Understanding the differences in condo types could save you stress and money!
So you want to buy a condominium. You’ve found your desired neighbourhood, you’ve got a budget sorted out, and you’re working with an excellent Realtor, like me, The Real JMcG!
So all that’s left is to see places and pick one, right?
You couldn’t be more wrong and I am glad you’ve clicked through to this blog post so that I can give you some important information that may save you time, money and ensure you find your perfect new condo with less stress.
Did you know that there are different type of condos?
Did you know that the pricing & costs of each can vary greatly between them?
This blog is only going to cover the basics, so be sure to talk with your Realtor or legal professional to get more information and better understand your particular situation.
In Ontario there are 2 main types of condominiums; Freehold & Leasehold.
Freehold condominiums are those in which the owners own the land on which the condominium sits and usually come in a few main forms.
In most cases you’ll be dealing with Standard Condominium Corporations, those where the unit owner owns their unit as well as an interest in the common elements (amenities, hallways, decor etc.) of the condo. This interest cannot be separated from the ownership of the unit and these are the most common type of condominium corporation in Ontario.
Another form of freehold condo is a Common Elements Condominium Corporation. This one differs in that it has no units but has common elements like roads, golf courses, pools or ski hills etc. All owners can enjoy the common elements but help fund the maintenance and repair of those amenities/elements together. Generally seeing a home listed on MLS that mentions “Parcel of Tied Land” (POTL) in the details shows that you may be dealing a common elements condo. You should know, that while you own your land & the home that sits on it, you cannot remove any share of common elements maintenance as it’s permanently tied to that property. Communities that want to build a new park, playground or feature may decide to create this form of condo as it’ll only affect the common elements of the community without affect each owner’s land/home.
A third form of condominium is a Vacant Land Condominium Corporation where buildings do not need to be constructed before the condominium corporation is registered. In most cases this form is used when a developer is building multiple identical units but would like to register all the buildings prior to construction. You will more likely come across these types of units when you are looking into “Pre-Construction” condos at sales offices.
Finally, you may encounter what’s called a Phased Condominium Corporation. This is where different sections of a single condominium may be built in phases and rather than registering the entire project at it’s full completion, each phase can be added into the existing corporation as it’s constructed. Generally, each phase will be self sufficient so that if the project isn’t finished each phase has all the elements it would need to continue operations in the event the entire project isn’t completed.
In each case when you purchase a freehold condo unit, it’s important to understand you will be buying the unit & land (proportionate share thereof) but will also need to investigate how your ownership of the common elements is broken down and what specifically will be the rules, regulations and costs associated with those elements. As you have seen there are some elements you cannot separate from your land title and maintenance costs can increase over time, so understanding how these fees break down prior to making an offer will ensure you aren’t caught by surprise in the future.
The second main type of condominium is a Leasehold Condominium. This is where the corporation does not own the land but rather it is leased from a “landowner” and each unit owner buys a leasehold interest in the units and common elements only.
For the most part, these condos are the same as a Freehold with the exception that a portion of the common elements fee is actually rent payable to the landlord and once the initial ground lease expires (typically the term of a lease is between 40 - 99 years), the owner’s right to occupy the unit is terminated. So if you are selling your leasehold unit near the end of the initial term, it may be valued lower than at the beginning of that term.
It is rare to see Leasehold units available for sale (this past year there have been only 29 listed on MLS in Toronto), so I wouldn’t worry to much about them, but it’s definitely something good to understand in general.
So now that you understand the different types & forms of condominiums, it should be easier for you to jump into the condo market, right? Well…I’m going to fill you in next week on the differences between Pre-Construction & Resale condos and some pitfalls to consider there, so you may not want to act
If you can’t wait until next week and have questions you need answered right away, please send me an email right away to email@example.com or give me a call at 416.922.5533. I’m here to help!
|Did you know?
Ontario just established the Condominium Authority of Ontario, an organization aimed at helping protect condo owners rights as well as improve condominium living by providing resources, mandatory training and dispute resolution services. Starting this month there will also be a Condominium Authority Tribunal to help resolve certain
disputes. For more information on the exciting new ways that Ontario condo unit
owners are being protected, please visit www.condoauthorityontario.ca.