Ask anyone who has bought a new condominium suite recently and they will tell you: (a) it is not like buying a house, (b) it is not like buying a resale condo, and (c) unless you are prepared, the cost of closing the deal will make your knees tremble.
So, what should neophytes know about buying that 485-square-foot gem in the heart of the club district or the 780-square-foot, two-bedroom high in the sky overlooking Square One in Mississauga?
What should they ask their lawyers — and ask them well before closing?
The pair of legal experts I talked with say the most important questions cover a basic trinity:
- The real cost of both closing the deal and then living in that new condo each month;
- Exactly what you will get for the price you pay;
- The rules you will have to abide by if you do not want to face everything from neighbours pounding on the walls to the condo board suing you.
When you buy a condo, you will take on mortgage payments, of course, but you will face other costs — both lump sums and monthly charges.
When is the best time to consider these costs? As early as possible during the 10-day recision period that follows the signing of the offer to purchase, says Tammy Evans, condominium and construction lawyer at Fraser Milner Casgrain. Any time in those 10 days, you can back out if sticker shock sets in.
"Get onto your lawyer immediately; bring along all the documents and go through them with him or her," Ms. Evans says. "You are going to need your lawyer to explain just what extra charges you have to pay at closing, and they are going to be sizable."
She suggests a new condo in the $200,000 range may carry total closing costs of $8,000 or more. That includes not just expected costs — such as legal fees of maybe $2,000 and both the provincial and city of Toronto land transfer taxes — but a slew of charges levied on the developer by the municipality and then passed on to you.
"Those closing costs can come as a real shocker if you are not prepared," Ms. Evans says.
Then pay close attention to what you will have to fork over every month. Yes, there will be that mortgage payment, but there also will be a monthly maintenance fee that covers your share of the building's operating costs. The average across the Greater Toronto Area right now is 43 cents a square foot. That means an extra $430 a month for a 1,000-square-foot suite, and that probably does not include your electricity costs since, in most new condos, each unit has its own hydro meter.
"You may also face user fees for things you might expect to be free," Ms. Evans notes. "That might include a fee to use the party room or a fee to have mom and dad stay the night in the guest suite."
What you are getting
If the extra cash required on closing comes as a shocker, so might the look of your suite when you finally move in, says Katarzyna Sliwa of Davies Howe Partners.
"Don't assume the finishes and fixtures you see in the model suite or artist's renderings will be the ones you get in your suite," she says. "They may be upgrades."
And do not expect your suite to be a mirror image of those model suites even if they have similar layouts. The model suite may be 1,150 square feet, compared with your 1,100.
"You have to ask if those are the appliances or the faucets or the tiles you are paying for or are they upgrades," she says. "You have to know just what a 10-foot by 10-foot room really looks like."Purchasers should also understand that occupation and closing dates may well be delayed, Ms. Sliwa adds. "Have your lawyer explain the Tarion [Warranty Corp.] rules governing delays and have a standby plan if your condo is delayed."
Rules and regulations
When it comes to condos, your home is definitely not your castle, Ms. Evans says. "Every project is going to have written rules that are aimed at guaranteeing all residents quiet enjoyment of their homes."
That can mean a limit on the kind, number and size of family pets. It can mean no barbecuing on balconies. It can mean limits on the number of people living in a suite, when, how and with whom you can use the pool, how loud you can play your sound system and even what colour you can paint your front door.
"It is up to you as the buyer to know all these things before you close the deal," says Ms. Sliwa. "You want to avoid surprises."