Condominium/Townhome living is a popular option for many as it can be a relatively carefree housing option. It is also an option to seriously consider if you are currently renting and would like to own– a $250,000 insured mortgage today, with a five-year fixed term and a 25-year amortization is less than $1,200/month.
There are several things you should be aware of when purchasing a condo/townhome. The first being that they are a collection of private dwellings called units. Each unit is owned and registered in the name of the purchaser. Collectively the property as a whole consists of the common elements of the building that may include lobbies, hallways, recreations facilities, hallway, parking and gardens. The ownership of the common elements is shared by the individual unit owners as is the cost for the operation, maintenance and ongoing replacement. Each owner has an interest in these elements and the value of each particular unit is calculated in proportion to the value the unit has in relation to the total value of all units in the strata. This percentage is used to calculate the monthly strata fee that you must pay for upkeep. As well if there are any unforeseen expenses or shortfalls you will be required to pay your portion of those in addition to your monthly strata obligation if the funds are not readily available in the reserve fund. This is referred to as a special levy. You will also be responsible for property taxes. You as an owner will purchase insurance for your personal property, any improvements and betterments made to the unit and personal liability. The strata also carres insurance coverage for the common areas, the units and personal liability against claims for bodily injury and property damage occurring on the property.
Each strata is governed by its own unique rules, regulations and bylaws. You should carefully review and consider these bylaws and rules prior to purchasing. If you are purchasing a condo as an investment be sure to check the bylaws with regards to rental restrictions. If you are purchasing a pre-owned condo/townhome you should also review the year-end financial statements and budget to determine the financial well being of the strata. An important part of the budget is the reserve fund. A portion of your strata fee is designated to the reserve fund and these funds are set aside to provide for major repairs over the life of the condominium/townhome building. This fund ensures that the common elements will be maintained in good shape for the life of the project. Most strata’s today also have a Depreciation Report available. This report contains a physical inventory of the common property and assets, the anticipated maintenance, repairs and replacement costs for common expenses projected over 30 years and a financial forecasting section with at least three cash flow funding models. As an owner you can attend Strata annual meetings and can serve on the council.
Condominiums/Townhomes can be a great alternative to the higher costs of owning and maintaining a home. For further information on purchasing a condo check out CMHC’s Condominium Buyer’s Guide, which can be found on-line at https://www.cmhc-schl.gc.ca/en/.
Of Prime Interest is a collaboration of mortgage professionals Trish Balaberde 250 470 8324 trishb@creativemortgage.ca Darwyn Sloat 250 718 4117 dsloat@creativemortgage.ca Christine Hawkins 250 826 2001 christine@creativemortgage.ca
