Purchasing your first property is a new and exciting endeavor. It is a right of passage for many entering another phase of their lives. The first type of properties first-time home buyers lean
10 Questions You Should Consider When Purchasing a Condo
Dated: July 8 2021
Purchasing your first property is a new and exciting endeavor. It is a right of passage for many entering another phase of their lives. The first type of properties first-time home buyers lean towards when they get into the real estate market are condos. Condos are a great place to start when entering the real estate market for many reasons.
However, it is extremely important for you and your local Realtor to do some research and due diligence on the strata before putting in an offer to purchase. For instance, collecting as much information on the strata as possible such as the current financials, how much the monthly maintenance costs are and what are included in those costs, getting a current depreciation report to understand the state of the building, etc.
It is especially important to understand that each strata you look at during your property search will be different. There will be some with lower or higher maintenance costs depending on what is included as well as various restrictions that need to be abided by all owners and/or tenants in the building. It is necessary to really know your needs and wants prior to purchasing a condo so you end up with a home you love without constraints.
These 10 questions will help guide you on your quest to know more about your needs and wants prior to purchasing a condo:
1. What are the rules and bylaws?
As you start your search, one of the most important areas to look at before viewing the property is checking the rules and bylaws in the strata to see if they will restrict your individual needs and choices in any way. Some things you will need to look at in the bylaws, rules and regulations are if rentals are allowed and if so, what are the parameters around rentals? Are certain pets allowed and are there size, weight or height restrictions for pets? Does the building have age restrictions, such as being an adult only building? Additionally, can you have a BBQ on your balcony? All these questions need to be considered before viewing a condo you might be interested in.
2. How much is the monthly maintenance fee? What is included in the maintenance fee?
The maintenance fee or strata fee is a monthly cost generally paid at the start of the month that covers the operating expenses of the building and contributes to the contingency reserve fund (CRF). The maintenance fees cover the following operational costs: heat, water, landscaping, weekly building cleaning, snow removal, garbage disposal, amenity maintenance, security, etc. It is essential to know what the maintenance fees cover fully, as some fees do not include all of these operational costs and require you to pay additional fees for things like BC Hydro, internet, garbage pick up, etc. Finding out what is covered and what is not will help you with factoring in additional bills you can expect to pay as a homeowner.
3. Are parking and storage included?
A common complaint about some condos is the lack of parking or storage space. Some condo buildings have a single parking space and a storage locker that are allocated to each unit. Alternatively, some condos do not include parking nor storage options for owners in the building. Having a parking spot, visitor parking and a separate storage space can be essential during your property search. Especially for being able to store items away that tend to clutter your livable space, such as bikes, outdoor gear, holiday decorations, etc. You can check to see if a parking spot or a storage locker is assigned to the unit on the Form B that your Realtor can provide to you from the strata. This is an essential strata document that you will need to see to make sure your needs and wants such as parking and storage are being met.
4. What are the amenities available?
Some buildings provide access to a gym, recreational room, swimming pool, etc. It is good to be aware of what kinds of amenities are present in the strata, as these will also be included in the maintenance/strata fee. These amenities can be some of the greatest assets in a building and really add to a higher quality of life as they are practically at your doorstep. However, a reason why some people back away from condos with a pool is because these types of amenities require increased maintenance and insurance, which often means higher strata fees or even taking from the contingency reserve fund for long-term repairs.
5. How much is in the contingency reserve fund?
The contingency reserve fund (CRF) in a strata is essentially their rainy-day fund or piggy bank. It is good to have more saved in the CRF as that will prevent special levies that will be issued to owners when building-wide repairs need to be completed. The contingency fund can be used for large projects like painting the whole exterior and interior of the building, replacing the roof, replacing old inefficient balcony windows with new double-paned, energy saving windows, etc. A healthy contingency reserve fund is indicative of a strata that is responsibly managed, as it will show that money is being allocated appropriately to keep on top of building repairs.
6. Is there a current depreciation report?
The best way to make sure the strata is on top of the repairs and upkeep of the building is by reviewing a current depreciation report. This report must be obtained from the strata to see how the CRF will be used based on the proposed depreciation of the building and the various expenses that will be incurred. A depreciation reports tells a strata corporation what common property and assets it has and what are the projected maintenance, repair and replacement costs over a 30-year time span. The engineer completing the report can compare the costs of the contingency reserve fund and current maintenance fees, and make recommendations on repairs, increase of maintenance fees, and anticipation of special levies. The depreciation report is an essential document when it comes to planning the stratas annual budget, monthly costs and other financial requirements in regard to building maintenance and repairs.
7. Are there any special levies being approved or proposed?
After reviewing the depreciation report, you will see whether there are any special levies that will be issued in the future. It is important to see if special levies have been issues in the past 2-5 years as well by reviewing previous strata budgets and financial records. Some strata buildings might have a balance of using the contingency reserve fund, maintenance fees, and an occasional special levy to keep month-month maintenance fees lower.
8. What does the insurance cover? How much is the strata insurance deductible?
The strata corporation’s insurance is a common expense; it usually occurs annually and is part of the strata’s operating budget. The strata corporation must review the effectiveness of the strata corporation’s insurance policy yearly and report on the insurance coverage at each annual general meeting (AGM). Many strata corporations choose to insure for a higher amount than the minimum $2 million and include coverage such as fire, earthquake, vandalism, lightening, vehicle or aircraft crash, etc. Knowing the strata insurance policy will be important to make sure you are covered in any type of emergency, as well as how much will be covered.
The condo could have a central boiler room that circulates hot water to all units in the building and includes water in the monthly strata fee. In some cases, the hot water tank will be in the individual units and the owners will be responsible for the maintenance and eventual replacement of the hot water tank. It is recommended that owners replace the hot water tank after 10 years of use for it to be most effective. While you will be responsible for the cost of water and hot water tank, the advantage is that you will also be in control of the water temperature and not have to deal with centralized issues such as unexpected water shut-off or lack of hot water when you are needing to jump in the shower before a busy day.
10. Who is the property manager? Is the strata self-managed?
It is good to know who the property manager is as they will be facilitating the strata council by carrying out the necessary objectives of the strata property act. They tend to owner requests, quotes for repairs, tenant/owner complaints, enforcing bylaws, collecting strata fees, etc. On the other hand, if the strata is within a self-managed building, the objectives of the strata property act are carried out by a collective of owners (in most cases). It is peace-of-mind to know whether there is property management in place or if the strata is self-managed to make sure maintenance fees are being used effectively, the contingency fund is being replenished and that repairs are being completed according to the depreciation report.
As always, these are just a few of the common questions to ask your Realtor when thinking about purchasing a condo. There are many more questions that you may have, as purchasing a property in a strata is complex and it varies for each building and for individual needs/wants.
If you have more questions and need more info on purchasing a condo, contact me below!
Jemilla Khan REALTOR®
Jemilla is a residential REALTOR® in Victoria, BC. She serves the communities of Victoria, Oak Bay, Esquimalt, Victoria West, Saanich West, Saanich East, the Westshore and more. Previously to getting....
Latest Blog Posts
Being cooped up at home in major cities in Canada has made many consumers long for moving farther out of city centres and acquiring more space. The heightened demand has created a frenzy in the
Happy Earth Day! We often hear calls to action about going green and doing more each day to protect our beautiful planet, especially with the climate crisis, protecting old growth forests and
Tax season is upon us and individual tax filing is officially open with CRA Netfile on Monday, February 22, 2021. While you are getting all your files in order, consider the following