Hidden value or Hidden problems.....Condos have both, the trick when buying is recognizing a diamond from a chunk of coal and age does play a factor but I've encountered new condos with issues, so appearances and age can be equally deceiving. When buyers go Condo shopping most of them base the core their search and want on visual appeal and location and don’t do enough research into the inner workings of what's happening.
There is a lot more to buying a condo than it's outward appearance and that's where I come in......As a former Strata manager I've learned to recognize a Healthy run strata vs Problem Strata and some of the issues not apparent to the untrained eye. My expertise in this area is what makes me the wise choice as your Realtor.
1. Is the property being managed properly and who is managing it, self regulated or with a management company.
Who's managing can play an important role. If self managed, a lot of the time the Strata Act may not be followed properly and unfair decisions and issues can arise. Some Self managed Strata's refer to a book of rules called "Roberts Rules"....which is a great tool and guide for councils however does not super cede what is set out in the Strata Act for Strata's to remain compliant. A Strata has to follow what is set out under the Strata Act. A Condo managed by a Strata management company will be more likely to be managed properly as you have a trained and licensed person guiding councils in their day to day operations of the building. Council members most likely have full time jobs and cannot dedicate same amount of time to learning all entailing in the Strata Act and management where a Strata manager does this daily and exposed to much more of a learning curb and knowledge base. I have seen some well run self managed Strata's, but buyers should be aware of the differences and determine if a Condo is being managed well before making the decison to purchase into it.
A Strata is only as good as the council running it is my Golden rule ......this is the core component of what makes a Healthy Building vs a Poorly run Building.
2. Do they have an accurate budget and taking care of building maintenance.
Budget will be important. Low fees look attractive to buyers, but I tell you low fees are a RED FLAG in any building new or old. If a new build has low fees it's because the proper line items have yet to be set out in an accurate budget. Developers merely put the required items into a initial budget, ie: Garbage, insurance water, landscaping and minimal amount for Contingency Fund Contribution...what they didn’t put was window cleaning, gutter cleaning, roof moss removal, legal funds, Proper Contingency Fund Contribution, Depreciation Report, Building maintenance, Management fees, and the list goes on...in a New Construction you can expect the fees to double or even triple after three years which is where they should be. And if an old Building has low fees, this most likely due to poor management unless the buildings costs are simply low for as they have minimal landscaping, or perhaps self managed, may not have an elevator or other things that drive up costs.
3. Are they on target with the current years budget, what is the buildings financial status.
You'll want to know if the building is staying on target with costs and expenditures.....and any deficit gets rolled into the following years budget driving up fees.
4. Do they have a current Depreciation report and healthy Contingency Fund.
A depreciation report is a huge asset for a Condo. It is a report that consists of cost to replace and repair various components of the Building. Roof, gutters, flooring elevators, windows etc.....this report tells you what year and estimated cost. Realtors, inspectors and Lenders now want to see Strata’s with Deprecation reports and current ones. A building Not having one can affect a buyers or ability to qualify with their lender, therefore hurting a Strata's resale value.
5. What's going on with the neighbor's, reading minutes can tell you a lot about how complaint issues are being dealt with.
Complaint issues can be problematic is some strata's...the main issues, Noise! Reading minutes can help determine if the unit your thinking of buying is in the line of fire of living near nasty nieghbors.
6. Past sales history, does the building hold value.
What have past sales been like. Have units sold consistantly? Does the building hold good resale value?
7. Rental allowances.
What if any rentals are permitted. Is there a cap on how many units can be rented at any given time. Did you get accurate information and bylaws from the selling agent? The year of the building will make a difference in rental allowances as well, this due the the Strata Act changung some rules regarding rentals 2009/2010 and what's set out in Form J.
What is a Form J?
For Form Js filed on or before December 31, 2009, a lot that has been designated as a rental lot by the Owner Developer on a Form J remains eligible as a rental lot – regardless of rental restriction bylaws – until either:
- the lot is sold or transferred by the first purchaser or
- the date set out on the Form J expires (whichever occurs first)
For the Owner Developer or the first purchaser from the Owner Developer, the effect of the Form J is to preserve the right to rent the strata lot for the length of time set out in the Form J, despite any subsequent rental restriction bylaws.
