Buying a condo comes with its own set of intricate details and considerations that even experienced home buyers may not be aware of. We are going to provide you with some of the most important things you should know about the condo buying process, as well as some advice from an industry expert.
The first decision you’ll have to make when purchasing a condo is whether to buy new or resale. Let’s take a look at some of the pros and cons of both options.
- lower purchase price
- a choice of units and locations within the building
- a better selection of options / upgrades
- new home warranty protection
- if the building is still under construction, you can’t see exactly what you’re buying
- it's difficult to know if a layout will work for you based only on a floorplan
- your initial deposit is tied up for the duration of construction
- builders sometimes require large deposits, which can be equal to 20% of the purchase price in many cases
- construction may not be completed by the expected date
- although you may be able to move into your unit while others are still under construction, you may have to deal with noise and disruptions
- depending on when you take possession of the unit, you may have to pay occupancy fees.
- you can actually see what you are buying
- no long waiting periods unless stated in the condition of sale
- deposits are often much lower
- there is an established condo community; you can see if the corporation is well-run, and the residents are a fit for you.
- older condos often have larger units
- less choice of available units, options and upgrades
- more maintenance may be required
- the amenities you would like may not be available, like fitness facilities
- older units may not be as energy efficient as newer ones
- major repairs to the building may lead to extra charges to the unit owners
- little or no warranty protection; only a portion of the new home warranty may be left
Interim Occupancy Fees
Interim occupancy is the time period between when you take possession of the unit and when you take final ownership. During that time, you will have to pay interim occupancy fees, otherwise known as “phantom rent”, paid to the developer. The Condominium Act requires that a development has to be constructed to a certain level before registration of the condominium plan. Title, or ownership, of the unit can’t be transferred until the building is registered. Since you can’t own something that technically doesn’t “exist”, you will have to pay these interim occupancy fees between your interim closing date (at the time of occupancy), and the final closing date (at the time of final registration). Interim occupancy times vary, with lower floors having a longer occupancy period, and a shorter time for higher units. The occupancy fee is roughly based on a combination of the following three elements: interest on the unpaid balance of the purchase price; an estimate of the Common Elements Fee; and an estimate of the property taxes.
Why You Need a Lawyer when Buying a Condo
In addition to a knowledgeable and dedicated real estate agent, potential condo buyers should also have a real estate lawyer that can help navigate the intricacies of the buying process. We spoke with John Bianchi, the lawyer at the helm of J. Bianchi, Trusted Legal Counsel in Toronto. He shared some excellent advice for condo buyers with us.
1) What are the fees that most often come as a surprise to condo buyers?
JB: Closing adjustments can catch new condo purchasers by surprise. Closing adjustments are additional fees listed in your Agreement of Purchase and Sale, including realty taxes, utilities, occupancy fee, common expense contribution, Tarion enrollment fee, connection fees, utility meters, development charges, etc. These closing adjustments can add up to $10,000 - $20,000.
2) Why is it beneficial for condo buyers to retain a lawyer?
JB: With new condo purchases, a lawyer will inform a purchaser of what he or she may view as important legal matters within an Agreement of Purchase and Sale, including floor plans, feature sheets, closing adjustments, HST new housing rebate, title, purchaser covenants/ representations and warranties, notice and warning clauses and time lines in the Tarion Addendum, in order to allow a buyer to assess the risk of proceeding with transaction.
For example, regarding closing adjustments, a lawyer will assess whether the builder is likely to delete some of the charges and adjustment items, if asked. The object is to determine, with as much specificity as possible, what the charges are likely to be, so that purchasers can budget how much money is required to close and are not caught by surprise on closing.
3) At what point in the condo buying process should buyers seek out a lawyer?
JB: The moment the purchasers sign the Agreement of Purchase and Sale, if not before. If purchasers cannot finalize the agreement satisfactory to them within 10 days from delivery of the accepted agreement to them, they will either have to extend the condition or kill the deal. Otherwise, it becomes firm.
Are you interested in purchasing a condo? Allow me to help you find the ideal new or resale condo.
Planning to sell your condo? Contact me for your free, no-obligation evaluation.