# Special assessment on Condo i'm looking to buy



## yousufj56 (Oct 4, 2018)

Hi, 

There is a condo that i'm interested in to purchase. Apparently the prior management was really bad and mismanaged the reserve fund. They were voted out and replaced with new management. 

New management has voted to levy $2000 for the unit i'm looking to buy. I'm not concerned about the amount of this fee.

Should i be concerned about anything else in regards to this special assessment? I've heard that it puts some sort of stigma on the property and future buyers would be weary of purchasing. 

I'm not looking to own this property as an investment. I'm planning on staying here at least 2 years or more. 

Thanks in advance


----------



## Just a Guy (Mar 27, 2012)

There are two ways to fund a condo, condo fees and special assessments. When a building falls behind on funds, they either raise the condo fees (which never go down it seems) or does a special assessment. As an investor, I tend to prefer special assessments, since it keeps money in my account to use as opposed to sitting in the condos bank account not doing me any good. 

That being said, if the condo doesn’t have a good reserve fund, it can severely affect the appeal of the property in the eyes of buyers. I tend to find the balance of about $2k/unit in a reserve fund to be a good compromise for a well run building. 

I’d take a close look at the condo docs, especially the financials and the reserve fund study (take this with a grain of salt, it’s like taking a car into a mechanic, they want to replace everything “as new” which is usually unrealistic) and make sure there is t something more going on. A $2000 special assessment is peanuts, if this building was truly mismanaged, there would be a lot more problems and probably more assessments to come.

As for future buyers, once the special assessments are paid, no one cares as long as no new ones are coming.


----------



## yousufj56 (Oct 4, 2018)

Thanks, 

What exactly should I be looking for in the status certificate? What would you consider major issues?


----------



## Just a Guy (Mar 27, 2012)

You need to be able to read the financials, and evaluate the condition of the building. There are people who can review condo docs for you if you don’t know what you’re looking at. You also want to review the minutes, but anything really bad would probably have been discussed in camera (off the record). 

Things you should look for are major renovations that need to be done, things like windows, doors, roof, mechanical, any structural things, pavement, balconies, parking lots, elevators, etc. Things that will cost big bucks to repair. Newer buildings don’t need these things, older ones may have already done the work. 

You also want to ensure no fraud has been going on, happens a lot with property managers...especially with volunteer boards who don’t know better. 

I find property managers will often tell you most of what you want to know without looking at the condo docs (I’d still review them later). If they seem evasive, think of it as smoke...chances are there may be a fire to find and avoid.


----------



## kcowan (Jul 1, 2010)

I am in an older building for 21 years. Although mentioned by JAG, I thought specific mention would reinforce the point:
- replacing the roof
- replacing all the copper piping
- re-pointing the reinforced concrete balconies (rusty rebar causing pieces to fall off)
- rehabilitating the elevators
- replacing the smoke and CO2 detectors
- replacing/remodeling the common areas: lobby and pool

All these only happened once. But they are unlikely to be identified in minutes.


----------



## yousufj56 (Oct 4, 2018)

Perfect, thanks guys


----------



## Just a Guy (Mar 27, 2012)

Not all of these are appropriate, but it may get you thinking about what to look for...

http://www.mindsetfinance.com/questions-to-ask-about-existing-rentals/


----------



## Mukhang pera (Feb 26, 2016)

I have never purchased a condo, but have acted as conveyancer for a fair number. That includes giving legal advice about what is being conveyed. At the same time, conveyancing lawyers do not often get to give advice that will keep clients out of trouble since, by the time the purchaser consults a lawyer, the deal is done. The client walks in with an interim agreement, subjects removed. More difficult at that point to escape a bad deal. At least no escape without leaving some blood on the floor.

For my money, there are more useful documents to research than financial statements. As well, most people are not really adept at reading F/S. If you ask, they cannot tell you what is the balance sheet equation. They do not know a debit from a credit. I know I didn't until, in my youth, I went to work for Clarkson, Gordon & Co. (anyone remember them?) in Toronto as a staff accountant/auditor. That job helped alleviate my fiscal ignorance. That is not to say that one must take accounting courses and work as an accountant to be able to read a statement of source and application of funds. I am sure many here on cmf have, over time, gained the requisite knowledge. 

I am not familiar with the laws surrounding condos in provinces apart from BC, but my guess is they are quite similar. So that means that an Ontario buyer should be able to access the same materials as are available to a BC condo buyer.

Here, the whole kit and kaboodle is governed by the Strata Property Act. We do not have "condo boards" as referred to all the time here on cmf. Here, unit owners elect a "strata council". One of the most useful steps one can take is to obtain the minutes of meetings of the strata council going back a few years. That will tell you a lot about how things have been run and what issues have been dealt with. For example, Vancouver has for years been famous for its "leaky condos". Many strata councils have been forced to deal with the vexing issue of leaks over a protracted period. The minutes will tell you if the strata corporation has commissioned any such things as an engineering study of building envelope water ingress. You can see the engineers' reports, see what they cost, what they recommended and at what cost, what was done, not done or proposed to be done, etc. Special assessments against owners of leaky condos often run into the tens of thousands. Good to know if one of those is on the horizon.

