Committing to a condominium isn’t quite like buying a house; here’s what you need to know
By Olev Edur
If you’re thinking about downsizing now that the kids have left home, you might be considering a condominium. A condo can be a terrific retirement option, but you’d better take the time to find out exactly what you’re getting into.
Owning a condo can be rather different from having your own house, and you should be aware beforehand of the potential drawbacks.
For starters, of course, you need to consider all the details that would apply to buying any type of home. Does the neighbourhood provide the amenities you want, such as shopping and restaurants, parks and recreation, transportation, and possibly proximity to friends or family? Are the size and layout of the unit adequate for your needs?
Then there’s the general look and feel of the facility itself. Has it been looked after properly? Are the grounds as well as the building itself clean and well maintained? Bear in mind that unlike your own house, where you have complete control over what’s done and when, the maintenance and upkeep of a condo is done by others at the direction of the condominium board.
When you tour the premises, do the residents you see seem like your kind of people? Unlike leafy neighbourhoods where detached houses are separated by yards, fences, and hedges, a communal condo setting means that your neighbours will be just a wall or floor away, and in some buildings—particularly newer ones— those walls or floors can be thinner than you might expect. Retired 76-year-old bachelor Peter Vallanti bought a brand-new one-bedroom condo in downtown Toronto’s fashionable Yorkville neighbourhood several years ago, but he soon discovered that playing his classical music drew noise complaints from his much-younger next-door neighbours.
“It’s not as though I play it loud—I don’t,” Vallanti says. “I thought about moving the stereo to another part of my unit because it was beside our adjoining wall, but that would have meant rearranging all my furniture, and I didn’t want to do that. It’s all organized the way I like it now, so I’ve turned the music down even more or I use my headphones. Once in a while, I hear their little dog yapping, too, but I can’t be bothered complaining,” he adds with a wry smile. “You hear things all the time, but that’s life in the big city, isn’t it? You just get used to hearing noises, and it’s not worth getting worked up about. And otherwise, this building is great. I really like it here—the location, the facilities, everything.”
Complaints, Disputes, and Tribunals
A certain degree of neighbourly friction is inevitable whenever people live in close proximity, and some people are less phlegmatic about it than Vallanti. In 2017, the Ontario government (condo governance falls under provincial jurisdiction) saw fit to establish an online Condominium Authority Tribunal (CAT), dedicated to helping condo owners and corporations resolve disputes quickly and affordably. “The tribunal assists in the resolution of disputes related to noise, odours, vibration, smoke and vapour, pets and animals, vehicles and parking, storage, condo records—any type of nuisance, annoyance, or disruption, as well as compliance with CAT settlement agreements,” says Bob Aaron, a lawyer specializing in real estate law at Aaron & Aaron in Toronto and a Toronto Star columnist.
In one of his recent columns, Aaron cites a case in which a tenant was smoking pot in his unit and common areas despite repeated warnings.
“The tribunal found that he failed to comply with rules prohibiting the smoking of cannabis anywhere on condominium property, including his unit’s balcony,” Aaron writes. “The tenant was ordered to refrain from smoking cannabis anywhere on the condominium property, and he and his landlord, who owned the unit, were ordered to pay compensation of $5,708.50.”
Similarly, British Columbia has established an online Civil Resolution Tribunal (CRT), designed to handle strata disputes (see below) and small claims of $5,000 or less.
“For disputes outside the CRT’s jurisdiction or exceeding the $5,000 limit, parties may consider small claims court or, in some cases, arbitration or mediation,” says Terry Dowle, an accredited real estate appraiser and principal at Niemi LaPorte & Dowle Appraisals Ltd. in Burnaby, B.C., and the current president of the Appraisal Institute of Canada in Ottawa.
(Technically, the term “strata” can apply to any property with individually owned as well as jointly shared elements, but in British Columbia, it’s generally used synonymously with “condominium.” “Essentially, there’s no real difference between the two terms,” Dowle explains. “Strata is used in B.C. to describe the legal entity of a type of property divided into ‘strata lots,’ where individuals own that lot and have an interest in common property shared by all owners in the strata. ‘Condominium’ is a more common term used in most other provinces.”)
Condo Rules and Regulations
All provinces have laws regarding the administration and maintenance of condos, but there are some differences.
“Each province has its own legislation, and this legislation can vary somewhat in terms, nomenclature, and so on,” Dowle says. “For example, in Manitoba it’s the Condominium Act, and in Saskatchewan it’s the Condominium Property Act.”
Among other provisions, though, these laws all require that condominium corporations establish a board of directors made up of residents who bear responsibility for managing the condo’s day-to-day operations and finances. One of the board’s first tasks is to adopt and perhaps modify a standard set of bylaws governing operations and residents’ behaviours within the condo.
“In B.C., there’s a standard ‘Strata Property Act Bylaw,’” Dowle says. “This outlines the general operations of the strata, including the duties to repair and replace common items.
But each strata corporation has the ability to amend its bylaws with a three-quarters majority vote of the members. In B.C., these bylaws should be registered with the land titles office.”
Bylaws could also affect all those issues dealt with by the tribunals. So, for example, in addition to smoking bans, a condo may impose restrictions on pets, overnight guests, or even children. (Some condos represent themselves as “adult only.”)
Limits and conditions may also be applied to use of the condo’s common elements.
