Buying a condominium home, particularly for a first time home
buyer can be a daunting experience. Knowing some of the basic
concepts can make it a much more pleasant and rewarding experience.
A condominium is a building where the apartments, known as residential
units, are individually owned whereas the common areas such
as the lobby and hallways are owned by all the unit owners in
common. Typically, in downtown condominiums, parking spaces
and lockers are also owned as separate units as well.
A new condominium building is governed by the Ontario New
Home Warranty Program (ONHWP) which insures the deposits given
by the buyer to the vendor up to $20,000 and provides guarantees
for the various building warranties. Prescribed excess deposit
insurance must be provided by the Vendor or deposits over $20,000
must be kept in a trust account.
The Condominium Act creates a comprehensive regime to protect
the homebuyer. The vendor is required to deliver to each buyer
a Disclosure Statement explaining all of the significant features
of the Condominium. The Disclosure Statement includes a draft
declaration which is the basic constitution of the condominium,
the proposed first year budget and various by laws and agreements
which the Vendor expects the Condominium to enter into upon
its creation.
A condominium purchaser is entitled to rescind the agreement
of purchase and sale within 10 days of signing the agreement,
receipt of the condominium documentation or receipt of notice
of any material changes to the Condominium documentation.
The Condominium Documents set out, in Schedule "D",
the percentage interest that each unit in the Condominium owns
in the common elements and also the percentage that the unit
must contribute to the condominium’s annual budget. The
first year budget spells out what costs the Vendor expects the
condominium to experience in the first year after its registration.
The level of service which the project is marketed should be
reflected in the budget and is most easily understood by figuring
out how many cents per square foot are the common expenses on
a monthly basis. Purchasers will see what utilities are included
in the budget and which utilities will be separately billed.
Other highlights of the budget are the number of hours of concierge
service, the amount of cleaning, cost of amenities, building
insurance, and the cost of garbage pickup. The budget also needs
to provide a reserve fund to repair capital assets from time
to time and sufficient funds to conduct a technical audit and
a reserve fund audit.
The Agreement of Purchase and sale contemplates that the purchaser
takes possession of the unit when it is substantially complete
and fit for occupancy. The occupancy period lasts from the day
that the purchaser takes possession until the condominium is
registered. During the occupancy period, the purchaser pays
a fee to the vendor called the occupancy fee which essentially
reflects the costs of carrying the unit as if the transaction
was completed and actually owned by the purchaser. The occupancy
fee equals the estimated realty taxes, common expenses and an
interest factor on the portion of the purchase price not yet
paid.
Once the Condominium is registered, the vendor may legally convey
legal title to the purchaser who then can register a mortgage
on the unit whereby the mortgage company will advance the mortgage
required by the purchaser to complete the purchase transaction.
Once most of the units have been completed, the Declarant calls
a turnover meeting at which time a permanent board of directors
are elected and who begin to manage the condominium on behalf
of the homeowners.
The downtown Toronto condominium market has recently enjoyed
several of its most buoyant years on record as sales and condo
prices have risen at record levels. Purchasing a home is one
of the largest investments many of us will make. Here are some
points to help you make the decision that is right for you:
Renting vs. Buying? A major reason for the Toronto housing market
being strong is an unprecedented extended period of low interest
rates. The tight rental market, low interest rates, steady construction
and condominium sale prices have all combined to create an environment
which makes it cheaper to buy then to rent your home.
Deteriorating stock prices and low bond rates have convinced
many former renters what experienced financial advisers have
been saying for a long time. The best investment you can make
is to own your home. Over long-term periods, home prices have
always increased so that your equity in your home is constantly
increasing as you continue to live in it. Furthermore, a continuously
increasing portion of your mortgage is being applied to principal
repayment so that, typically, after 25 years, you could end
up owning your home free and clear – a real retirement
benefit. And best of all, gains in the value of your home when
it is your principal residence is free of capital gains tax.
Compare that to 25 years of renting and what do you have to
show for it?
The condominium market has been strong for some time now. Prices
have risen and the rise in construction has finally created
an increased vacancy rate in Toronto. Does this mean that you
"missed this cycle"?
Clearly, nobody has a crystal ball but if you believe that
inflation is inevitable, increasing home prices is usually a
good bet. Nobody can ever figure out the absolute best time
to buy. However, the earlier you get on the bandwagon and invest
in your own home, the more time you have to build up the equity
in your home as part of a good comprehensive retirement/investment
strategy.
What can I afford and how much will it cost to carry?
The key is to figure out how much you can afford and obtain
a good capped rate mortgage commitment from a bank so you know
how much your home will cost. An experienced salesperson at
the sales office will help you do the math. Make sure you consult
your lawyer or the sales person to help you calculate your closing
costs and what your carrying costs will be based on your mortgage
commitment. Your monthly costs also includes realty taxes and
common expenses. Ask what are included in the common expenses,
specifically in terms of utility costs.
For further information, please feel free to come to our sales
office and speak to one of our knowledgeable sales staff members.
Monday - Thursday: 12:00pm to 6:00pm
Saturday and Sunday: 12:00pm to 5:00pm
Closed Friday
