Buying a condo in Toronto: what to check before you buy

A condo is a shared building owned by everyone in it. You own your unit outright, and you also own a share of everything else, called the common elements. A board of directors, elected by owners, runs the condo corporation, usually with a property management company handling the day to day.

Three documents set the rules of the building: the declaration (the condo's constitution), the by-laws (how it is run) and the rules (day-to-day living, like move-in times or barbecues on balconies). You agree to all of them when you buy.

Every month, each owner pays a maintenance fee (also called common expenses or condo fees). Your share is based on your unit's percentage of the building, which is why larger units pay more. The fees pay to run the building today and save for big repairs tomorrow.

What is included in your unit?

This varies a lot from building to building. Some fees include your heat, water or even hydro. Others meter each unit separately, so you pay those bills on top. When comparing two condos, always ask exactly which utilities are included before you compare the fees.

In Ontario, the condo corporation must provide a status certificate on request, for a fee. It is a package of documents that tells you about the building's money, rules, insurance and any legal issues, plus whether the unit you are buying owes anything.

On a resale condo, buyers usually make their offer conditional on their lawyer reviewing the status certificate, typically for a few days. On busy offer dates, sellers often order it ahead of time so buyers can review it before offering.

Red-flag checklist

None of these automatically means "walk away", but each one deserves a closer look with your lawyer and your agent before you go firm:

• A special assessment has been approved or is being discussed
• The reserve fund is well behind what the reserve fund study recommends
• Big repairs are coming soon: roof, windows, elevators, garage, balconies
• The corporation is in a lawsuit, or there are large unresolved claims
• The budget shows a deficit, or fees have been kept artificially low
• A large insurance deductible that owners could be charged
• Rules that do not fit your plans: pets, leasing or short-term rentals
• Arrears on the unit you are buying (these should be paid by the seller)

The reserve fund is the building's savings account for major repairs and replacements: the roof, elevators, windows, boilers, the garage. Every month, part of your fee goes into it.

A reserve fund study is a long-range plan prepared by a qualified professional. It lists every major component, estimates when each will need replacing and what it will cost, and sets the contributions the building should make to be ready. Ontario requires condo corporations to update the study on a regular schedule.

If the fund falls short when a big repair arrives, the corporation can raise fees or charge owners a special assessment, a one-time bill that can be large. That is why the reserve fund is one of the first things we look at.

Parking and lockers

In some buildings, parking spots and lockers are their own legal units with their own title (and sometimes their own small property tax). In others, they are exclusive use common elements assigned to your unit. Either way, make sure the agreement lists the exact parking and locker numbers that come with the unit, and that the status certificate matches.

Building age and quality

On a tour, look past the unit. Wait for an elevator at a busy time. Check the lobby, hallways and garage for upkeep. Read the notices on the board. Ask how long the property manager has been there. A well-run building shows.

A resale condo already exists: you see it, you check the status certificate, and you usually move in 30 to 90 days after your offer. A pre-construction condo is bought from the developer before it is built, sometimes years ahead. Here is how pre-construction works, in simple terms:

• Deposits in instalments: instead of one deposit, you pay several over the build, set out in the agreement.
• A cooling-off period: in Ontario, when you buy a new condo from a developer you get a short window after signing to cancel.
• Occupancy period: you may move in before the building is officially registered and pay a monthly occupancy fee. It covers interest, estimated fees and taxes, and does not pay down your price.
• Final closing: once the building is registered, your mortgage funds, land transfer tax is paid and ownership transfers to you.
• Assignment: selling your purchase agreement to someone else before closing. Developers usually need to approve it and may charge a fee.

Condos are easier to compare than houses because similar units in the same building sell regularly. That is the starting point for pricing. From there, the details move the number up or down:

Price per square foot is a useful yardstick, but only between truly similar units. A smaller unit often has a higher price per square foot, and two units the same size can feel completely different if one wastes space.

Shopping downtown? Our downtown Toronto condos page covers how to compare buildings.

Condo insurance

The corporation insures the building and the common elements. You still need your own condo unit owner's policy, which typically covers your belongings, upgrades you or past owners made to the unit, your personal liability, and your share of costs the corporation can pass on to owners, like a deductible if a leak starts in your unit. Ask your insurance broker to read the building's deductible and the standard unit definition before choosing coverage.

Fees count toward your mortgage approval

Lenders include condo fees when they work out how much you can borrow, because the fee is a monthly housing cost just like your mortgage and property tax. Many lenders count half of the fee, and some count all of it. Either way, a higher fee means a smaller maximum mortgage.