the shoulders of the listing sales representative to the shoulders of the lawyer for the assignor/seller.
Believe it or not, whether or not HST is applicable to an assignment depends on the original intention/the plan (in the mind of the assignor/seller) when the offer to purchase was made with the builder. If the PRIMARY PURPOSE by the assignor/seller in buying from the builder was to profit by assigning/flipping the deal, THEN HST IS APPLICABLE to the assignment/sale.
On the other hand, if an individual originally signed an offer to purchase a condo apartment (to be newly constructed by a builder) with the primary intention that the unit bought would be used (for example) by:
(1) a son or daughter when attending University/College, OR
(2) a parent who wanted or needed a place to reside, or
(3) a spouse who planned to separate from the family, or
(4) the buyer(s) who intended to downsize, or
(5) the buyer(s) who intended to use the apartment when working downtown or when visiting Toronto
(6) a son or daughter who was engaged to be married, or
(7) buyer wanted to move closer to a workplace OR to relocate a place of work
THEN the Canada Revenue Agency would typically conclude that HST is not applicable on the assignment/sale if (at a later date) a reasonable change in circumstance resulted in an assignment/sale of the unit if, for example,
(1) such son/daughter chose not to go to University/College, or
(2) the buyer's mom or dad no longer could use or wanted to use such apartment as a residence (due to their death or needs a retirement home), or
(3) intention to separate from family changed, or
(4) decision was made later not to downsize, or
(5) the buyer(s) reasonably changed his/their minds about such intended use, or
(6) the engaged son or daughter decided not to marry or decided to live elsewhere, or
(7) the workplace location changed or the intended relocation of workplace changed
The question is whether the facts or circumstances would indicate to the Canada Revenue Agency that the condo was originally being acquired from the builder for the primary purpose of personal use versus buying the unit for only a potential profit with the intention of assigning or flipping the deal. If a buyer purchases two or more new condo units or has a corporation purchase a residential unit, it is more difficult (perhaps impossible) to try to explain to the Canada Revenue Agency that the primary purpose in buying from the builder was to acquire the unit for personal use as a residence for an immediate family member.
The bottom line is that a listing realtor, seeing an offer from an assignee, should encourage the assignor/seller to sign back the offer with a condition for approval of the terms of the sale by the lawyer for the assignor/seller.
Harmonized Sales Tax (HST)
What is HST?
·It is the merging of the current Provincial Sales Tax (PST) with the Federal Goods and Service Tax (GST) into one new tax.
Who does it affect?
·The new HST affects Ontario and British Columbia.
·Nova Scotia, New Brunswick and Newfoundland have already implemented a Harmonized Tax while Saskatchewan, Manitoba, Quebec and Prince Edward Island all collect a separate Provincial Sales Taxes (PST) or QST for Quebec.
How much is it?
Provincial Sales Tax (PST)7%8%
Federal Goods and Service Tax (GST)5%5%
New Harmonized Sales Tax (HST)12%13%
When will the HST be implemented?
·July 1, 2010.
How does it affect the sale of my current owner occupied principal residence (re-sale)?
·The sale of housing that has been previously occupied by an individual as a place of residence and that was exempt from GST would also be exempt from HST.
When does the HST apply to the sale of a new construction home or new rental property?
·Builders’ sales of newly constructed or substantially renovated homes would be subject to HST when both ownership and possession of the home are transferred after June 30, 2010.
·The provincial portion of HST would not apply to builders’ sales of newly constructed or substantially renovated homes that are taxable under the GST where, under a written agreement of purchase and sale, ownership or possession of the home is transferred before July 1, 2010.
·The HST would not apply if either the ownership or possession of the complex is transferred, under a written agreement of purchase and sale, to the purchaser before July 1, 2010 or if the sale was entered into on or before June 18, 2009 in Ontario and November 18, 2009 in British Columbia, regardless of the ownership or possession date.
Is there a Housing Rebate?
·Yes, new housing rebates would apply when HST is charged and the purchaser would have qualified for a GST rebate.
·Please visit http://www.rev.gov.on.ca/en/taxchange/index.html and http://www.gov.bc.ca/hst/ for more information on the rebate.
Are other closing costs subject to HST?
·Yes, other costs associated with the purchase of your new house, including legal fees, home inspection fees, appraisal fees and real estate agent commission fees will be subject to HST.
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