Welcome to Chapter 1 of condos.ca's First-Time Buyer’s Guide. Our 10-part guide walks you through the whole condo buying process. It starts with basic terms, defines the big decisions and ends with you feeling confident and informed about the purchase of your first home.
If you already have a good sense of what a condo is, skim or skip ahead to Chapter 2: The Costs of Buying a Condo. As you level up, come to one of our First-Time Buyer Seminars. You'll hear from condo-specialized Realtors, a mortgage broker, and financial consultants. It’s free.
If you're a first-time buyer, a little free can't hurt.
This chapter introduces what a condo is, how a condominium building works, and the responsibilities of ownership.
What is a condo?
A condo is two things:
- It's property. A home you can buy, rent and sell.
- It's a form of ownership. Condo owners set rules and share costs.
Every condo owner is a shareholder in a building's condominium corporation. Collectively, owners own the building. Lofts and townhouses can be organized this way too.
As owners sell their property, new buyers (you, someday) take possession of a unit's Title Deed. The new buyer's details are added to the Land Registry of Ontario. Old owners go out, new buyers come in.
Owners share the condominium and the corporation, so they share the costs of keeping it clean and in good repair. This cost is called a maintenance fee and is usually a monthly payment to the condo corporation based on the size of the owner's unit. Maintenance fees vary widely from building to building and often go up as the building ages and/or gets more expensive to maintain. The condos.ca Toronto condo Maintenance Fee Study is also a good source of context and comparison.
Skimming? Here's the reveal. The term 'condo' describes both the unit and the shared responsibility and rules.
What’s the difference between a condo and a condominium?
The word condo is used for both the units in a building and the building itself. To avoid confusion, we refer to a condo as an individual unit and a condominium as the whole building—the suites, hallways, elevators and shared spaces. Special building features like 24-hour concierge and indoor swimming pools are called amenities.
Are all condominiums skyscrapers?
Toronto’s skyline is a ridge of steel and glass that may one day include the tallest residential building in Canada, but condominiums can be any size and any number of floors. Smaller buildings use terms like mid-rise, low-rise and boutique condos.
Loft buildings like the Toy Factory lofts are also organized into condo corporations. So are townhouse developments like the King West Village towns—'condo towns' is their shorthand. Shared ownership makes sense for buildings, building clusters, and developments where the units are similar.
Fun fact: Toronto's first apartment opened in 1889 at St. George and Harbord. It wasn’t until 1968 that a townhouse community in Rexdale became the first condominium in Toronto. The first condo in the US dates back to 1960. Historically speaking, condos are a pretty new thing.
What is a condominium corporation?
A condominium corporation is the legal entity that represents the condo building. The corporation is made up of every owner and represents their shared commitment to maintaining the building and common areas.
A condominium corporation is managed by a small group of elected condo owners: the Board of Directors. More commonly known as the Condo Board. This group manages the condo’s reserve fund and changes building rules - as long as they respect the Ontario Condominium Act. For example, a condo board might modify the rules around how many pets a tenant can keep or whether AirBnB rentals are allowed.
Every condominium has a corporation number. You can see a building's corp number on its page on condos.ca. Here's the building page for the popular Shangri-La in Toronto.
The status certificate: a report card for buildings and units
A condominium's financial health is reflected in its status certificate. A certificate is made up of documents that detail the building's maintenance history, current budget and decisions. In short, what the condominium corporation has spent money on in the past and where it will spend in the future. It also reveals any red flags about the building and paints a picture of how well each individual unit has been managed. Do you want to buy a unit that has thousands of dollars in unpaid maintenance fees?
Having your lawyer review the status certificate is a critical step when you're ready to make an offer. We cover this in more depth in Chapter 7.
Condo maintenance fees
Condominiums have gardens and walkways that need to be kept clean and landscaped. Carpets need cleaning, elevators must be serviced and heating and air conditioning systems need maintenance. These costs are shared by the owners as maintenance fees. Each owner pays this fee as part of their obligation to their neighbours. A healthy building also means healthy prices when owners sell. In Toronto, the average maintenance fee is $0.64 per-square-foot. So if you owned an 800 sqft condo, you’d pay $512 a month in maintenance fees. The owners of larger units pay more. You can see the maintenance fee history of most buildings in the GTA on condos.ca.
Cleaning costs are low and predictable. Replacing an elevator or a pool heater is not. Condominium corporations plan for major and/or unexpected expenses by keeping a portion of maintenance fees in a reserve fund.
If you owned an 800 sqft condo,
you'd pay $512 a month in maintenance fees.
