Everything You Need to Know When Buying a Condo

Buying a condo can be an exciting yet complex experience, especially for first-time homebuyers. Condominiums offer a unique blend of community living and ownership, making them an attractive option for many. However, buying a condominium involves a unique set of considerations and processes when compared to purchasing a single-family home. This guide will help you navigate the journey of buying a condo and highlight essential factors to keep in mind.

Understanding What a Condo Is

A condominium (or condo) is a type of housing where individual units are owned privately, but ownership of common areas and amenities (such as games rooms, gyms, and landscaping) is shared with other residents. Understanding this shared ownership structure is crucial as it affects your responsibilities and the overall living experience.

How Condominiums Operate

All the owners in a condo complex together make up the condo corporation. A set of Bylaws, registered with the Alberta Land Titles office dictate the duties of the corporation, as well as the rules and procedures by which the condo corporation must operate and conduct its affairs. Bylaws can vary slightly from one condominium to another, but in general:

• All the privately-owned Units within the condo corporation have voting rights to elect a Board of Directors from within the ownership group. The Board of Directors is responsible for managing the condo corporation's budget, financials, maintenance, and resident issues.
  
  
• The Board of Directors will typically hire a licensed Condominium Management company to carry out the day-to-day operations of the condo corporation, for a fee. Please note: this is not the monthly condo fee each owner pays, but rather a fee paid by the corporation as a whole.
  
  These day-to-day duties will include things like collecting condo fees on behalf of the condo corporation, producing financial statements and managing the accounts, administration of documents and records, managing maintenance service providers, and anything else the Board of Directors may need taken care of on their behalf.
  
  Some condominiums with capable boards will self-manage their condo corporation, although this is far less common.
  
  
• The Board of Directors will meet regularly (usually once every month or two depending on the size of the condo complex) to review financials, make decisions, and provide direction to the management company.
  
  
• The operating budget for the condominium is determined and approved by the Board of Directors. They allocate enough money to pay for ongoing annual maintenance around the complex like landscaping, snow removal, garbage removal, etc., and for long-term maintenance items such as the roof, building envelope, concrete or asphalt, and so on.
  
  This is where your condo fees are derived from. A portion of the fees each owner pays are for the annual operating budget, and some go into what’s called a Reserve Fund to pay for replacement or repair of the major, long-term, items like the ones mentioned above.
  
  
• An Annual General Meeting will be held once every 12-15 months to conduct any business that requires voting of the entire ownership. A new Board of Directors is typically elected at this meeting, although some condominiums have terms that run longer than one year for board members. All owners can attend this meeting, and may run for a seat on the board if they are interested.

Condominium Rules and Regulations

As mentioned, every condominium has a set of Bylaws established by the condo corporation and registered with Alberta Land Titles. In addition to these Bylaws, most condominiums have a set of Rules and Regulations that set-out expectations for residents along with penalties for contravention.

These guidelines dictate everything from pet ownership policies to renting out your unit. It is essential to familiarize yourself with these rules before purchasing to ensure they align with your lifestyle and preferences.

Steps to Purchasing a Condominium

Lifestyle Preferences - An important first step in finding your new home is to discuss your lifestyle and preferences with your real estate agent. They can assist you in identifying buildings that fit your unique needs. 

For instance, if you have two beloved puppies, your agent can present options that are not only pet-friendly but also accommodating to multiple pets. Some buildings may have age restrictions, while others might permit smoking in the units. Regardless of your lifestyle, your Realtor can help you discover the perfect fit.

Considering Costs - Once you’ve narrowed down a short-list of buildings or complexes, the next step is to understand the associated costs. Condo fees vary significantly from one condominium to another, and not all properties have the same maintenance expenses or requirements. Some may offer unique amenities or services that can affect overall costs. It’s essential to ensure you’re viewing properties within your budget, taking into account the mortgage and other home-ownership expenses. This foresight will help you avoid the disappointment of falling in love with a unit only to discover later that it exceeds your financial capacity.

