8 terms to know when buying a condo
This article will provide prospective condo buyers with an overview of key terms related to the purchasing process.
If you’re unsure about any of these terms or concepts, discuss them with your real estate agent or lawyer, especially if you’re new to the market. We’ve tried to list these terms as logically as we can; let’s get started!
If you’re looking at buying a pre-construction condo unit, you’re looking at “investing” in the upcoming building before anything has really been built.
Pre-construction condo projects may start selling units in hopes of securing additional funding to build the project quicker and/or keep things running on time.
Builders may offer early investors incentives such as flexible down-payment schedules, varied floor plan options, or a pick of your unit’s location in the building.
'Pre-construction' condos differ from 'resale' condos in that the resale condos are already built and have been inhabited before you. You purchase a resale condo from its current owner, much like the purchase of a home.
A mortgage is a legal agreement that involves a financial institution and a prospective homebuyer. The financial institution – whether it’s a creditor, bank, or private lender – lends money to the homebuyer in exchange for interest on the loan itself, plus the title of the debtor’s property until the debt is repaid.
In essence, the bank buys the property for you while you pay back the loan with interest, over its term.
A status certificate is provided to prospective buyers (whether resale or pre-construction) by the condo corporation or board.
This document shows you the status of your unit while giving you a snapshot of how the building functions, how the condo board collects and spends its money, who is on that condo board, what maintenance fees are in place, what the reserve fund looks like, and anything else relating to the building laws and your individual unit.
Understanding the status certificate you’re given can lead you to move forward on the purchase of your unit, or not. We have an entire post on status certificates if you're looking for more information.
Agreement of Purchase and Sale
The Agreement of Purchase and Sale is a written contract between a buyer and seller for the purchase and sale of a particular property, whether a condo or home. In this Agreement, the buyer will agree to purchase the property for sale as long as certain terms and conditions are met.
A condition, for example, could be that the purchase of the property at "X" price depends on a successful home inspection or similar process.
Closing costs are what you pay for above and beyond the purchase price of the property. Closing costs are something all property buyers and sellers have to account for during a real estate transaction.
The amount you pay in closing costs can be influenced by the state of the particular property being considered.
Costs can include things like a home inspection, utility hookups, various government taxes, administrative and legal fees, development charges, and even renovations.
Condominium Act 1998
The Condominium Act 1998 is an act of legislation written by the Ontario government (or your own province) which regulates most aspects of condo formation, governance and purchasing. Any document you receive from a condominium must be based around the province’s Act.
The Act isn’t perfect and has its own pitfalls, like many pieces of legislation. However, amendments have been made over the years in hopes of addressing collective concerns.
One of the main loopholes with Ontario’s Act is that no one is in charge of overseeing condo corporations comply with the Act itself. Some condo owners believe the Act better serves managers and building boards better than residents.
Amenities and condo fees
These days, many condos aim to attract buyers by offering up a wealth of exclusive amenities available to its owners. It’s worth understanding what these perks include, and what they are likely to cost.
All buildings are different and will thus offer residents various perks to enjoy apart from their single condo unit. Every owner in the building is expected to pay for their share of these amenities through condo maintenance fees (also known simply as condo fees).
Common amenities include perks like party rooms, gyms, outside patio spaces and barbeques, storage options and security features. More luxurious condos may offer swimming pools, spas or saunas, yoga or dance studios, dog areas, 24/7 concierges and even car washes.
If you find yourself interested in one of these luxurious buildings, you can expect to pay higher fees that go on to pay for the staff on site plus the cost to maintain certain features.
Fees can spike if there is a costly repair one month, then fall if nothing needs fixing the next. This is why condo fees in newer buildings are generally cheaper than established ones. When most finishings or elements are new, there are less maintenance costs involved.
Different insurance types
Condo building insurance can get confusing.
First, there’s the Condo Master Policy which covers the building’s structure, common areas and your unit’s structural features. This policy offers limited protection for owners, and is intended to protect the builder’s property from damage.
Next, there is personal condo insurance for the interior of your condo unit, personal liability and contents protection if so desired. Condo insurance operates much like homeowners insurance, but usually at a lower cost.
If you’re renting a condo from an owner, you may want to take out your own renters insurance policy to protect your personal belongings from damage or theft. Your landlord will likely have their own, limited policy in place to protect their own appliances and other features.