Are you considering buying a condo but confused about strata corporations, council minutes and depreciation reports? There are a lot of details to consider, and if you've never owned a strata property before, all these factors can be intimidating. But don't be put off – this article provides insights that will help ease the process and ensure you know exactly what you’re buying.
Strata Management Companies
Not all strata boards employ a property management company. You are in a better position if the building you’re considering has the support of one. If the building is managed, find out about the reputation and history of the property management company, and how long the company has been working with the strata board. See how many companies have come and gone over the past few years. A red flag should go up if there is no history of a property management company, or if there is one that has changed hands several times.
Decisions are Made Through a Voting Process
Unlike buying a detached home, with condo ownership you are really buying into shared living. All common areas and systems (those outside your unit) will only be repaired or replaced according to majority vote. You have to look at the building, including common areas, as everyone’s responsibility. You may have to be patient if the windows along your unit have lost their seals or maintenance is needed on the balcony, for example.
Strata Minutes and Depreciation and Engineering Reports
The more information you can learn about the building, the better off you’ll be. As a buyer, you should be given a minimum of two years’ worth of strata minutes, but try to get your hands on minutes going back as far as possible. Ask the strata president questions if possible, or even chat with residents about the building. Every strata and building will be managed differently, so it is important to find out about the building’s history and future costs associated with maintenance, repairs and replacement.
Buildings are now required to have engineering companies produce depreciation reports. Essentially, these reports give you a snapshot of all required upgrades and maintenance tasks needed for the next 25 to 30 years. They are broken down by systems and components with ballpark costs according to useful service life. These reports will also give you options for payment, usually based on a phased approach. Depreciation reports are costly, so it is not unusual for buildings to postpone them as long as possible (even though they all need to be done). Make sure the building has one for you to study. If not, your risk of ownership increases, and gauging future costs will be challenging.
Condo Buying is All About Timing
As laid out in the depreciation report, every building system and component has a service life. As a buyer or investor, you should consider how long you plan to live in the condo in relation to the costs involved with ownership. Timing is important here because you want to try to avoid paying major costs if possible. Normally, the big-ticket items include replacement or repairs to the exterior, plumbing, roof and underground garage. So, if you manage to buy into an older building after the majority of the “big-ticket” items have been paid for, great. The “x factor” (which cannot be known) might be a special levy to repair an unexpected flood, for example. Furthermore, strata fees will continue to increase over the years, so you must anticipate extra costs in addition to those listed on the data sheet. Budget accordingly.
Common Issues with Older Condos
The main concerns will be upgrading the common areas described above. Further to this is aluminum branch wiring. There have been issues with aluminum wiring, especially when it is spliced with copper. Copper and aluminum expand and contract at different levels when they heat up. This can lead to electrical fires, but special wire caps can be used to solve this problem safely. Another electrical concern includes missing ground fault circuit interrupter (GFCI) outlets. These safety devices provide important protection near water sources. Many older condos don’t have them, so they will have to be installed. It would be best to speak to an electrician about these issues.Other concerns involve material built with asbestos, especially if you plan to do any renovation work.
On the flip side, when buying an older condo, you are typically getting a larger space. So if the described issues and many common areas have been repaired or budgeted for, your older condo could be a good investment.
Leaky Condo Issues
Stucco buildings built from the late 1980s to the mid-1990s were problematic for leakage. Condo owners have been shelling out huge sums of money to have these buildings rehabilitated. Find out if your building has been affected or repaired.
What a Home Inspector Can Do for You
Here in BC, your home inspector is only really responsible for evaluating the systems and components of the unit. According to our standards of practice, common areas and appliances are not included. Some inspectors will take on more responsibility, but this is a business decision and should not be an expectation. Fortunately, many inspectors are willing to help. Some may even scan through the minutes or reports to give you insights. Ask the inspector to see what he or she is willing to do before the inspection.
If you want the inspector to look at the common areas, and the inspector is willing to do so, your real estate agent will have to work with the listing agent and/or strata to find out what can and cannot be inspected. Some building managers have special rules about common areas and may not allow the inspector to view these, so find this out in advance.
Your Responsibilities as a Condo Owner
You are responsible for finding out the rules about any renovation work you wish to have done. There are sound restrictions you need to follow, especially for floor installations, so be sure to find out from the strata what is and is not allowed before you purchase. Emergencies and special levies should be anticipated, even if they do not happen, so include these in your budget. Floods are common in condos. If an investigation determines the owner is responsible, he or she may be on the hook for repairs or increased insurance premiums. Leaving items in the underground garage could land you in trouble as well. I suggest speaking to the strata council as soon as you take possession to learn all you can about your expected role as a condo owner.
Decide to buy objectively, looking beyond the esthetics. Try to view the condo as an investment rather than your dream come true. All listing sheets sell the “experience” of condo living, including a very well crafted description of the extra amenities. These may be exactly what you are looking for, but at the same time, you should think about whether will you will actually use the pool, sauna, gym, and so on, because you will pay for them no matter what.
Condo buying can be complicated, so be sure to read as much as you can to make sure you’re informed before making your purchase. For specific questions, chat with your real estate agent or contact me and I’ll help you out.