Condos, the new rental buildings
When condominiums first appeared in Ontario, they were designed as an
affordable alternative to semi-detached and detached houses. They were
residential units in apartment buildings and townhouse complexes.
They were built as residential homes. Many condo apartment buildings
contained only two and three-bedroom units.
A traditional rental apartment
As late as 2001, condos were built and sold to people who intended to
live in them. Data from the city of Toronto shows the number of renters:
(basements, over stores, rooming houses, boarding)
Rental housing was supplied by private purpose-built rental apartment
buildings, private houses for rent and basement apartments. Then, due
to rent controls, tax laws and other political pressures, developers
stopped building rental apartment buildings.
By 2006, about 50% of all Ontario renters live in private-purpose built
apartments, 30% live in the secondary rental market that is made up of
houses, rented condos, duplexes and units above stores. The remaining
21% of renters live in social housing.
filled the rental gap
Developers saw that small-time investors were buying condo units as
rental properties. They encouraged this new market for condos by
increasing the number of bachelor and one-bedroom in their
projects. Every year, the average unit size got smaller. (It did not
hurt that jamming in more units in in taller buildings increased
The growth in the rental market in Toronto has now swung away from the
private-purpose rental buildings to rental units in condo
buildings. This has created a condominium building boom.
On the average, 23% of all condos in Toronto is thought to be be
likely it is far more.) In some
downtown condos, up to 60-90% of the units are owned by
small-time investor-landlords who do not live in the building. Some
do not even live in the country.
Condo Investor is a new supplement to Condo Life,
a free Toronto magazine that promotes new condominium developments.
Published four times a year, Real Condo Investor shows just how
important the rental market has become for new condo sales.
As the Cinema Tower, a new condo building, was being completed in
January 2014, the owners of between 96 and 118 units, out of a total of
445, were looking for tenants.
This staggering amount of rentals flooding the market shows that many
condo corporations are really little more than rental buildings.
landlords find their tenants?
Some advertise on Craigslist and Kijiji, some put leaflets on bus
shelters and the condo's bulletin board or newsletter, others place ads
in the ethnic newspapers and everyone uses word of mouth.
Many investor-landlords sign on with real estate agents who charge one
month's rent if they rent the unit. (If there are two agents involved,
they split that fee.)
There are professional property management companies, a few owned by
the developers who built the condo towers, that will manage condo units
The developers and sales staff enjoy the benefits of selling condo
units to small-time landlords who intend to rent their units and then
sell them, hopefully for a profit, sometime down the road.
However, the owner-residents in these buildings are losing out.
Property values don’t rise in value at the same rate as those in
buildings where owner-occupants predominate.
This is because the common elements take a beating as the elevators and
carpeting wear out prematurely and the hallways get banged up due to
having renters constantly moving in and out.
Many small-time investors do not properly screen their tenants so there
can be noise and trash issues, vandalism and over-crowded units.
If the condo is on a subway line or is close to community colleges,
universities or language schools for foreign students, the
resident-owners may be living in a building full of young students and
You may want to give these condo buildings a second thought.
Too often the investor/landlord thinks that once the lease is signed,
all he has to do is sit at home and wait for the monthly cheques to
arrive. Being a landlord is not always so easy.
If the owner gets a letter from the property manager saying there are
behaviour problems with the tenant, the landlord needs to act
immediately and had better not ignore that letter. The tenant needs to
be warned, in writing, that any more complaints will result in an
application for eviction. A copy of that letter should be sent to the
A letter from the corporation lawyer means that the issue has
escalated. The legal letter comes with a demand to pay the cost of the
letter. Ignore that letter and a $700 cost quickly rises to $2,000.
Within 90 days, a lien may be registered against the unit.
The landlord needs to hire a lawyer or a paralegal to advise the
corporation's lawyer that proceedings to evict the tenant has been
initiated at the Landlord and Tenant Board and ask them to forebear
until such time as the proceeding has concluded.
I could go on about damage to the unit, other units and the common
elements that the owner could be also be responsible for but there
should be no need.
Can't restrict leasing
In the United States, many condominium Declarations cap the percentage
of units that can be leased.
The Veterans Administration, Federal Housing Administration and
mortgage giants Fannie Mae and Freddie Mac all have rules setting
limits on the number of units in an association that can be leased. For
an FHA-insured mortgage, for example, the property must be at least 50%
Some American banks check the status certificates and will not give a
mortgage if there are too many units in a given condo corporation that
are leased out.
However, in Ontario, a condo corporation cannot put a limit on the
number of units that can be leased. However, the Act does give the
corporation many powers to be able to control any unacceptable
behaviour by a renter mainly by making the owner-landlord, responsible
for any damage done by the tenant. It also allows the condo's
Declaration to limit the number of times a unit can be leased and the
length of the lease.
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