Buying a condo: Everything you need to know
Buying a condominium is an important decision that is attracting more and more Quebecers, particularly because it is often more affordable than a single-family home. Whether it is to benefit from the ease of maintenance or access to amenities, condominiums offer many advantages. However, they also come with responsibilities and legal specificities that are essential to understand before taking the plunge.
SUMMARY
What is co-ownership?
Divided versus undivided co-ownership
The advantages and disadvantages of co-ownership
Monthly fees and condo funds
Documentation to understand and verify
Tips for buying a condo
What is co-ownership?
In real estate, a co-ownership is a legal structure in which the right of ownership of the immovable is shared between several people, called co-owners.
When you buy a condo, you become contractually bound to your neighbours for everything concerning the building that you share.
Divided versus undivided co-ownership
When it comes to co-ownership, it is essential to understand the difference between the two main types: divided co-ownership and undivided co-ownership. These two legal structures have important implications, both legally and financially.
In a divided co-ownership, each co-owner has an exclusive right to his private unit (his apartment, for example), as well as an undivided share of the common areas.
This is the most common form of co-ownership. The vast majority of buildings are divided co-ownerships, commonly referred to as condos.
In undivided co-ownership, the property is held collectively by the co-owners, with no formal division between private and common portions. Each co-owner holds a share of the entire property.
For example, when buying a duplex or triplex with family or friends where each person lives on one floor, rather than officially dividing the property, co-owners share the entire property and establish rules in an undivided co-ownership agreement.
| Divided co-ownership | Undivided co-ownership |
| Each unit has their own separate property title and tax accounts | A single property title and common tax accounts |
| Individual mortgage financing | Group loan |
| Managed by a syndicate of co-owners | Managed by the co-owners |
| Rules established in a declaration of co-ownership | Rights and obligations set in an undivided co-ownership agreement (optional) |
The advantages and disadvantages of co-ownership
Living in a condo has several attractions, especially for first-time buyers looking for an affordable option to access property ownership. It also comes with constraints.
| Advantages | Disadvantages |
|
|
With condos, what is an inconvenient for some can be an advantage for others. For example, many people appreciate the closeness of neighbours and the community spirit found in some buildings. On the other hand, some people want more peace and quiet, and would therefore prefer a single-family home with privacy.
The important thing is to weigh up the advantages and disadvantages to determine which of a condo or a house best suits your expectations and lifestyle.
Monthly fees and condo funds
When you buy a divided co-ownership, you have a monthly amount to pay to the condominium, which is often called “condo fees”. This amount varies greatly depending on the building, its size, amenities or maintenance needs.
The monthly fees are used for three funds managed by the condominium syndicate.
1. An operating fund or administration fund
This account is used for the condominium syndicate’s current expenses such as bills, maintenance of common areas and administrative tasks if applicable.
2. A contingency fund
This fund can only be used in the event of major repairs to the common areas of the building. For example, roof repairs or unforeseen work such as repairing or replacing the building’s elevator.
3. A self-insurance fund
The self-insurance fund is a mandatory reserve created by the syndicate of condo to cover the payment of deductibles related to the building's insurance. This fund ensures that the necessary sums are available in the event of a claim.
Documentation to understand and verify
Buying a condo comes with several essential documents to analyse carefully. Here is a list of the main documents to examine if you are considering the purchase of a divided condo.
The declaration of co-ownership
The declaration of co-ownership is a legal document that establishes the regulations on the use and management of a condo, specifying the rights and obligations of the co-owners as well as the monthly common fees and other important terms.
This document outlines your responsibilities and several details that are relevant should you become a co-owner of the building.
Financial statements and budget
Before you commit, you want to know the financial health of the building. Are there any loans or major debts? Is the contingency fund sufficient to cover potential major works? As a co-owner, you share the financial responsibility for the building.
Minutes of the co-owners’ meetings
The minutes give you an idea of what is happening in the building and allow you to get to know your neighbours a little better.
Other documents such as the building’s insurance policy, the maintenance log and the contingency fund study are also relevant to review. All of this documentation reflects not only the condition of the building, but also the quality of management and the general atmosphere within the co-ownership.
Tips for buying a condo
1. Plan for common costs and contingencies
Monthly condo fees are not included in the mortgage payments and will have to be paid for as long as you live there, even after your mortgage has been paid off.
You also need to set aside an amount for unforeseen expenses. Condo funds exist precisely to absorb major costs, but it may happen that expenses exceed the amount available and you'll have to disburse the amount shortage.
Similarly, if the funds are low after a major expense, you'll have to contribute to replenish them and ensure that the necessary sums are available for future contingencies.
2. Read the important documents relating to the co-ownership
When you are interested in a co-ownership, ask to consult the documentation relating to the condo, as presented above. This will allow you to better understand what living in the building entails.
3. Ask about the condo account statements
When buying a condo, it is essential to find out about the status of the contingency fund and the self-insurance fund. If these funds are low and require a large contribution due to a problem prior to the purchase, it is the new co-owner’s responsibility to pay it.
4. Don’t neglect the pre-purchase inspection
The pre-purchase inspection is just as important for the purchase of a condo as for a single-family home. Indeed, an inspection of the private portion and common areas allows you to check for any possible problems. Whether the condominium is new or not, an inspection is strongly recommended before purchasing.
5. Use the services of a real estate broker
Real estate brokers are familiar with the paperwork and peculiarities involved in buying a condo. They are the best people to guide you through the process, to make sure you don't miss a thing.
With the right planning, buying a condo is a very attractive option that offers an excellent compromise between affordability and comfort.
To find out more about buying a condo and all it implies, listen to the episode “Vivre en copropriété” (in French) of the Sutton – Quebec podcast Sans compromis avec Julie. In this episode, Julie Gaucher, President of Sutton-Quebec welcomes Pierre-Alexis Bombardier of the De Grandpré Jolicoeur law firm.
The episode is available on Spotify, Apple Podcasts and Youtube.
