Common Sense for Condo Buyers

BY SHANNON MONEO

As the median price of single-family homes in Greater Victoria goes up, the appetite for condo living is definitely on the upswing. While the average price of a single-family home in the region hovers at $800,000, condo prices average around $430,000 — and the choice is growing as developers build for singles, couples and families.

But unlike most detached homes, condos almost always have strata corporations — the boards who run the residences — so teasing out accurate information is critical. Despite today’s feverish sales environment, realtors agree that purchasing a condo requires “home” work.
“You need to approach buying into a strata carefully. There are lots of moving parts,” says Bradley Stokes-Bennett, a realtor with The Condo Group. A former investment adviser and developer, Stokes-Bennett has somewhat of a bias when it comes to condos.

“People have to be very cautious with older buildings,” he warns. “If talking about buying, I go with smaller and newer rather than older and bigger.”

There’s no comparison between 1970s-built condos and new structures, Stokes-Bennett says. He considers condos built since 2001 “new,” but he ups the ante, adding that 2006-built and later are even better because building codes were thoroughly revised.

These building codes remain important. Remember the 1990s-built leaky condos? Those were the result of a California building code being applied in a West Coast rainforest. Today’s codes stipulate constant airflow to prevent mould, for example.

“The older something is, the more it costs to fix per square foot,” Stokes-Bennett says. As well, homes built by licensed residential builders are covered by mandatory home-warranty insurance. Minimum coverage includes two years on labour and materials, five years on the building envelope and 10 years on the structure. Still, older gems can be found, but it takes time, he adds.

If an older condo is in great shape, it’s usually been managed well by the strata. To discover how well a strata operates, carefully review the mandatory depreciation report (note that condos with four or fewer strata lots don’t require one), strata board minutes and bylaws.

Once an offer is placed on a strata property, the documents are accessible, says Andy Stephenson, a realtor with Sotheby’s International Realty in Victoria. “It’s absolutely critical to be up to speed on the building,” he says. It can even be prudent to have an accountant or lawyer go over the documents.

WHAT CONDO FEES CAN TELL YOU
Monthly strata fees can be a warning. If fees are too low, it could be an indication that the building isn’t sufficiently maintained. Expensive repairs, such as elevators, could be jeopardized. “It’s critical to collect the right strata fee,” Stephenson warns. “Older folks on a budget don’t want to increase the fees. But you have to pay the piper at some point.”

Andy Spurling, president of Proline Management, which manages a number of Victoria properties, notes that strata fees are typically set via the unit’s square footage so that larger condos, for example, pay more than smaller ones.

“It’s easy to keep condo fees low if you’re doing nothing — no gardening, cleaning, updating,” says Spurling.

He agrees that reading the depreciation report is vital because it outlines work to be done in a fixed period. The report is usually prepared by an engineer and addresses features such as the building exterior, electrical/plumbing/heating systems, landscaping and balconies.

“If you see that three years ago all the windows were due for replacement and nothing’s been done, what may have been a $2-million expense will now cost $3 million,” Spurling says. The day someone becomes a condo owner, they’re on the hook for all shared strata expenses. Annual general meeting (AGM) minutes also provide important insight, he says. They’re mandatory and must address insurance and the strata’s budget. Would-be buyers often find the reports boring, and if the buyers are caught in a bidding war, they may not do their due diligence. Also, minutes may be scant and not truly representative of what’s actually occurring at the strata. An advantage of property management companies is that they, not the strata board, record minutes fully and factually, Spurling notes.

While having a lawyer go over the documents with a fine-tooth comb may cost money upfront, this could save you money in the future and avoid unpleasant restrictions in the future. For instance, Spurling has seen buyers end up with unpleasant surprises when they decide at a later date to add mobility ramps or satellite dishes, rent the unit to friends, start the dishwasher at 11 p.m. or smoke a cigarette. Had these buyers looked closely at the bylaws, they may have noted that such actions were prohibited.

In a condo, the idea that “my home is my castle” can be challenged. “You get in and can’t live the way you expect to,” Spurling says.

A DEEPER LOOK
Beyond paperwork, a proper home inspection remains crucial, Stephenson says. The unit and all public premises should be checked by a reputable building inspector.

Stokes-Bennett has noticed that buildings that don’t allow short-term rentals are maintained better, and there’s less wear and tear on common areas. Stephenson, meanwhile, has witnessed a “real clampdown” on short-term rentals. Some new condos only allow rentals for a minimum of 30 days at a time.

Outside of probing the premises, Stephenson also explores what elements are important to his clients’ lifestyles to determine how a condo fits their needs.

“Any client I get, I align the condo with the activities they like to do,” he says. If they love sports, for instance, location becomes important. If they own a big dog, condo choices are limited. If clients are over age 50, they may want a 50-plus property.

“What’s important to their lifestyle?” he asks. Another important question is, what’s the impression when first walking in? “Sometimes people fall in love too much with cosmetic upgrades,” Stokes-Bennett warns. The marble countertops, stainless steel appliances and the appeal of a carefully staged unit could be camouflaging a not-so-well-built condo.
“If it’s outdated, who cares?” he says. The condo can be revamped. What’s more important is that the building is well constructed.

“Remember, when you’re buying a condo,” Stokes-Bennett says, “not only do you want to live there, you want to make money when you sell.”

Condo Buyers’ Checklist
• Is the condo part of a strata corporation and do you fully understand the pros and cons of stratas?
• Do the depreciation reports, strata minutes and bylaws check out? Have you had them reviewed by a legal and/or accounting professional?
• Have you carefully reviewed strata fees and any associated fees?
• Have you checked the reputation of the builder and developer?
• Have you talked to any current owners about what they like and don’t like?
• Are there bylaw restrictions that impact your lifestyle, such as those around pets, rentals, suite renovations, patio barbecues, personal gardens, exterior decorations and more?
• Have you had a professional inspection done on both the unit and premises, i.e. electrical room, rooftop, elevators?
• Do you understand the pros and cons of wood frame versus concrete? Of note, concrete buildings often provide better soundproofing.
• Have you checked out rules regarding parking and storage?
• Have you asked how much money is in the strata’s reserve fund to ensure the condo has sufficient funds to cover major repairs and renewal projects?
• Have there been special assessments in the last five years? Are any expected in the next 10 to 15 years? Frequent and costly ones may indicate a deteriorating building or poor financial management.
• What is the turnover rate in the complex? This will give you an idea of how happy people are living there.
• Is the condo corporation involved in any lawsuits? If it is and it loses the lawsuit, a portion of your maintenance fees could go toward paying a settlement. This is a good reason to review the corporation’s liability insurance coverage.
• Has the condo corporation made any insurance claims in the last five years? This can tell you about the condition of the property and may account for steeper condo fees.