Condo maintenance fees typically increase each year - in line with inflation rates and property taxes. A well-managed building generally has lower maintenance fees because the Condo Board is experienced and proactive.
How a hole in the ground becomes a condominium corporation
Going from construction to condominium to condominium corporation is complicated and can take up to 5 years. Here's how it usually works:
• A condominium project is approved by the local municipality
• The project is announced and sales open. But you're buying an agreement, not the condo. See below.
• Construction starts
• Occupancy period - buyers move in as floors are finished
• Registration - the building becomes a condominium and receives its corporation number
• Turnover meeting - this is where the building's developer 'gives' the condo to the owners
• First Condo Board is elected
• Building rules set
• Condo Board and property management company bring deficiencies (building issues or unfinished work) to developer
• This continues for as long as necessary
• 1-year after turnover - Annual General Meeting of owners
Did you know? Developers are required to sell at least 70% of a project before construction can begin.
Buying a new (unbuilt) vs. ‘used’ condo
No one wants a ‘used’ condo. Would you? The industry uses the term resale. But please, tell your friends you’re out looking for a used condo. We dare you.
To clarify, a resale condo is purchased from its owner. The buyer purchases the property and receives its Title. A pre-construction or new condo that is unbuilt or unregistered (see above) is bought from a developer. It can also be purchased from a person who owns the rights to a unit that is unbuilt. These are called assignment sales. Here's a video that explains them. Buying a new (unbuilt) condo from the developer lets you choose size, layout, floor level and finishes.
New condos offer a more accessible entry-point into real estate because you pay for them differently. Investors and first time buyers frequently buy new condos. Pre-construction condos are typically 10% more expensive than resale condos.
Buying resale condos - The costs of ownership are clearer with resale and you assume ownership as soon as the deal closes. A resale condo can be in any condition from freshly renovated to old and rundown. A real estate agent is invaluable in helping you avoid a lemon of a building or a unit.
Buying new / unbuilt condos - known as Pre-construction or 'Pre-Con', typically you're buying a future unit that is currently a plastic model in a showroom. A School for Ants, if you will. You're not buying a condo as it is not yet registered as such. You're buying a document called the Agreement of Purchase and Sale. The payment structure is very different. Ownership costs like maintenance fees and property taxes won't be determined until the building is completed and set by the developer. New condos can be cancelled by their developer without warning.
Condo vs. house
One of the benefits of choosing a condo as your first home is that maintenance is managed for you. Your upkeep and repair costs are fixed and shared with other owners and the condo board hires contractors and technicians to fix serious issues. They pay for this with the reserve fund (the boring section you skimmed a few paragraphs ago).
With a house, you own the property and the land around it. Not so with a condo, where you own what's inside the walls. With great property comes great responsibility, though. The cost of maintaining and repairing a house is yours to bear. House owners should put aside 1-3% of a home’s value every year to offset repair costs.
Let's compare a $600,000 house with a $600,000 condo.
House: 1-3% of a home's value put away for future repairs. $6-18k
Condo: $512/month in monthly maintenance fees. $6k
Is buying a condo a good idea?
Maybe. It really depends on where you’re at in your life and what your goals are.
As you educate yourself and figure out if it's a good time to buy a condo, you should sit down with a financial advisor and a mortgage broker. And of course you should continue with our First Time Buyer's Guide.
The Condo-Buying Good:
First Time Home Buyer Plans. There are federal and local programs and rebates that make buying a little easier.
The Bad:
The stress test and mortgage insurance. It’s harder for first-time-buyers to get away from them.
And the Ugly:
Buying a condo has many costs. Then there's the costs of ownership. Some are obvious, like your down payment and mortgage. Others are quieter. We look at both seperately in Chapter 2: The Costs of Buying a Condo and Chapter 3: The Costs of Owning a Condo.
Agent advice
"Know how much you can comfortably afford"
Be critical and conservative and avoid trouble down the road. You don’t want to be overleveraged and overwhelmed. Your budget will clarify your buying location(s) and keep you from falling in love with suites that are out of reach. If that keeps you from buying right now, it’s ok.” - Brendon Cowans, Condos.ca Top Producer
Nothing beats the insight of a real estate professional. Whether you’re talking to a mortgage broker, real estate lawyer, or one of our Condo Pros, professional advice and consultation is an excellent complement to your own research.
In the next chapter of the First-Time Condo Buyer Guide we'll help you understand the large and small costs of purchasing from the mortgage down payment to closing the deal.
Onwards, hopeful homeowner!
