08/22/2014 05:28 PM Toronto staff

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File photo of condo construction in downtown Toronto. THE CANADIAN PRESS/Steve White.

Investing in a home can be a scary proposition, and there are things homeowners are not aware of before they take the plunge into the condo market.

According to a survey by the Ontario Real Estate Association in July, 28 per cent of Ontarians who are thinking of buying a home in the next two years plan to purchase a condo. In Toronto, 41 per cent of respondents said they plan to buy a condo.

When buying a new condo, the Ontario Ministry of Government and Consumers Affairs advises prospective buyers to review the condo declaration, bylaws and rules with their lawyer, real estate agent or accountant. If it’s a resale condo, buyers should also look at the condo board’s budget and the status certificate.

The ministry offers the following tips below on what people should look into before they buy a condo, as well as buyer protections and developer obligations.

Items to consider before buying

Condo fees

How are the monthly fees determined? What services and operating costs are included? Do certain costs need to be paid in advance?

Condo fees can cover costs of operating fitness facilities, party rooms, swimming pools, as well as security, cleaners, gardens and a concierge.

It’s also important to ask if all utilities are included in the condo fees.

If you are buying a new condo, how much will the fees increase in the second year? Also, are there any differed costs?

Reserve fund

A portion of your monthly condo fees goes to the corporation’s reserve fund, which is in place for major repairs like the roof, exterior of the building, sewers, heating, electrical and plumbing.

If you are buying a resale condo, is there enough money in the reserve fund? This will determine the financial health of the corporation and what the condo fees will be.

Unit repairs & insurance

Are the repairs and maintenance in the units the responsibility of the buyer or the condo corporation?

In terms of insurance, what does the corporation’s standard insurance cover? Will you need to get extra insurance?

Condo budget

Is the condo budget in a deficit or surplus? How much has it increased over the past years, and were the increases due to inflation or utility costs? This will determine how your condo fees are affected.

Some other questions to consider:

• If you are looking to rent your unit, are there any restrictions for owners?
• How many rental and/or mixed-use units are there? Are there any commercial units?
• How many parking spaces and locker units come with the unit?
• Is the corporation involved in any lawsuits?

Click here for more information on what other questions to ask.

Protection for buyers

If you are buying a new condo, the Ontario Ministry of Government and Consumers Affairs says a buyer has the right to cancel his/her purchase within 10 days, “which starts from the time you receive a copy of the fully signed purchase and sale agreement or the disclosure statement (whichever comes later).”

A buyer also has the right to cancel the sales agreement within 10 days if a “significant change” has been made to the disclosure statement.

If a buyer wishes to cancel, the developer must refund the deposit (plus interest).

When a buyer makes a deposit, the developer needs to ensure “it is held in trust.”

Without a buyer’s consent or a court order, a developer cannot terminate a buyer’s purchase and sale agreements.

New condo units are covered by the Ontario New Home Warranties Plan Act, which is overseen by Tarion Warranty Corp. Click here for more information on Tarion’s warranty.

Part of that warranty includes deposit protection on homes and condo units. Deposits paid for new condo units are protected by Tarion up to a maximum of $20,000 and only for residential units.

Obligations for developers

A developer needs to ensure the condo is completed on time, and if the condo closing is “unreasonably delayed,” the buyer has a right to receive compensation.

The developer also has to set up the condo corporation by registering the required legal documentation and provide a disclosure statement. Click here for more information on what the statement includes.

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http://www.thestar.com/life/homes/2015/06/12/hidden-purchase-fees-can-cost-you-thousands.html

Hidden purchase fees can cost you thousands

Real estate agents and builders don’t always tell you about the thousands of dollars in hidden fees

 

Two areas involving builder agreements of purchase and sale that cry out for action by the new homes provincial watchdog are disclosure of additional costs and unit size.

Last week Stella came into my office to review a builder purchase agreement for a unit in a flashy new Toronto condo project. During the negotiation of the deal, both the buyer and the builder were represented by separate real estate agents.

Initially, Stella was enthusiastic about buying her own place — even if it wasn’t going to be ready for as long as six years. By the time she left my office 90 minutes later, after we went through the offer together in detail, she had changed her mind and decided that she was going to exercise her right to back out of the transaction.

Stella’s unhappy experience reveals a huge gap in consumer protection that needs to be remedied by Ontario’s Tarion Warranty Corporation. (Full disclosure: I am a past member of its board and Consumer Advisory Council.)

As I walked Stella through a schedule to the builder agreement, which lists the extra charges she would have to pay in addition to the $392,990 purchase price, her enthusiasm for the purchase dropped away. Although the extras are detailed in the agreement, they were never mentioned in the sales office and are effectively buried in the 41-page document.

Despite their obligations as registered real estate agents, neither the builder’s agent nor her own agent ever mentioned the charges to her.

In total, the extras came to about $12,000 which cannot be mortgaged and would have to be paid on closing.

But that’s not all. Buried in a thick volume of disclosure materials, there is an obligation for each purchaser to contribute proportionately to the purchase of a $744,000 superintendent unit and a $265,000 guest suite. Stella’s share would be $1,952, plus interest, at the Bank of Canada 10-year bond rate plus four per cent, repayable over the next 15 years.

The overall total of undisclosed extras at closing and afterward would be about $16,000.

Although all these charges are by law required to be set out in the purchase agreements or the disclosure materials, there is no obligation to mention them in any meaningful way in the sales office or disclose them prominently on the first page of the offer form.

As a result, buyers who do not have their offers reviewed by their lawyers in the first 10 days after an agreement is signed, often experience huge sticker shock on closing.

This needs to be remedied both by Tarion and by the Real Estate Council of Ontario. Builders and their sales agents should be required to speak up and be transparent about extra charges.

The other area which cries out for Tarion regulation is the failure of most — but not all — condominium builders to include in their purchase agreements floor plans that show linear measurements and the total unit area. Size is, perhaps, the most important factor in buying a condo and measured floor plans are crucial to buyers.

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Some of these charges typical in builder agreements — that came to about $12,000 — cannot be mortgaged and must be paid upon closing:

$7,797 (all figures include HST) for charges and levies imposed by government authorities or school boards;

$1,695 “administration fees” for connecting and energizing hydro and water meters to each unit;

$282.50 to keep track of the buyer’s deposits;

$904 to amend the agreement to add or remove a purchaser’s name;

$339 to subsidize the builder’s lawyer’s legal fees for registering discharges of the construction financing on the property title;

two months’ extra common expenses for the reserve fund; and

the Tarion enrolment fee of $1,050.

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Bob Aaron is a Toronto real estate lawyer. He can be reached at bob@aaron.ca , on his website aaron.ca and on Twitter @bobaaron2.