How to Avoid Key Risks when Buying a Condo

Worried that the condo you buy will have hidden traps and expenses? Here’s what you need to do to go ahead with peace of mind

Young buyers buying condo apartment


If you're embarking on the purchase of a resale condo unit, there are a number of factors to take into consideration to ensure you are buying a sound property. Follow these pieces of advice and you can go ahead with peace of mind.

Condominium unit inspection

The details of each building inspection depend on the municipality and on the individual building inspector. If you are purchasing a condominium, make sure your inspector specializes in condominium inspections. The building inspector should look at the unit’s plumbing and electrical systems, appliances, and all exposed areas such as balconies, patios, and decks. Depending on your budget, you can also ask the inspector to report on the electrical room, boiler room, roof, parking space or garage, and storage space. Inspectors will also inspect common areas such as hallways, lobby areas, and stairways, if asked to do so. Some building inspectors will also read strata corporation minutes, property disclosure statements, building envelope reports, and engineer reports.

Before you hire a building inspector, ask what services are provided and at what cost. Some inspectors prepare a written inspection report filled with comments and suggestions as well as photos.

What areas of a condominium may need repair?

Two areas of condominium property that may need repair are the interior common areas and the building envelope. The interior common areas are stairwells, hallways, lobby areas, and garages. A building envelope includes all the building components that separate the indoor conditioned space from the outdoor unconditioned space. Samples of building envelope include the exterior walls, foundations, roof, and outside windows and doors. A building envelope failure means that any or all of these areas have water ingress caused by wind, rain, and air pressure.

A problem building envelope may exist if there are visual signs of wood rot, peeling paint, cracked or missing sealants, water flowing down the sides of the building, pools of water on the decks with no drainage system, windows that are wet on the inside. Further, when reading through the minutes, if there is no regular inspection and preventative maintenance program in place, this may be a sign of potential problems.

Protect yourself from a “leaky condo”

“Leaky condo syndrome” has put a serious dent in the home buyer market in some cities, notably Vancouver and Victoria. Your realtor should provide you with a disclosure statement from the seller, minutes, title search, an engineer’s report, and a building envelope report. Have your realtor ask the seller’s agent for a verification of the disclosure statement.

Home buyers must, however, perform their own due diligence with regard to reading the reports and documents provided to them. As the buyer, you must assess whether the property you are interested in may have problems. If English is not your first language, retain a professional translator to help you understand the intricacies of the real estate transaction.

When reading strata corporation minutes, check whether owners or tenants have complained of water coming through windows, balconies, roof, or any exposed part of the building. If you are buying a recently constructed building, you might want to check the developer’s and builder’s credentials and other developments in the community, find out about associations to which they belong, years of experience, certification, track record, and so on.

Further, ask whether the condominium building’s strata council is active in maintaining the building and the property. Is it responding to problems immediately? Is there enough money in the council’s contingency fund to do repairs? What about the management company — is it professional and reliable? Is the building self managed? Are all the issues regarding repairs being dealt with? Find out also how many other units are in the building. The more units in the building, the less you have to pay, if a special assessment were to be made.

What is a special assessment?

A special assessment is the outcome of a specially convened meeting of condominium unit owners who have an extraordinary expense that was not budgeted for in the regular maintenance fees and that cannot be fully covered by the monies in the contingency fund. Special assessments are generally rendered by the condominium corporation to pay for major improvements to the complex such as fixing the roof or repairing the parking garage. They are divided proportionately among the individual units. The amount assessed covers the shortfall and is charged pro rata, in accordance with unit entitlement of the suite of each strata owner.

If a special assessment is forthcoming, you will want to find out who will pay for it. If it is made during the time that the seller is still the owner and the assessment is levied before the completion date, even if the work is to be done after the completion date, it should be stated in the contract of purchase and sale that the seller is responsible for paying the assessment.

If a special assessment is levied after the completion date, including special assessments that are proposed, but not approved, the buyer will pay for this assessment. This detail must be written into the contract of purchase and sale to ensure that there is no misunderstanding between the parties later. If it is known that a special assessment will occur after possession, the unit’s price might be drastically reduced to reflect that the new buyer is taking on the responsibility of paying for the special assessment.

Special insurance coverage is available for special assessments. A condominium endorsement to a leading title insurance company provides coverage for situations in which a special assessment had been contemplated before the policy was issued but the prospective owner was not made aware of it through a status certificate. This type of insurance policy may be a very prudent investment.

Strata documents checklist

Searching for the right condo includes investigating the history and circumstances of that property. Look through the following documents carefully:

❏ Copies of the by-laws/house rules for strata units

❏ Minutes from the last annual general meeting or extraordinary general meeting held since the last annual general meeting

❏ Financial statements (latest approved balance sheet and income statement)

❏ Engineer’s report

❏ Title search

❏ Property disclosure statement for a condominium

❏ Strata plan

❏ Form “B”

Review these documents carefully, because they provide the history of that building. They may reveal potential problems or past problems such as plumbing leaks, complaints of noise from neighbours, theft, or vandalism. They may also reveal sufficient or inadequate monies in the contingency reserve fund.

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