However, a purchaser who buys the strata lot from someone other than the Owner Developer does not have a right to rent the strata lot. For the new owners, a strata lot may only be rented if there is no rental restriction bylaw or the owner is permitted to rent despite a rental restriction bylaw because of:
- the family member exception
- a determination of hardship by the strata council
- the provision that delays the application of a rental restriction bylaw. The Strata Property Act gives owners who are renting time to comply with a new rental restriction bylaw
For “Form J: Rental Disclosure Statements” filed on or after January 1, 2010 there are different rules. The owner-developer can now designate that a strata lot can be rented to a date specified on the Form J.
For these strata lots, a strata lot eligible as a rental remains designated as eligible until the date the rental period expires. The strata lot is not affected by any subsequent rental restriction bylaws until the rental period date on the Form J expires.
This means the right to rent a strata lot can continue from one purchaser to the next as long as the rental period on the Form J remains unexpired. This provision only applies to "Form J: Rental Disclosure Statements" filed on or after January 1, 2010.
Rental restrictions can affect resale value....No rentals allowed buildings seem to take longer to sell, as do buildings that have a cap on how many units can be rented....so note this when buying and you are thinking of resale value.
8. Bylaws and registered or unregistered bylaw changes.
Bylaws....yes Condos have rules and bylaws to abide by. Owners are also liable for any tenants and responsible to have tenants complete a Form K showing they have provided tenants with these bylaws. Bylaws will have set fines according the Strata Act should they not be followed. There is a standard set of bylaws set our by the Strata Act but over the years many issues have risen forcing Strata's to amend or adopt new bylaws and rules ...A strata has 60 days from the date voted and approved to register these bylaws with Land Titles....or the validity of any new bylaws can be brought into question. Some bylaw changes may not affect a current owner like rental restrictions but should the unit sell new bylaws will apply to subsequent purchasers...so what the current is permiited to do may not be what you will be permitted to do. Say for instance.....a current owners has two dogs and the strata chnaged the byalws only permittign one dog. The current owner is grandfathered to keep the two dogs, should one pass that owner cannot go out and get two dogs. So be wary of whats in the current byalws not what applied to that owner.
9. Common Property/ Strata Lot or Limited Common Property and what pertains to your unit.
Common Property- is owned by the Strata/ all owners equally and it's use can be had by all owners and maintenance/ repairs falls to all owners.
Limited Common Property- maintenance and repair the responsibility of the strata/ all owners yet the use is exclusive to one strata lot/ owner this could be a deck or parking space
Strata Lot- Owned by that individuall owner, as well the cost and maintenance/ repair and up keep
10. Pets in Condos.
Many condos allow pets and then theres some condos that allow no pets. A strata CAN enforce a no pet bylaw and have an owner remove that pet. So be wary if you have a pet and buying a Condo and hat they bylaws are. Some allow pets but restrict the weight or number of pets....again if you have large breed dog and there's a weight restriction they can enforce the bylaws. In my experience pet restrictions do affect resale as with many people have pets these days and the more rules or bylaws you have the more you reduce your buyers pool.
11. Children in Condos and noise issues.
Kids in Condos have been a point of contention for some Condo owners. Victoria does offer some adult only buildings, these often take longer to sell as again you reduce your buyers pool to only buyers with no children. A great time to look at Condos is going to be when you think the neighbors will be home....such as dinner time. It will give you clear idea of noise transference if people are home next door performing thier daily habits. Some people may not like little kids running on their heads....ask who lives above or below. Find out as much as you can about neighboring units. Go for a second visit some times you see things you missed the first time and catch noise you may have missed the first time.
12. Mortgage Lenders and Inspectors and what they will be looking for.
Lenders are getting sticky on many fronts including Condo Purchases.....With condos and co-ops, it’s not just your creditworthiness the lender has to worry about. It must also verify the fiscal and physical health of the entire development into which you’re buying.
Inspectors will want a current depreciation report and see a well maintained building...not having a depreciation report may have a buyer walking away if they can't see what repairs and cost are coming their way.
So now as you can see there are mnay things beyond just looking for a cute condo.....and using an Expert can help you make better informed buying decisions and avoid costly mistakes.
Cathy Curti ~ Your Real Estate Resource and Condo Expert!