Is Condo Living Right for You?
Photo: Steve Rosset
Looking to make a move? We weigh the pros and cons of condo living — and what you should know before jumping into the condominium market
You’ll meet all kinds of people at condominium open houses: first time buyers looking to get into the market, investors snapping up rental properties and, of course, baby boomers wanting to downsize their space and responsibilities.
Condos can be low-rise buildings, townhouses, freestanding houses, duplexes, triplexes or “mixed use” buildings, such as condos above offices or store fronts. They can be brand new, re-sell or conversions — that is, buildings that used to be apartments or factories turned into condos.
What makes condos different from freehold houses is that you own your unit but you also share ownership of the land, building and common areas. You share costs with fellow members of your condo association, and the board of directors or a property management company makes the big decisions.
There’s a lot of buzz about condos in the market right now, but are they a smart choice? We weigh the pros and cons.
The benefits of condo living
– Someone else handles the outside work. One of the biggest draws of condo ownership is freedom from maintenance you might not have the time, desire or ability to tackle — like shoveling snow, mowing the lawn or repairing outside structures. Your monthly condo fees cover these services.
– Many major costs are shared. By law, a portion of those condo fees goes into a reserve fund. When the property is well managed, this fund covers major repairs like replacing windows and roofing without additional costs to owners. Even when the reserve fund falls short, you’re not in it alone — a “special assessment” will be done and costs will be shared equally among owners.
– Lifestyle. If you prefer to live on one floor or in a one- or two-bedroom home, condos allow you to own your own space rather than rent. Common areas like pools and recreation rooms offer opportunities to socialize with neighbours. Many condo developments cater to specific groups — like young professionals, families and older adults.
– Amenities. Some condos offer benefits you won’t see in the average home or apartment building — like a theatre room, gym, swimming pool and party room.
– Customization. Unlike renting, you’re free to paint the walls, put up pictures and renovate.
– Price. Depending on where you live, some condos are more affordable than owning a freehold home — and a mortgage plus condo fees may be equivalent to rent.
– Location. If you’re craving a prime spot in a major city — like downtown Toronto — condos may be the only practical option. What you lose in space and higher condo fees, you gain with easy access to work, dining, activities, public transportation and other amenities.
– Security. Marketers say condos offer greater security than a free hold home or renting. For one thing, people are more likely to take better care of property they own, and some buildings offer a secure entrance or a doorman. You might feel safer with neighbours on either side, and worry less if you frequently travel.
The potential pitfalls
Any form of home ownership has its risks and limitations, and condos are no exception.
– Price. Depending on where you live, the purchase price of condos can exceed that of a freehold property. Moving to a condo doesn’t necessarily mean downsizing to a cheaper home — especially if you’re upsizing the luxury.
– Appreciation. If you’re treating your home as an investment, some sources like HomeBuyers.ca warn you may not see as high an increase in value on a condo over time as you would with a house. You may want to compare past real estate prices in your area to see how the numbers compare.
Also, unlike a freehold house, major repairs and renovations won’t necessarily raise the value when it comes time to sell, says former real estate journalist Jayne Huddleston. Even when the purchase price is lower than a house, the overall cost of ownership could be higher.
– Condo fees. Like other types of homeownership, the costs don’t disappear when you pay off your mortgage. Monthly condo fees can range from $200 to $600 depending on where you live, what’s included in the fees and what amenities you have. Perks like swimming pools and elevators can drive up the costs, and older buildings generally need more repairs and maintenance.
Like most expenses, condo fees increase over time and aren’t likely to go down again, warns Huddleston. High fees can make your home less appealing to future buyers and ultimately cut into your profit.
“If the condo fees have tripled, it’s hard to find a buyer that will take on a mortgage plus those fees,” says Huddleston. “Sellers may be forced to discount the sale price to get a buyer.”
– Special assessments. When your condo board goes over budget, the costs will be passed to you. For example, if your condo fees include water but your fellow condo owners collectively spent $3000 over the amount budgeted, you have to pay your equal share of the shortfall. When some owners use more of a common element than others, everyone pays.
Likewise, if major repairs are needed that the reserve fund can’t cover, you’re required by law to pay up. In buildings with more units, there are more people to cover the costs — or incur them.
“A member of the Board can literally show up at your door anytime and tell you you’re on the hook for thousands of dollars,” warns Huddleston. “And it is legal.”
– You’re responsible for everything within your walls. Unlike renting, you can paint the walls and make renovations — but you’re also responsible for repairs inside your unit, replacing appliances and insuring your unit and belongings. Before you buy, you should have a clear understanding of what you’re responsible for, says the Canada Mortgage and Housing Corporation (CMHC).
– You’re responsible for other people’s problems too. Sharing costs can be a boon, but the downside is you pay your share for problems too — like if someone damages a common area. If your association is involved in a lawsuit — such as suing the developer over building faults — you’ll be paying legal fees too.
“The bottom line is that you are in a joint ownership with people you don’t know, didn’t choose, and who will continuously change through the life of your ownership,” says Huddleston.
– There are rules and bylaws. Noise restrictions may be in place after a certain hour, for example. Things like parking, pets, garbage disposal and outdoor fixtures (like satellite dishes) may be established by the condo corporation. You’ll want to know the rules — including who sets them and how they’re enforced.
– You have limited control outside your unit. You have the final say within your own walls — but you might not get a choice when it comes to decisions like redecorating the lobby or what colour to paint everyone’s front doors. It’s up to someone else when work gets done — like when your windows will get replaced.
Ultimately, there are risks and rewards to any type of dwelling — it all boils down to what you want and what limits you can accept.
Tips for first time condo buyers
– Get some expert help. A real estate agent and lawyer who have expertise and experience with condos can help you navigate the market — and minimize your risks.
– Get to know the legislation in your province. Every province has different regulations regarding condos. (You can often find the Condo Act through your province’s website.)
– Learn about different types of ownership. Just as there are different kinds of buildings, there are different kinds of legal ownership too — like leasehold interest, freehold, tenancy-in common and joint tenancy. (HomeBuyer.ca has an overview of Different Types of Condo Legal Ownership.)
– Compare condo fees. The number doesn’t tell the whole story — you’ll want to know what is and isn’t covered when looking at your monthly budget.
– Learn the rules, bylaws and regulations. As we mentioned before, you should know the rules and how they will be enforced. Remember, they can work in your favour — like sparing you a neighbour’s late night party.
– Ask about occupancy. If you plan to rent out your condo, make sure it’s allowed under the rules. Likewise, you may want to know if you’ll be sharing space with temporary renters like students.
– Look beyond the unit. Some questions you may want to ask include: Is the building well managed? Does it have a healthy reserve fund? What special assessments have been done in the past? What work needs to be done in the future? Your home inspector should look beyond your unit too.
– Get the right insurance. The insurance included in your condo fees only covers common areas and the original building. It’s up to you to cover your belongings and what happens inside your unit — like water damage or accidents.
– Volunteer with your condo’s board of directors. If you want a say in what happens, consider participating in your condo association’s board of directors — but keep in mind you only get one vote. Regardless, it’s a good idea to keep up with what’s going on and bring any concerns you might have to the board’s attention.
ON THE WEB
For more information about condos, download the CHMC’s Condominium Buyers’ Guide.
For a look at the legal aspects of condo ownership, visit the Canadian Bar Association’s Buying a Condo webpage.
Additional sources: LendingTree.com, Realtor.com, RealtyTimes.com