Get To Know Condominiums
What are condominiums?
Condominiums are individually owned units or structures within a jointly owned corporation. Condominiums come in various forms such as high rises, low rises, townhomes, and detached homes. In these various building styles, there are also numerous types of condominium corporations.
The most common condominium corporation you’ll come across is a standard condominium corporation. Other types include vacant land condominiums and common elements condominiums otherwise known as POTL.
Just as any form of ownership, there are advantages and disadvantages to condominium ownership. Often home buyers look to condominiums due to their hands-off lifestyle, greater sense of community, condominium amenities and sometimes, affordability. On the other side, buyers may choose not to live in a condominium due to rules and regulations on owners, monthly condominium fees or sometimes lack of individually owned land.
Either way, condominiums can provide a great way of living whether you’re a first time home buyer, a family or a retiree. It’s best to always go over what your needs and wants are for both now and the future when searching for a property in a condominium. The Condominium Authority of Ontario, CAO for short, is an organization that works to improve the life of condominium residents by providing resources and services to owners, residents and board directors.
The most common condominium corporation you’ll come across is the standard condominium. In this type of condominium, the corporation owns the land and the building/townhomes are broken down into individual units. Each owner has full ownership of their unit with shared ownership of the common elements such as hallways, roadways, balconies, and amenities. Often, in a standard condominium, the corporation will maintain core elements of the property such as windows, foundation, siding, and roofing. In return, the owners pay a monthly condominium fee that goes towards maintaining the property.
A vacant land condominium is similar to a common element condominium. The main difference is that no buildings are constructed on a vacant land condominium. Owners pay a monthly fee for maintaining the common elements.
A less common condominium corporation is a common element condominium, often known as POTL (Parcel of Tied Land). The condominium is made up of a piece of land that is attached to the corporation. This could include a golf course, recreational facility, or simply a private park. There are no units in this type of corporation, only individually owned properties attached to parcel of land. Often you would pay a monthly fee to the condominium corporation to oversee the parcel of land.
When looking to purchase condominiums buyers have a lot of decisions as to what type of condominium they would like to purchase as well as the amenities / services that they are hoping to obtain. Understanding the ins and outs of purchasing a condominium is essential to have a strong investment in the real estate market. A condominium reputation can sometimes make or break a sale both with potential buyers and lenders. Prior to purchasing a condominium take a look at the purchasing condominiums page below for more information. You can also click here to get started on your condominium search.
What’s a Special Assessment?
Every fiscal calendar year a condominium corporation must prepare a budget. The budget reviews all costs that the condominium corporation can expect throughout the year based on previous history and upcoming expenses. In the case of a shortfall the condominium must find a way to cover the expenses. Shortfalls can sometimes be made up in an increase in condominium fees, or a one time charge called special assessments. In most cases condominiums that have special assessments will make it payable over a period of time. Continuous special assessments can often reflect that the condominium is poorly managed and can be an issue come time to obtain a mortgage.
What’s a Reserve Fund?
When condominiums collect the monthly fee a portion of the fee goes towards the reserve fund. The reserve fund is essentially a savings account for the condominium corporation to use for major repairs and replacements of condominium elements. There are reserve fund studies labelled as Class 1, Class 2 and Class 3, all of which are completed by an engineering firm to ensure that the reserve fund is adequately funded to support major repairs and replacements in the future. Reserve fund studies are required every 3 years and provide a significant importance when looking into status certificates of a condominium corporation.