1. Learn what you’re buying

Your first order of business when searching out a condo for purchase is learning exactly what it is you’ll be buying. Who owns what in a condo isn’t as clear cut as a detached home. Windows for example, can be problematic. In some condos, windows are the property of owners, and if someone chooses to buy one of poor quality and water comes in, it can affect the building. It’s best when the windows are part and parcel of the condo property.

2. Get down to the nitty gritty

Is there an elevator, pool, gym within the complex? Will you use them enough to justify the maintenance costs? Find out if your parking space is title or not. This will make a difference to the value of the property. Does the unit have enough storage space? If not, is there a locker for your luggage and bikes? Are pets allowed? Can you rent your unit out short or long term? Are there age restrictions that stipulate who can occupy the unit? Anytime you see a lot of restrictions, it’s more of a negative. People should be thinking about resale, and a lot of restrictions gives your property less marketability at the end of the day.

3. Post tension

Many professions don’t recommend buying a post-tension building. In fact, many lenders won’t lend on a structure built with post tension cables, and if they do, they’ll often ask what inspections have been done to ensure the structure is sound. Most of these structures are in either a repair or monitoring program, and the removal and replacement of the cables is really expensive.

4. Don’t judge a book by it’s cover

It’s impossible to know during a walk through what lies beneath the surface. A condo could be 40 years-old, but in mint condition or brand new and falling apart. If you’re unsure if the potential property is in need of imminent or future repair, don’t balk at getting an inspection for a single family home, but the practice isn’t as common with condos – though it’s as important of an investment. You want to make sure you know what you’re walking into today, and down the road.

5. Use a good lawyer

Ensure the estoppel certificate is clear, and that there are no special assessments or condo fees still owing from the previous owner. The last thing you want is to become engaged in a legal battle after you’ve taken possession.

6. Always ask

The absolute first thing you need to ask owners and property managers, is if the condo has had any water penetration problems. If it has, you need to learn everything you can about it. Find out if the board used a building envelope consultant to solve the problem, or was caulking thrown on the wall as a band-aid solution?

Ask the board how confident they are as volunteers in managing this multi-million dollar business. How aware are they? If they don’t have a particular expertise, do they source that out? Do they enforce bylaws consistently and fairly?

The more informed you are on what’s going on in the building, the better off you’ll be.

Talk to other residents. Suss out if the property management company is attentive, ask if the residents like living there, and if they have any complaints. If you buy with your head in the sand, you’ll be in trouble.

7. Understanding condo documents

Condo documents are a series of documents buyers should review in order to make an informed purchasing decision. These documents include the minutes from the AGM and regular board meetings, the bylaws that set out the rules, insurance certificate, fee schedule, current financial statement, operating budget and the reserve fund study.

Minutes from meetings give potential buyers a clue as to how the corporation makes it’s business decisions, if issues are being death with, and if there’s enough money to do so. You’ll be able to judge if the board is proactive or reactive. Do they use professionals or the guy with the best deal to solve their problems?

The financials are a key piece of this documentation. You want to know if the corporation is financially sound, or if they are deferring projects to the future.

Both buyers and lenders should be going over these documents with a fine toothed comb. Lenders hour be reading them as well because ultimately they are at risk.

Confused by it all? Services such as Condo Check, a Calgary-based consultancy examines these documents on your behalf and produces a written report highlighting what potential owners need to pay attention to. They’re looking to see how the board operates and other critical pieces that determines if the property is expected to grow in value.

All experts agree: buyers should never purchase a condo without doing a thorough document review. Otherwise, it’s just too risky. We need to make sure our buyers fully understand what they are buying. All that information is in the condo documents.

8. Reserve funds

Often considered the most important aspect of all the condo documents, the reserve fund study is used as a guideline for the condo board to make appropriate decisions. It indicates what need to be repaired, and how much is in the financial reserve to make those improvements.

A good one will tell you why things have to replaced. They you want to find out from the board if they’re actually following those recommendations. We like to see the reserve fund at approximately three to five percent of the overall building value.

Reserve fund items are regular planned issues that are highly legislated. If something is in need of repair and isn’t listed in the study, money from the fund can not be used to fix it, which is when special assessments come into the picture.

9. Special what?

Special assessments are additional payments imposed by the board when the condo corporation doesn’t have enough money to fix a large repair bill. Each owner is asked for a portion depending upon how much they owns of the common area. The term special assessment typically strikes fear in the hearts of prospective buyers, but this shouldn’t always be the case. Neve judge a condo by its monthly fees or a special assessment – the board and management could be doing everything right.

Over the past few years special assessments have become a common practice in Alberta, particularly among condo conversions. While special assessments are often seen as a red flag, sometimes they’re a sign of drastically improving the property and its value.

Yet in other cases, it’s a result of the board’s inability to make touch decisions and passing those off to the next guy. It all boils down to if the board is managing the money properly, keeping the building in good condition and utilizing experts.

Lenders are ultimately responsible for special assessment if the owner can not pay. We saw a lot of that in 2008 and 2009. Some lenders won’t lend on condos as a result. The ones that do, should be scrutinizing the condo docs.

10. Call to duty

Condo boards are made up of volunteer owners who act in the best interests of all the residents. Being part of the board is an excellent way to understand what you’re buying. Lack of education and awareness costs people.

If you’re part of a condo, you need to expect to be called upon to be a board member You shouldn’t own a condo if you’re not willing to be on the board.

Bu you don’t want to be on the board only to be lynched by other owners. Ensure an insurance policy is in place to cover the legal costs of board members should disputes arise.

If you have any questions about financing a new condo or condo documents, give us a call, we can help!