Council minutes will also reveal any proposed or debated bylaw changes (you should have the strata corp. bylaws in any event). For example, maybe rentals are permitted at the moment, but perhaps the council will soon vote to prohibit rentals. Good or bad depending upon your perspective.

A more fulsome and useful checklist of steps to take and matters to consider is here:

https://www.cbabc.org/For-the-Public/Dial-A-Law/Scripts/Housing/407


----------



## ian (Jun 18, 2016)

We rented a higher end condo. The owner had an assessment just prior to us moving in plus she lost six months of rent. Her assessment was $30K. All of the water pipes had to be replaced in the condo. What a mess. Prior to leaving, she got it with another assessment for $5k to improve the security system.

We eventually purchased an HOA instead of a condo. We spoke with the managing partner of a firm that specializes in condo litigation at a social event. His comment was that it can be very difficult to ascertain what is coming around the corner. Especially when it pertains to very expensive remediation such as building envelope. The other issue that it is difficult to get a handle on condo litigation....ie what builders/developers in a city are notorious for poor work and subsequent litigation. Knowledge of this would be a real eye opener. Over the course of four years of casual condo shopping we did get some salient advice as to what builders/developers had issues and were common targets of litigation.

Keep in mind that the last thing that folks on the condo board want who see significant issues ahead for the building is for the issue to be prematurely discussed in the condo meetings/minutes. It makes it more difficult for them to sell their units and it negatively impacts the sell price. We had a very experienced agent who purposely steered us away from some developments because of the combination of her industry knowledge and personal contacts inside of those condo associations. One of her clients was a building engineer whose specialty was building envelopes. She said she got her eyes opened as he went through the list of potential condos for sale and rejected numerous buildings that he was familiar with.


----------



## Just a Guy (Mar 27, 2012)

The last three places I just bought as a package deal were in a condo I already had a unit in. For the past 3 years we did numerous special assessments, but we redid the entire building. Everything was redone, roof, windows, flooring, paint, railings, parking lot, paint, lights, cameras installed, keyless entry, etc. 

The guy selling to me just wanted out, he wound up paying for all the special assessments and I basically got 3 units in a new building. If the money is used wisely, there is nothing wrong with special assessments. The value of the building, as a whole, has increased. His not visiting the place to see the changes allowed me to get them for a steal of a price. He had to pay of 16k in condo fees on closing, money that just came back to me in a way.

I expect the bank appraisals to come in quite nicely.


----------



## Numbersman61 (Jan 26, 2015)

The initial comment that the property was mismanaged by the prior property management company is somewhat misleading in that property management company takes its instructions from the Condo Board, Strata Council or HOA Board. In many cases, the Board relies on the advice from the property management company, who in in numerous cases are not too competent. I live in Alberta and our single family home is part of small bareland condo. Alberta has strict rules regarding Reserve Funds for all condos and is currently modifying the the condo rules. I served as Treasurer of our Condo Association for a number of years. When I joined the Board, a large regional property management company was our property manager. It took a couple of years but I succeeded in eventually convincing my fellow Board members into terminating their contract. In my 50 years as a chartered accountant they were the worst service provider I had ever encountered. We now have a local firm and all is well. When we purchased our home, I retained the services of a independent condo expert to research the condo documents, financials, minutes reserve study and issue a report. The cost was around $500 but it was money well spent. Since I am a retired senior executive and former Board member of a number of public corporations, I could likely have done my own research but with a purchase price of almost a million dollars, I wanted to the peace of mind that comes when retaining an expert. I recommend that all purchasers of properties like this to try to find an expert. Don’t rely on your realtor - often they are misinformed and just want to close a sale.
We own in condominium in a gated community in the greater Phoenix area which is in a HOA and a Condo Association. I take an active role in both by providing financial and accounting advice. Rules regarding Reserve Funds much less stringent here.


----------



## ian (Jun 18, 2016)

Agree completely.

In fact, our realtor insisted that IF we made an offer to purchase on a condo that it be contingent on having an expert review all the condo documents, etc as well as a physical inspection of the building. A few years ago that cost was, I believe $500 plus another few hundred for a physical inspection. 

From our perspective, it was the very least amount of due diligence that we could do. 

When we started looking in Calgary the market was hot. Our first realtor suggested we put in an offer, above list, on a $750K condo without any inspection of the above based on the the comment that there would be multiple offers yata yata yata. We walked from the condo, and we walked from that realtor. And we walked from the market for three plus years. Renting for four years proved to be very much to our financial benefit. Our preference was to buy when everyone was selling, and sell when everyone was buying.


----------



## Longtimeago (Aug 8, 2018)

While some of the comments so far make perfect sense, there is nothing in the OP to tell us is relevant in this particular case.

