6. Why should I care about the building’s reserve fund?
If a reserve fund isn’t big enough to cover a specific job, like updating the elevators, a condo board can pass a special assessment, meaning that each owner is suddenly on the hook for a percentage of the cost. This also happens when there’s an emergency repair, or if a condo board is faced with a surprise expense, like a lawsuit. “Buildings that have glass falling off the terraces are a major concern for lenders. It’s a huge legal liability,” says broker Kim Gibbons. Both the Festival Tower, attached to the Bell Lightbox, and the Murano Towers, at Bay and College (buildings that have had incidents of falling glass), are facing $20-million lawsuits filed by unhappy owners.
Condo boards are required to do a reserve-fund study every three years to assess what repairs and maintenance will be needed over the next 30 years. When Denise Lash, a real-estate lawyer who mostly represents condo corporations and developers, gets a client’s status certificate, she compares the engineering report with the condo board’s plan to keep its reserve fund healthy. She decides whether the board is on top of the building’s long-term needs, and if the fund can bankroll the planned maintenance. “Make sure the building has a reserve-fund study, preferably done by an engineer,” she says. Andrew la Fleur suggests reading the minutes from the most recent condo board meeting. “You can find out what the real issues are, what the board is talking about,” he says.
7. How do I make sure my condo is built properly?
Even if your building is new, your developer has a reputation, so look into it. Lash recommends using Tarion, a private corporation that administers warranties on new residential properties in Ontario, and checks up on builders to make sure they aren’t doing anything illegal. Its website, tarion.com, will confirm that your builder is licensed in the province, show you how many buildings they’ve put up in the past decade, and how often Tarion has had to mediate warranty disputes. Market-research outfit J.D. Power also puts out an annual customer-satisfaction survey about Canadian builders, which is free on its website, canada.jdpower.com.
8. What are some signs that I should walk away from a unit or a building?
“One red flag is a history of above-average maintenance-fee increases,” says Andrew la Fleur. “Maintenance fees should rise at roughly the rate of inflation, so a 10 per cent rise every year for the past five years is a warning sign.” Ask the building’s property manager, or get your agent to look into a unit’s history on MLS. Sharon Golberg advises looking out for fast turnover in board members or property-management companies—ask other residents or security staff, or tell your agent to make finding out one of the conditions of your offer.
Word of mouth is an unbeatable source of intel, but as la Fleur notes, people aren’t going to bad-mouth their building in public since eventually they’ll want to sell. He does try a casual “So, what do you think of this building?” if he runs into residents during a showing, and says the offhand question can sometimes elicit honesty. The forums at urbantoronto.ca are also worth lurking in: The rumours are wild and the hyperbole intense, but that doesn’t mean it’s all lies.
9. What are the pros of buying pre-construction?
The main benefit is personalization: You pick the cupboards, countertops, floors, and other finishes, so it’s totally your style. “It’s a beauty contest out there,” says Sharon Golberg. “But bear in mind, it has a cost.” Buying pre-construction is appealing to those with smaller down payments, since the construction period provides some more time to save. When you buy pre-construction, you put down an initial deposit—your down payment isn’t made until the second closing, when the building is totally complete. Brand new buildings also tend to have low maintenance fees, at least for several years.
10. What are the cons of buying pre-construction?
The biggest drawback of buying new is that buildings very, very rarely open on time. Which means that not only will you have to keep renting (or living with your parents), but your deposit money will be tied up, not earning any interest, during months (or even years) of delays. There’s also the chance that a builder will make changes in your unit—most agreements say they can, at the very least, tamper with the layout.
Denise Lash reminds all of her clients who buy into new buildings that they have two closings, which can be expensive. After the first, or interim, closing, you’re on the hook to the developer for monthly occupancy fees1 that don’t go towards paying off your mortgage. There’s usually a couple months’ lag between that and the city’s inspection and registration of the building, which is the final closing. Be prepared to pony up for lawyer’s fees both times.
1 Occupancy fees include maintenance fees, property taxes, and interest on the unpaid balance of the purchase price of the condo.