Purchasing a Condo? Here’s What to Expect
A record number of Ontarians currently make their homes in condominiums. According to recent census data, more than 13% of the province’s population lives in condos. In cities across Canada, the desire to own a unit inside a condominium building is steadily rising. Out of the nearly 2 million condo-dwellers in Canada, more than two-thirds own their units themselves.
Buying a condo can be an exciting milestone in a person’s life. The prospect of living amongst neighbours with shared access to amenities may very well be the perfect residential situation for urban singles, couples, and families. Often located in high-population neighbourhoods, condominium buildings are usually constructed near accessible public transit, grocery stores, shopping, restaurants, entertainment, and other conveniences that condo-dwelling families can enjoy.
Making a major purchase requires preparation, thoughtfulness, and guidance. Any first-time homebuyer will undoubtedly have questions about the real estate transaction, in addition to questions about the new responsibilities that come with owning a home. However, for people purchasing a condominium for the first time, the process can be even more complicated and confusing than usual.
Buying a suite in a condo building is similar to other real estate sales in many ways, but some key differences make the process of purchasing a condo unique. Due to the complex nature of condo purchases, the assistance of a real estate lawyer can be valuable. If you are thinking about purchasing a unit in a condominium, Cohen Highley LLP may be able to ensure that all complexities and considerations of the sale are handled succinctly and expediently. To learn more about how our real estate lawyers may be able to assist you with your purchase, contact Cohen Highley LLP today.
Planning for Expenses
Before making the decision to purchase a condo, it is important for Ontarians to be aware of several realities of condominium law.
While many people think of condos as the individual residential units inside a larger building, condominiums are, essentially, a system of ownership. Condominium corporations are considered legal entities regulated by the province’s Condominium Act.
In addition to purchasing real estate, people who purchase condos are, in essence, buying into the larger community of homeowners that comprise the condominium corporation. Because of this shared ownership model, condo owners have a certain set of expectations and responsibilities.
People purchasing a condo essentially buy a share of the property’s common elements. Common elements refer to anything in a condominium building outside of the individual units. Examples include hallways, elevators, parking garages, and on-site fitness facilities. People who own individual condo units are required to pay for a portion of the property’s common expenses, including maintenance and utilities costs.
The portion of common fees each condo owner is required to pay is determined by the condominium corporation, often calculated to reflect the varying sizes of each individual unit. Each condo owner’s monthly fee for common expenses typically includes an amount for:
- The condominium’s operational costs.
- Regular maintenance services required for upkeep.
- Utility fees for common elements.
- Projected capital expenses.
- A reserve fund in case major repairs or replacement of common elements is needed.
Armed with the knowledge that, in addition to monthly mortgage payments, homeowner’s insurance, and utility charges for their own individual unit, prospective condo owners will be required to pay fees for common expenses, homebuyers can begin their search for the perfect condo. While searching for their new home, either independently or with the assistance of a real estate agent, prospective homebuyers may begin submitting necessary paperwork financial organizations or lenders to try qualifying for mortgage pre-approval.
In order to purchase a condo under $1 million, prospective buyers will likely be required to provide at least 5% of the asking price as a down payment. For condos over $1 million, the down payment may be at least 20% of the asking price.
Upon closing, people purchasing a condo may also be required to pay the following closing costs:
- Provincial land transfer tax
- Municipal land transfer tax (for properties in Toronto)
- Lender or appraisal fees
- Any adjustments
- Legal fees
If purchasing a pre-construction condo, before paying closing costs, new homeowners may be required to pay interim occupancy fees to the building’s developer. Commonly referred to as “phantom rent,” occupancy fees are monthly charges that cover the interim time period between taking occupancy of a unit and taking ownership of it.
New condo buyers can only close on their units and officially take ownership of them once their building has been registered. Newly constructed buildings may take several months to complete their registration. Occupancy fees collected during this time go directly to the developer and are not put towards future mortgage payments.
Pros and Cons of Purchasing a Pre-Construction Unit
It is not uncommon for developers to put condominiums up for sale before the building’s construction has even begun. While there are many benefits to purchasing a pre-construction unit, many people prefer purchasing resale condos, located in completed residential buildings. Ontarians who purchase a condo from its current owner may be able to see the unit in person before making a down payment. They may also be able to take occupancy of their new home relatively quickly.
However, depending on the building’s age and history, fees for common expenses in resale condos may be significantly higher than pre-construction units. Additionally, older buildings may be less energy-efficient, leading to higher utilities costs down the line.
When making the decision to purchase a pre-construction condo, it is important for prospective buyers to weigh the pros and cons. Purchasing a pre-construction condo may have several notable benefits, including:
- Lower asking prices than resale units (depending on the market).
- Greater choice of location within the condominium building.
- The potential to upgrade condo features and appliances before they are installed.
- 10-day “cooling off” period in case buyers wish to change their minds and recover their deposit payment.
- New home warranty protection.
However, purchasing a pre-construction condo is not necessarily the best option for people who are eager to move immediately. Construction timelines can be delayed by any number of factors. It is not uncommon for Ontarians to wait several months– and even several years– longer than their projected occupancy date before they are able to access their new homes for the first time.
Additionally, people who purchase condos in new buildings may be required to pay monthly occupancy fees to the developer from the time they take occupancy to the time the building is registered. Furthermore, new homeowners who decide to move into their condos while the building is under construction may find themselves dealing with ongoing noise, dust, and other construction-related disruptions for several months while the other suites and common elements are completed.
How a Real Estate Lawyer Can Help with Your Condo Purchase
Purchasing a new home is an involved process, with many steps, fees, and preparation required. If you have recently bought a condo, the assistance and advice of an Ontario real estate lawyer may ease the stress of dealing with all of the sale’s many complexities and may help expedite the process.
At Cohen Highley LLP, our Ontario real estate lawyers endeavour to protect the rights of our clients who are in the process of buying a new home. We work hard to review all documents pertaining to the sale, identify any concerns or red flags, and act on behalf of our clients to make sure the terms of the sales agreement are met.
Contact Cohen Highley LLP Today to Learn More
The real estate team at Cohen Highley LLP have a history of helping prospective condo buyers across Ontario realize their dreams of purchasing a new home. To learn more about the services we provide, book a consultation with us today.
Cohen Highley LLP services clients throughout Ontario from our head office in London and branch offices in Chatham, Kitchener, Sarnia, Stratford and Strathroy. For more information about how we may be able to assist with your condo purchase, contact us today.