Condominium or townhome living is a popular option for many buyers as it can be a relatively carefree housing option.
Interest in condo/townhomes tends to grow with an influx now available on the market and relatively low mortgage rates. It’s an option to seriously consider if you are currently renting—a $200,000 mortgage today at a five-year fixed rate is a $956/month payment.
There are several things you should be aware of when purchasing a condo/townhome.
First, you are moving into a collection of private dwellings referred to as units. Each unit is owned and registered in the name of the purchaser.
Second, ownership of the common elements of the building such as lobbies, hallways, recreations facilities and landscaping is shared among the individual unit owners, as is the cost for the operation, maintenance and ongoing replacement.
Each owner has an interest in these elements and the value of each particular unit is calculated in proportion to the value the unit has in relation to the total value of all units in the strata. This percentage is used to calculate the monthly strata fee that you must pay for upkeep.
As well, if there are any unforeseen expenses or shortfalls, each unit owner will be required to pay a proportion of those costs not already accounted for in the common ownership reserve fund.
Each unit owner is responsible for their own property taxes, which typically are less than the tax assessed for a single family home. As a unit owner, the responsibility is yours to pay for personal property insurance, any improvements to the unit such as kitchen or flooring upgrades, and personal liability.
The strata looks after insurance coverage for the common areas and the units, as well as personal liability against claims for bodily injury and property damage occurring on the property.
Each strata is governed by its own unique rules, regulations and bylaws. Always carefully review and consider these bylaws and rules prior to purchasing.
Also review the year-end financial statements and budget to determine the financial well being of the strata. An important part of that budget is the reserve fund. A portion of your strata fee is designated to the
reserve fund and these funds are set aside to provide for major repairs over the life of the condominium/townhome building. An insufficiently funded reserve fund puts unit owners at risk for added costs to deal with major property repairs.