In the past 2 weeks we’ve had the pleasure of helping 2 clients search for a condo to buy. One client bought a condo managed apartment (typically known as a “condo”) and the other made an offer to buy a condo managed town-house.
Condos can be appealing because the condo corporation (the Management) takes care of most of the maintenance and repair work. What many people forget is that the unit owners condo maintenance fees pays for all of the work.
Every condominium complex is run by a management group. It’s this group’s responsibility to collect maintenance fees and oversee the maintenance and upkeep of the condominium complex.
And if the condo Management company is negligent in doing proper maintenance, quality repair work when needed, or not responsible enough to keep the condo corporation profitable (with a healthy cash reserve fund), then it is YOU (the condo unit owners) who foot the bill for the cash shortfall.
Thankfully, there is a way for condo buyers to do their due diligence and know what they are getting into (before it’s too late). When we [at Shuster & Cado’] prepare offers for our buyers to purchase a condo managed property, we always have a condition [clause] in the offer that requires the Seller to provide a “Status Certificate” and allows for our Buyer’s lawyer to review and approve of it.
The Status Certificate is a fancy term for a package of reports that usually includes; financial reports, maintenance reports, engineers reports, reserve fund studies, and even more info, that allows for you and your lawyer to asses the financial stability of the corporation. A well run condo complex will have an excess of money in their reserve fund in case of emergency repairs or upgrades.
It usually outlines past, present, and future cash outlays, budgets, and future work projects, so we can assess the future financial stability of the condo corporation. You also want to know that the Management company is doing everything necessary to ensure your enjoyment and comfort while living in the property, as well as future potential resale value of your property.
While our client who purchased the condo apartment obtained a Status Certificate that was better than any other Status Certificate her lawyer has ever seen, the other client who offered to purchase a condo managed town-house was not so lucky. Thankfully, the condition we put in her purchase offer allowed us to back out of the deal without penalty.
In her case (the ladder), the budget showed a $150,000 expenditure to repair roofs and water leak damage every 2 years on an ongoing basis. With approx. 200 units, if the corporation was spending $150,000 for repairs to the roof every 15 years, that might be considered reasonable. But if you had to fix the roof on your house every 2 years, wouldn’t you think something was wrong?
There are more than 7,000 condominium buildings in the GTA and some are more than 40 years old. By a conservative estimate, more than 25 per cent of these buildings are in trouble, meaning there is not enough money in the reserve fund to pay for necessary repairs.
Almost 40 per cent of GTA buildings do not have professional managers. One reason is that there is a shortage of qualified managers. Another is some buildings can’t afford it.
Another reason buildings fall apart is that even when the board wants to make needed repairs and sends out special assessment notices, other owners who disagree gather enough votes to remove the board and install a new one that cancels the assessment.
It takes 51 per cent of owners to replace the board. The long-term result is that the units in these buildings lose value and scare off potential buyers.