So you're about to buy a condominium. This article will detail a few things you should put your mind to that many purchasers don't when they sign an agreement of purchase and sale. This list could easily be a hundred items long but I've chosen five of the most easily overlooked things prospective purchasers do not put their minds to when searching for the condominium of their dreams.

1. BUYING A CONDO IS LIKE BUYING INTO A BUSINESS

You must be aware that, unlike a freehold parcel of land, a condominium in Ontario is governed by the Condominium Act, 1999 (Ontario). The condominium corporation is the body responsible for the day to day operation of the condominium development project. You as a unit owner are a member of the condominium corporation. The condominium corporation itself is a corporation without share capital that consists of a Board of Directors (whose members are all unit owners). The condominium corporation has certain financial obligations regarding such things as the reserve fund (the pool of money set aside for the expected future costs of major repair and replacement of the common elements and assets of the corporation), property management, and property insurance. The financial status of the condominium corporation is as important as the physical layout of the unit itself. Your solicitor will request a Status Certificate from the condominium corporation for review prior to the closing of the deal. Make sure you sit down with him or her and review this document and supporting documents (including the Disclosure Statement for new condominiums) in great detail. Among other things, the Status Certificate will inform you if there are any arrears in common expense payments as against your unit (which arrears will form a lien against the unit) or if there are any court judgments against the condominium corporation. It will be important to review the amount of money in the reserve fund to ensure that the condominium corporation has sufficient funds to pay for any unexpected major repairs. Finally, you will find out the number of rental units in the condominium, which could affect the market value of your condominium in the future. A high percentage of short term rentals is generally seen as undesirable from an owner's perspective.

2. YOU MUST OBTAIN ADEQUATE PROPERTY INSURANCE AND UNDERSTAND THE APPLICABLE WARRANTIES

It is important for condominium purchasers to plan to place liability insurance, insurance on personal belongings, and insurance on the improvements to the units. The condominium corporation will maintain either "all risk" or "major peril" insurance on the building itself. You are responsible for insuring all other items in your unit. Also, your solicitor should review the condominium's deductible amount in their master insurance policy. In the case of loss, you as the unit owner will be responsible for paying the insurance deductible amount. Unit owners should obtain deductible insurance in certain cases where they feel the deductible is exorbitantly high. The best course of action is to consult with your solicitor and insurance broker to ensure you obtain proper insurance coverage.

Also, new condominiums will be covered by the Tarion Warranty Program (formerly the Ontario New Home Warranty Program Act). Warranty coverage is provided for up to seven years for defects in work and materials. The duration of coverage under the Warranty Program differs for different types of defects. It is also important to note that coverage under the Warranty Program may still exist for resale condominiums. The duration of any warranty coverage remaining will depend on the age of the condominium itself.

3. UNDERSTAND THE RESTRICTIONS ON YOUR PARKING UNIT AND STORAGE LOCKER

It is important to note that many new condominiums do not allow the leasing or sale of parking units or storage lockers separate from the sale of the condominium unit itself. The sale of your locker and parking space is most often tied to the sale of your unit. This may be important for someone who is planning to supplement their mortgage payments with rental income from these particular items.

4. KNOW THE RESTRICTIONS ON THE USE AND ENJOYMENT OF YOUR UNIT

Some condominium corporations will place restrictions on the owner's use and enjoyment of the unit. For instance, with regard to your freedom to sell the unit, some older condominium declarations grant condominium corporations a right of first refusal on the sale of individual units. Also, some new condominium agreements of purchase and sale contain provisions warning prospective purchasers of a restriction on the sale or lease of the unit for a specified period after the legal title has been transferred into your name (i.e. one year).

Further, substantial renovations of your unit will require approval from the condominium corporation's Board of Directors. It may be advisable to contact the property manager for the condominium corporation and review with him/her any large renovation projects you anticipate doing in your unit well in advance of work commencing.

Next, the condominium declaration may prevent the owner from carrying on a business in the unit. Applicable zoning by-laws often require that condominiums be operated solely as "single family" residential dwellings.

In addition to any restrictions on the sale of the property, there are often leasing restrictions placed on unit owners in a condominium. Such restrictions include requiring the approval of the Board of Directors, tenants agreeing to abide by the condominium corporation's rules and the tenants agreeing to indemnify the condominium corporation with regard to damage to the unit.

Finally, if you are a pet owner, it is important to closely review the condominium rules and regulations to determine what restrictions are placed on you in this regard, if any.

5. BE PREPARED FOR DELAYS IN CLOSING

This is a general comment relating to "blueprint" condominium purchases and it applies as much to new homes as it does to new condominiums. It is important to understand that closing dates for new condominiums will almost always be moving targets. Agreements of purchase and sale for new condominiums will contain detailed sections permitting the vendor to extend the closing date due to delays in construction or otherwise.

The Tarion Warranty Program discussed earlier provides for compensation to a purchaser to a maximum of $5,000.00 for delays in occupancy including living expenses and other direct costs, under certain circumstances.

Expect delays. Many purchasers are now signing the agreement of purchase and sale years in advance of the expected closing date. Delays are a normal part of the construction process and it is important to evaluate your ability to plan for the multiple extensions of the closing date that could possibly occur.

SUMMARY

These are just some introductory points to think about when considering the purchase of a condominium, new or resale. Some people don't know that new condominium purchasers are given ten days after the execution of the agreement of purchase and sale (the "Cooling Off Period"). Purchasers of resale condominium units are not given the benefit of such a "Cooling Off Period", so it is important to protect your rights in the agreement of purchase and sale. Don't forget to seek legal counsel prior to signing the agreement of purchase and sale! It can save you plenty of headaches in the future.

Steven Sheppard is an associate with BrazeauSeller.LLP. Steven's practice focuses primarily on real estate and civil / commercial litigation.