Monday, November 27, 2006
Is Condo Life For You?
As a real estate professional and apartment dweller myself, people ask me this question quite often.
Condominiums have been in the news in recent years, sometimes for the wrong reasons.
In British Columbia, thousands of people have lost millions of dollars in equity because they bought condos that turned out to be leaky. The situation became so serious that the Provincial Government launched an inquiry, which ultimately came up with a compensation package for distraught property owners. And those property owners were really in distress. The members of the Barrett Commission, in charge of the Government inquiry, stated that they had never encountered anything like the passion and rage of people who felt their homes had been violated and their finances shattered - by water. It turned out that the construction techniques, which work well in California and Arizona, do not work equally well in the soggy weather of Canada's West Coast, no matter how nice all those wooden exteriors look.
On the other hand in Toronto, in the post-September 11 real estate boom, condos were again big news as they came to dominate new home sales in the built-up urban areas. According to the Greater Toronto Home Builders Association, fully 80 percent of all sales in the 416 area code were condos, while the numbers were reversed in the 905 suburban area, where 80 percent of all sales were non-strata freeholds. This is of great interest, since condos have accounted traditionally for just under 30 percent of the market, with one notable exception: before the real estate collapse of 1989.
To be precise, a non-strata freehold interest in land is one in which the titleholder owns ‘everything' - from lot line to lot line, whether it is a detached house, side-by-side duplex or even townhome. He owns the grass, driveway, bricks, shingles, windows and walkway. Not so with the condo, where what it is own goes from the inner one-half of a wall to the inner one-half of the opposite wall, and floor to ceiling as well. The condo owner, furthermore, shares in the ownership of everything else in the development with all the other owners, including outer structure, parking garage, elevators, landscaping, windows and roof.
Condos can also come in different varieties, not just as apartment buildings. There are condo lofts, condo townhouses, condo commercial units and rural communities with acres of common grounds. Typically some of the common features that everybody owns are set aside for the exclusive use of individual owners, such as balconies or backyards, lockers and parking spaces. Condos are bought, sold and mortgaged just like regular non-strata freehold interests, but the owner only insures the contents of the unit, while the strata corporation carries insurance on the physical structure itself. Condo owners pay a regular monthly fee for common expenses such as outside maintenance, ongoing repairs, landscaping and utilities for common areas, as well as a contribution to a reserve fund to be used in emergency situations.
Like homes, condos come in all price ranges and can be a great way for first-time purchasers to get into real estate, moving from rental tenancy to ownership in a small apartment unit. At the other hand of the scale, aging Baby Boomers are selling off their mansions, which require lots of care and attention, and move into luxury condominiums which offer a more liberating lifestyle as well as added security.
Indeed, there are distinctive advantages to purchasing a condominium. For example, there is no outside maintenance to worry about - no grass to mow, snow to shovel, roof to patch or driveway to seal. All this work is arranged and contracted out by the strata corporation. This means, one can have an exceptionally carefree lifestyle, knowing that someone else is looking after the chores.
Also appealing is the stable nature of the ongoing costs of ownership. With a single-family detached house one just simply never knows when the furnace is going to quit or, worse, the hot water tank is going to give up and flood the basement. With the condo, the predetermined monthly fee takes care of everything. Furthermore, speaking of money, it costs far less to find a nice condo residence in a demand neighbourhood than a single detached house in the same location.
Another big plus for people who like big swimming pools, exercise rooms, libraries or even art galleries is that condo developments often come with such amenities built right in. When everyone contributes through their monthly fees, some impressive things can be achieved.
So therefore, is condo life ideal for everyone? Definitely not.
Some people absolutely despise the loss of personal freedom that condominium lifestyle invariably brings about. Because one does not fully own the unit he lives in, one cannot control or even change it without collective agreement. This means making no exterior improvements or even internal renovations in some cases. There can be a great deal of rules and bylaws, and they can change at the whim of the majority of the property owners, who may not share the same vision or who may collectively decide that major renovations or improvements are required. The owners may decide that additional money may be collected on top of the monthly fees, and the strata corporation can place a lien on a unit if the owner refuses to pay up.
There have been instances in deluxe developments where prospective purchasers have had to be sponsored by existing condo owners, and then had their own personal finances and habits examined to be eligible for admission!
Less dramatic, but equally important, are the possible restrictions that can be imposed on ownership of a dog or cat. Also privacy is drastically reduced, compared with a single-family house. Then there is the value of the unit itself to consider, entirely dependent on how much a similar unit has sold, even on a different floor.
So therefore, condo ownership is an entirely different ballgame, which does not suit everyone. A careful scrutiny of the development in which the condo is being purchased always help, but in ultimate analysis what counts is the capability of the purchaser to adapt to an entirely different lifestyle.
Real Estate Chronicle
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