In addition, most condos have restrictions on making cosmetic changes within the units themselves, unless the changes are sanctioned in advance by the board. As a result, any potential condo buyer should become familiar with the bylaws as well as related legislation to ensure that they represent acceptable limits.
Financial Documents and Disclosures
One of the most important considerations in evaluating a condominium, however, is its finances. With a house, you’re in charge of all financial matters related to maintenance and upkeep, but in a condo you’re going to be paying a monthly fee set by the board for those services, and that fee is updated every year.
This condo fee has two components. One part covers all routine annual operating expenses, but another portion goes into a “reserve” or “contingency” fund that is used to cover larger expenses that can arise over the long term. The amounts each unit owner must pay are generally based on the square footage of their units and can vary widely depending on a unit’s amenities, location, and age, but they typically range from $0.75 to $1.50 per square foot.
“Operating funds are used to pay for the regular expenses that come up over the course of the year,” Dowle says. “Some items are legally required to be included in the condo fees, such as insurance [for common elements— residents are required to insure their own units], regular maintenance, including management-company salaries and expenses, where applicable, and reserve-fund contributions. Other items are optional and depend on the building itself, the bylaws of the condo, and the preferences of the condo owners.”
The reserve or contingency fund covers long-term expenses such as roof repairs, window replacements, and plumbing or electrical-system repairs or improvements. In Ontario, condo corporations are required to conduct a reserve-fund study within the first year of their registration— and at least every three years there- after—to determine if the reserve will be sufficient to cover those long-term repair and maintenance costs.
“Each province has its own requirements, but generally the renewal cycle is every three or five years and must cover a projected period of 25 or 30 years,” Dowle says. “In B.C., for example, the ‘depreciation report,’ as it’s called here, is now required every five years.”
He adds, however, that “the 2024 implementation deadline for this schedule has been extended to 2026 or2027 in most parts of the province outside the greater Vancouver area.”
Reserves and Special Assessments
While it’s fairly easy for a condo board to ascertain its yearly operating costs, making expense projections 25 or 30 years into the future is less straight- forward, especially given the heightened possibility of problems over such a long time span. And unfore- seen events can sometimes result in costly “special assessments”—particularly troublesome for retirees living on fixed incomes.
“At best, it’s a very incomplete science,” said Rod Escayola, an Ottawa lawyer specializing in condo law, during a 2024 CBC News interview with reporter Stu Mills last year. The subject of the CBC report was a condominium complex in Kanata, Ont., where residents were suddenly faced with an unexpected $600,000 repair bill for leaking glass solariums and faulty railings. Levied on top of their regular condo fees, this amounted to assessments in excess of $10,000 for some owners.
What was worse, the CBC report noted, was that after being told the amounts involved, residents were given just three months to cough up the dough: “One resident was told that if he didn’t pay his share of about $11,000 by the June 30 deadline, the condo corporation would ‘immediately move to place a lien on his property…neither deferrals nor instalments [would] be offered as payment options.’”
A similar fate befell Irene Dunstan, a 69-year-old widow, when a special assessment was imposed to repair water damage to the entire foundation of her Mississauga, Ont., condo townhouse complex. She was given the option of paying by instalments, but even so, Dunstan had to sell her unit. “I couldn’t afford the instalments,” she says.
“They would have cost more than my small mortgage and my condo fees combined. Thankfully, even with the looming assessment, I got as much as I originally paid because the price had gone up quite a bit, so I was able to buy a smaller condo apartment nearby.”
Vital Due Diligence
What can you do to minimize the chances of being caught by an assessment? For starters, if you’re buying a pre-owned condo, you should make sure to get a Status Certificate (Form B Information Certificate in B.C.) that will provide, among other details, the condo’s current maintenance fees and annual maintenance budget, reserve-fund balance, condo rules and bylaws, and any ongoing legal concerns.
In addition, would-be buyers should obtain a copy of the condo’s reserve-fund study (depreciation report in B.C.) to get a better idea of the condo’s history and whether there are any outstanding maintenance issues. It would also be helpful to obtain and review the condo’s annual-general-meeting minutes to get a better sense of how the condo is being managed.
For example, are problems being properly remedied or are temporary solutions being applied to keep maintenance fees down?
When you’re making comparisons between different condos, lower maintenance fees may appear to be a selling feature, although, as Dowle notes, fees will vary depending on a number of factors. But all other things being equal, he cautions that higher fees may reflect more-thorough maintenance practices, which will keep costs down in the long run.
Of course, it can be difficult for the average person to make sense of all the financial and other information that’s required to make an educated buying decision. Realtors may be helpful in this regard, but they do have a vested interest in making the sale and may not have the expertise necessary to evaluate a condominium property’s finances thoroughly.
And, while mortgage lenders will usually conduct an appraisal of a property before consenting to a loan based on its collateral value, retirees who are downsizing after selling the family home will usually have no need, and may not even qualify, for a mortgage.
It can therefore be a good idea to seek the services of an accredited professional appraiser (see “A Valuable Tool”) to make sense of all that documentation and to provide a comprehensive report on the various factors that determine a condominium property’s true value.
Also, Canada Mortgage and Housing Corp. publishes a Condominium Buyers’ Guide. It provides an overview of the potential issues involved in condo living.
In the final analysis, condominiums can represent an ideal lifestyle solution for retirees, and the vast majority offer years of truly carefree living. But with an investment of this magnitude, you need to exercise due diligence to help ensure that you don’t run into problems down the road.