Offer and Conditions - After viewing several units, you will likely find one suitable to your needs and preferences. Your real estate agent will help you with the purchase offer and negotiation process. Normally, an offer to purchase a condo unit will be conditional upon the following items:

• Mortgage Financing - Even with a mortgage pre-approval in place you’ll still want to include this condition unless you are able to close the deal in cash. The reason for this is that a mortgage pre-approval is only a general approval to borrow a specific amount based on your income and debt levels, but the lender still needs to approve the specific property and purchase price as well.
  
  
• Condo Document Review - There are several documents relating to the condo’s rules, operations, and financial situation that should be reviewed before committing to a purchase. Your Realtor will advise you of any specific documents that should be reviewed for the particular condominium you are purchasing in, but the most common are the:
  • Information Statement - This document lays out several important facts such as: the amount of Unit Factors registered per the Condo Plan, the current monthly fees, if there are any ongoing lawsuits or unsatisfied judgements involving the condo corporation, if there are any loans held by the corporation, and many other important items.
  • Management Agreement - The agreement between the condo corporation and the condo management company, describing the duties of the manager, their fees, and the length of their contract.
  • Budget - The annual budget as determined by the Board of Directors for this operating year.
  • Annual Financial Statements - The most recent audited and approved financial statements of the corporation. Many purchasers find it valuable to review the most recent monthly financial statements as well, but the primary reason for reviewing the annual financials is because they are audited by a licensed accounting firm.
  • Bylaws, Rules, & Regulations - These outlay how the condominium operates, detailing what is permitted for residents and occupants as well as any restrictions in place. It is important to ensure these rules align with your lifestyle.
  • Annual General Meeting Minutes - The AGM minutes record the business of the entire ownership. These are things like electing a board, choosing an auditor, and voting on items that are beyond the powers of the board (such as modifying bylaws, for example).
  • Board Meeting Minutes - These outline the most current issues going on around the condominium that the board is managing or working on. You can gain a lot of useful information about the management and operation of the condo corporation by reading through the board meeting minutes.
  • Professional Reports - The most notable of these is usually the Reserve Fund Study described below, but these can also be other important reports such as engineering reports, legal reports, etc.
  • Insurance Certificate - A certificate confirming the particulars of the insurance coverage acquired by the condo corporation. Although this covers most things related to the buildings and common areas, deductibles can be quite high ($25-50k). You will still want to acquire your own insurance against the condo’s insurance deductibles and to cover your personal contents as well as any upgrades within your unit.
  • Standard Insurable Unit Description - A detailed description of the “standard unit” covered by insurance. This will include materials used for flooring, countertops, etc., within the unit. Any upgrades beyond what is covered here, would need to be insured separately by the unit owner.
  • Reserve Fund Study, Plan, & Report - These critical documents show the condition of long-term maintenance items, and the financial schedules associated with their repair and replacement. An underfunded Reserve Fund can mean future Special Assessments (aka cash calls) or significant increases in monthly condo fees. Ensuring the Reserve Fund is well-funded is a key component of the Condo Document Review.
    
    
• Property Inspection - A property inspection, or home inspection, can help identify any maintenance or mechanical issues within the unit. Inspections for condominium units do not include the common areas, but rather the specific unit only. They will inspect things like windows, doors, water pressures/flows, exhaust fan drafts, electrical outlets, etc.
  
  Most home inspection companies will check appliances as a courtesy and note their age, but do not guarantee their functionality because of the unpredictability of when they will stop working.

Closing the Deal

Once all offer conditions are satisfied, you can proceed to close the deal. Your real estate agent will be there to guide you through the closing process. It typically takes 3-4 weeks from the time you make your offer until you receive your keys, and can move in, though it can sometimes be expedited.

Join Us on Your Real Estate Journey

Purchasing a condo can be a rewarding investment and a great lifestyle choice. By understanding the unique aspects of condo ownership and following a well-structured buying process, you can ensure a smooth transition into your new home. If you have any questions or need guidance throughout your condo-buying journey, feel free to reach out to us at LGA Realty Group. We’re here to help you turn your real estate dreams into reality!

Reach out today to start your journey!