A guide to becoming a condo owner

Why should you consider buying a condo?

If you’re thinking of becoming a homeowner, there’s a good chance you’ve thought about buying a condo. Condominiums are common in urban centres and offer the opportunity to be part of a community while benefiting from certain services. They generally require less maintenance than a single-family home, especially if they’re newly built. Living in a condo also allows co-owners to share the payment of common expenses and other responsibilities. 

What should you consider before buying a condo?

If you’re thinking about condo ownership, the sale price isn’t the only factor to consider. Here are some other criteria that can have an impact on your lifestyle and the money you’ll have to spend:

The type of co-ownership

First and foremost, check whether it’s a divided or undivided co-ownership. In the first instance, you’ll own your unit as well as having access to common areas. In the second, you’ll own a percentage of the entire building. 

Divided co-ownerships are usually apartment buildings with common areas. They’re subject to legal rules and administered by a board of directors called a condo board.

Undivided co-ownerships often take the form of a duplex, triplex or quadruplex. Their administration is generally more flexible: the co-owners (joint owners) make decisions by mutual agreement.

​​→ ​Check out our article on the differences between divided and undivided co-ownerships  

The down payment

Another distinction between these two types of property concerns the down payment. If you’re buying an undivided co-ownership, you’ll need to take out a conventional mortgage requiring a down payment of at least 20%. If you’re buying a divided co-ownership, you’ll only need to put down 5% of the purchase price – but don’t forget that if your down payment is less than 20%, you’ll need mortgage loan insurance.

​​→ ​Check out our practical guide to down payments

Condo fees

In addition to repaying your mortgage, you’ll also have to pay condo fees. This monthly contribution is used to finance the administration and maintenance of the building and its common areas, such as elevators or indoor parking lots. Optional for undivided co-ownerships and compulsory for divided co-ownerships, condo fees are often higher for the latter type of property, which generally provide more services. 

Your contribution is proportional to your share, i.e., the percentage of the building you own. Other factors can influence the amount you pay, such as the number of common areas and services offered. If you opt for a condo building with a gym, swimming pool or valet service, you can expect higher condo fees. 

​​→ ​Check out our article on what you need to know about condo fees

Contingency funds

Find out about the condo’s contingency fund. Financed by a percentage of the condo fees, this monetary reserve is used to pay for major repairs, such as a new roof or masonry work. If the contingency fund is insufficient or non-existent, you’ll have to pay additional fees in the event of unforeseen circumstances. 

Insurance and other fees

If you buy a divided co-ownership, you’ll also have to contribute to a self-insurance fund. This fund needs to be large enough to cover the building’s home insurance deductible, which is the basic amount you’ll have to pay in the event of a claim. 

In the case of an undivided co-ownership, expenses such as school and municipal taxes, home insurance, notary fees and transfer tax will be shared with the other joint owners, in proportion to each person’s share of the property. 

Declaration of co-ownership or undivided co-ownership agreement

You should also consult the declaration of co-ownership or the undivided co-ownership agreement, depending on whether the property is divided or undivided. These documents contain clauses and regulations that could have an impact on your lifestyle. Here are a few examples:

• If you want to rent out your condo, check whether there are any restrictions on short- or long-term rentals. 
• If you have a cat or dog, make sure pets are allowed.
• If you want to install a clothesline or outdoor decorations, be aware that some condos prohibit any changes to the appearance of the building.

​​→ ​Check out our article on understanding the declaration of co-ownership  

Co-owners

Just as you would for a single-family home, it’s essential to visit the condo unit you’re interested in to make sure it suits your tastes and needs. And since condo living means living with others, it’s also a good idea to meet your co-owners. A solid understanding of the property will facilitate decision-making and contribute to your peace of mind.

What should you avoid when buying a condo?

Have you decided to buy a condo? Before you make an official offer to purchase, make sure you don’t fall into any of these traps:

Investing in a poorly managed co-ownership

Here are a few questions to ask to make sure a condo board or group of joint owners are properly managing their finances:

• How much is in the contingency fund? A healthy reserve means you won’t have to make any additional contributions in the event of unforeseen circumstances. But be careful: if it’s too well funded, it could also mean that the condo fees are too high. If the fund is fairly low, ask if it’s because renovations have recently been carried out.
• Has a fund review been carried out recently? If the answer is yes, this is generally a good sign.
• When was the last time additional contributions had to be made? If co-owners often have to dip into their savings to pay for repairs, it’s a sign that the building is in poor condition or that finances are poorly managed. 

Not calculating all the fees

Looking for a condo building with a pool and indoor parking? Make sure you can cover the condo fees in addition to your monthly payments. Would you prefer to opt for an undivided co-ownership that doesn’t require this kind of contribution? See if you have enough money for the 20% down payment.

Don’t forget to include property taxes, home insurance, notary fees and transfer tax in your calculations. 

There are other important steps to consider. You’ll need to think about the terms of your offer to purchase, check your borrowing capacity, take out a mortgage and choose the right interest rate. If you’re having trouble making sense of it all, we’re here to help.