Every day I deal with sellers and buyers in real estate transactions. I notice that first time buyers are so excited about getting into a new home that they seem to take the paperwork very lightly.
It is said that the new car manual is the best published and least read book in the world. When was the last time you had a look at one of those?
See what I mean! If you ever bought a new construction, when you signed on the dotted line, you got this fat, boring document called, The Disclosure Statement.
Did you read through it? Unfortunately many of the buyers don't and than they are surprised when certain rules or conditions make their lives miserable.
In a regular re-sale transaction, there are probably more papers to look at. Two years of strata corporation meetings, bylaws, rules, financials.... Wow. Why do we have bother? Building looks pretty good, I was told it has no problems, so what can be bad.
In re-sales it is even more important to read all the paperwork. It's like buying a used car. Nice and shiny, runs good, looks good, so why would I have to take it to a mechanic?
Strange enough, there are more people taking their cars to a mechanic for a check up before buying, than there are buyers reading all the paperwork.
Unbelievable. The car costs $20,000 and the condo $200,000 ???
So if you are about to buy a re-sale condo or a townhouse, make sure that you review these 10 important points.
1. What is the monthly condominium fee and what does it pay for? The monthly strata fee can range quite dramatically from condominium to condominium. The fee is a by-product of the number of units, the annual expenses to maintain the common area, whether the condo is professionally managed or self-managed, the age and condition of the project, and other variables such as litigation. For budgeting and financing you need to know the monthly fee and exactly what you are getting for it. Although they relate to the size of the unit, strata fee's are calculated according to "Unit entitlement'
2. What are the condominium bylaw and rules? Condominium/Strata Bylaws govern the operations of the Strata Corporation, and all new projects start with the Standard Bylaws according to the Strata Property Act. Subsequently, the Strata Corporation may make some changes, and these, to be valid, have to be registered and filed at Land Title Office. Bylaws can, as an example, prohibit pets, your ability to rent out the unit, and perform renovations. Make sure you also carefully review the Condominium/Strata rules and "regulations". Under the Strata Property Act, a strata corporation has rules, not rules and regulations. Rules govern the use, safety and condition of common property and common assets. Regulations are part of the Strata Property Act and are made by the Lieutenant Governor in Council.
3. How much money is in the Contingency reserve account and how much is funded annually? The contingency reserve fund is like an insurance policy for the inevitable capital repairs every building requires. As a general rule, the fund should contain at least 25% of the annual revenue budget, and in the case of older projects, even more. If the Contingency reserve account falls under 25% of the just completed operating budget, the Strata Corporation must contribute, by way of increasing strata fees, a minimum of 10% of the total contribution to the budget of the current year. Make sure you request and review the Strata Corporation financial information.
4. Are there any contemplated or pending special assessments? Special assessments are one time fees for capital improvements payable by every unit owner. Some special assessments can run in the thousands. You need to be aware if you are buying a special assessment along with your unit. It's a good idea to ask for the last 2 years of strata meeting minutes to check what's been going on with the the particular condominium/strata project..
5. Is there a professional management company or is the association self-managed? A professional management company, while an added cost, can add great value to a condominium with well run governance and management of common areas.
6. Is the condominium involved in any pending legal actions? Legal disputes between owners, with developers or with the association can signal trouble and a poorly run organization. Legal action equals attorneys' fees which are payable out of the condominium budget and could result in a special assessment.
7. How many units are owner occupied? A large percentage of renters can create unwanted noise and neighbor issues. Check the Bylaws for the rental restrictions and review Form J
8. What is the condominium fee delinquency rate? Well run Strata Corporation usually doesn't have huge delinquency issues. Review the accounts receivable information as part of the financial information requested.
9. Do unit owners have exclusive easements or right to use certain common areas such as porches, decks, storage spaces and parking spaces? To find out the status of these kind of areas, consult the Strata Plan
10. What Does The Master Insurance Policy Cover? Strata Corporation must carry adequate building master insurance policy and it's cost is part of the yearly budget. Each owner should however carry its own policy, to cover contents and other losses. Check out a "Condo Insurance" with your insurance provider. Some of the policies may cover you against Strata Corporation assessments.
Besides reviewing these 10 questions when purchasing your strata unit, make sure that you also review the, Property Disclosure Statement-Strata Properties which is completed by the seller and may contain additional information on the building.
You have to do proper research and due diligence with the help of your experienced Buyers Agent, before any deposit money is given.
Helpful sites;
Clark Wilson LLP http://cwilson.com
Home Protection Office http://www.hpo.bc.ca/
Talk Strata http://www.talkstrata.com/
Condominium Home Owners Association http://www.choa.bc.ca/
If you are looking to Buy or to Sell real estate in Vancouver area, give me a call. My consultations are FREE. The benefits to You, may be worth a lot of money.
Call Jeff Stark at 604-290-7890 or email me at jeff@jeffreystark.net
