buying-protection

No consumer protection
“No ones interests are served by open discussion”
—University of Birmingham in a letter to staff about planned job cuts.
(Private Eye #1412)

When you buy a resale condo unit, you have absolutely no consumer protection what-so-ever. None. The Ministry of Government and Consumer Services gives you more protection if you buy a five dollar electric toothbrush than if you buy a $500,000 condo.

If you buy a new condo from the developer, you can count on the developer making any required basic repairs and you do have the TARION warranty, which gives you some protection, but you get no warranty with a resale.

I don't consider having to take a condo corporation, the seller or a real estate agent to court as consumer protection.

Worse than that, despite what they say, almost everyone involved with the condo corporation, and with your purchase, have a vested interest in hiding any and all defects and keeping you in the dark for as long as they can.

Protect yourself

Buying a used condo is like buying a used car in the bad old days. If you didn't know what you were doing, you were very vulnerable to be sold a lemon.

The normal safeguards for re-sale condos are very hit-and-miss. It depends on people telling the truth but if their self-interest is at risk, truth is kicked out of the nearest window.

For example:
The real estate agent
They only make money if they close a sale.

The status certiﬁcate
The manager may deliberately leave out important information or write in vague or misleading information. The certificate may be missing items such as:
• The units have aluminum wiring.
• The units have Kitec plumbing.
• The building has serious mould problems.
• The Reserves are badly under-funded.
• The building has a lot of water leaks.
• The city has issued work orders.

The audited ﬁnancial statements
Those statements have been written by the management company and the board, not the auditor. Most of the cautionary comments added by the auditor are buried in the notes attached to the back of the report where they are easily missed. If the buyer does reads them, they are often written in such complex language, it can be very hard to understand what they mean.

Read this warning that an auditor buried in Note 13 on page 11:

Several adverse conditions exist for the Corporation that cast doubt upon the validity of the going concern assumption. Given the accumulation of operating losses in the most current three years and the deficiency of working capital (with current liabilities exceeding current assets by $368,433 for current year & $56,258 for 2013 year), the Corporation's ability to realize its assets and discharge its liabilities is dependent on attaining additional capital, keeping expenditures within budget, and continued support from the unit owners and its creditors. (emphasis added.)

How many potential buyers read this? Not enough as units in that condo corporation are still selling.

Your real estate lawyer
He or she is paid to insure that the title to your new home is clear of any liens or unpaid taxes and that you will have a clear title. If you went with the lowest priced lawyer, that's just about all your going to get.

She is not paid enough to read through all the attached documents that make up the status certificate package, unless you pay extra, nor is it certain she would understand them if she did.

The Reserve Fund Study
The full Reserve Fund study is not included in the Status Certificate, just a contributions table. Ask the manager for an appointment so you can read it.

The shared facilities information
The shared facilities information is often missing from the status certificate package. Ask for a copy for the latest audited Shared Facilities financial statements and you'll want to read its Reserve Fund Study.

Other owners
The owners that you meet in the lobby or elevator are not likely to tell you any negative things about the condo. It is not in their best interest to discourage potential buyers. The renters may as they don't have anything to lose.

Read this blog that was written in early 2014 by David Fleming and then read the Comments. The threats and rage from the owners when they read their "private corporation's secrets" being exposed. After reading this, do you still expect that the owners you meet in the lobby will give you the full truth about their condo?

It's an investment first, a home second
Your condominium unit is an investment which you expect will gain in value with time. Yet like all investments, some condo corporations will rise in value far more than others while some will drop in value—a few dramatically.

When you buy stocks, bonds or precious metals you hire financial advisers to give you advice. When you buy stocks, you pay for analysts to investigate the qualifications and track record for corporation's board of directors and top management. The analysts pour over the corporation's financial statements and tour the company's facilities to better determine the corporation's value.

You don't have access to that type of advice when you buy into a condominium corporation. You either take a gamble and hope for the best or you perform as much due diligence as you can.

Before you make an offer

1.	Pick the building where you want to live.
2.	Interview the board. Ask for 15 minutes prior to the start of a regular board meeting. You want to know if the condo has yearly increases to the monthly fees. (The answer should be yes. If they brag on how they keep the fees low, buy somewhere else.) You want to know if they had any special assessments or loans in the previous three years. (The answer should be no.) You want to know if they strictly enforce the declaration, by-laws and the rules. (The answer should be yes.) You want to know how long the management, cleaning and security companies have been with the corporation and if there has been a lot of turnover in these companies. (A stable condo corporation does not change their contractors often.) You want to know if they hold yearly AGMs and how do they communicate with the owners and how often?
3.	Ask the present owners, or their agent, if they or if any previous owners made any renovations to the unit. (Electrical work, plumbing, changed the floor plan or flooring, mounting a satellite dish to the exterior wall or adding a washer and dryer) and if they did, you want a copy of the board's written authorization to do those renovations. Note: Some owners throw up a wall to "convert" a bachelor unit into a "one-bedroom" unit. If the board did not approve the renovations—in writing—then you want the owner to get the board's approval, in writing, prior to you making an offer to purchase.

When you decide to buy
When you sign an offer to buy a unit, put the following "escapes" in the written sales offer:

1.	The sale depends on a satisfactory status certificate that is approved by your lawyer, accountant or condominium consultant. If you have difficulties reading the audited financial statements that are included with the status certificate, make an appointment with an accountant who has experience auditing condo corporations. It could cost you up to $500 for a professional opinion. Don't expect your real estate lawyer to be able to read the declaration, by-laws and rules for you. If there is something there you are not sure of, make an appointment with a lawyer that practices condominium law. It could cost up to $3,000 for an experienced condominium lawyer to review a complete status certificate package and explain it to you.
2.	The sale depends on the unit and the common elements passing a house inspection by a qualified home inspector. Hire an independent inspector, not one that was recommended by your real estate agent. You want the inspector to be loyal to you and not to the agent who wants this sale to go through. You want an inspector who is experienced inspecting condominiums, including the common elements; underground parking garages, amenities and the hallways. Walking through these areas, he should be able to spot obvious signs of serious water leaks, building and fire code violations and if the building looks sound. (He will not be allowed to inspect the maintenance rooms or the roof.) If there has been any renovations done by the previous owners, the home inspector should be able to determine if they meet the building codes. See this newspaper article on why you need a house inspector for a condominium unit.
3.	If you are buying an older townhouse, have the house inspector check that there are fire stops—on both sides of the unit—from the basement up to and including the attic.