You have left out as much information as you have provided. How old is the building and therefore the amount of time over which a reserve could have been built up and what is the $2k special assessment for? Those would be my first questions as someone who has owned condos and was at one time President of a condo board.

If a building is only a year or two old for example, then there has been no time to build up a reserve fund and a 'surprise' need may well have come up that requires a special assessment to cover it. But it may also indicate some kind of shortcoming in the building in the first place as well. There is no knowing without you saying what the $2k is to pay for and how old the building is.

If a building is older, then there should have been a healthy reserve built up unless there have been repeated large ticket jobs (roof, windows, etc.) that have needed to be covered and they have depleted the reserve. But you haven't said how old the building is, so we can't tell whether you should be asking about the past use of the reserve fund or not. For example if they have just finished a PLANNED series of renovations to the building and simply got caught out by a 'surprise' need, that may be perfectly understandable.

Nor have you said what the condo monthly fee is. Depending on where the building is located etc. you should be able to determine (your realtor should in fact know the answer) what the average monthly condo fee should be. As a past President, I can tell you that owners almost invariably want to keep the monthly fees as low as they can and will often 'diss' the board if an increase in monthly fees is being suggested. There are plenty of condo buildings where the reserve and operating budgets are too low, thanks to owners consistently not allowing fees to be put up when in fact they should be. When I read about mismanagement by the previous board and the property management company, I most definitely take that with a grain of salt. My question would be WHO says anything was 'mismanaged' and just HOW was it mismanaged? Then I would decide if I agreed it had been mismanaged. If for example the monthly fee is well below the average for the area, then I would say the mismanagement was by the owners as much as the board. I would walk away as in a situation like that, my standing up in an Annual General Meeting as an individual owner and saying, 'hey people, our monthly fees are too low given the local averages, we need to increase our monthly fees', is hardly likely to gain immediate overwhelming approval is it.

If I decided it had truly been mismanaged in any way, I would walk away regardless of them having changed the board etc. What that would be saying to me is that the owners didn't care enough to make sure things were being done properly and now that they have found out it wasn't they dump the board and elect a new one from owners who didn't care enough in the first place. I would have no confidence in the new board being better than the previous one. When you have a group of people who allow things to go wrong, you will still have a group of people who allow things to go wrong. A leopard doesn't change its spots just because you make it chief leopard.

For anyone contemplating living in a condo, I always suggest they keep two things in mind. You as an individual owner will NOT have control over what happens, only a vote in what happens. If you do not participate (as many owners don't) in the management of the building, you are like a voter who chooses not to vote, you can't complain about what you get as a result. The more active you are in the day to day management of the building, the more input you will have into what happens with the building and your individual condo unit. There ain't no free lunch. 

Many people think a condo is like renting, you just pay your money every month and someone else has to worry about everything. In fact, it is like paying rent AND being the landlord as well. It actually isn't an ideal situation at all. Consequently, you get situations where those who have not participated suddenly discover there is a problem and they are 'on the hook' to resolve it. As you can imagine, when that happens, there is all kinds of blame being thrown around.

Before I would venture an opinion on this particular condo you are looking at, I would want to know the answers to the questions I have asked as a minimum and that is long before I would start concerning myself about the financial statements, condo/strata rules, etc. etc. How old is the building, what has been done with the existing Reserve fund and what are the monthly fees like in comparison per square foot to what the average is for comparable properties in the area? ONLY if the answers I got to those questions satisfied me, would I need to consider a more in depth look at anything.


----------



## yousufj56 (Oct 4, 2018)

Thanks, 

The condo fee is $650/month. This is average for the Scarborough, Ontario area. Not sure about per sqft though. This unit is 1100 sqft

The condo fees haven't gone up much since 2015. In 2015 the condo fee was $635/month. 

This is a relatively small building, with only 48 units. However, I believe the condo fee is split amongst 2 other buildings (plus this one). So that is 144 units total. 

The building was developed in 1980s. 

I have no clue yet what the reserve funds were used for. My realtor says that the status certificate will shed more light on what needs to be done in the building. I also dont have any meeting minutes of the board.


----------



## yousufj56 (Oct 4, 2018)

Just a Guy said:


> Not all of these are appropriate, but it may get you thinking about what to look for...
> 
> http://www.mindsetfinance.com/questions-to-ask-about-existing-rentals/


Do you think the below details are relevant? Or should I not even take them into consideration. 

Units sold 2016 = 32
Units sold 2017 = 16
Units sold 2018 (to date) = 9

I get the urge to speculate that the pattern of fewer units being sold could mean that the worst is behind the building.


----------



## Mukhang pera (Feb 26, 2016)

yousufj56 said:


> I get the urge to speculate that the pattern of fewer units being sold could mean that the worst is behind the building.


Or they are getting harder to sell (?).


----------



## yousufj56 (Oct 4, 2018)

Hmm, i should look into days on market data. 

Also, do you know who would provide me with the meeting minutes? Is it the management?


----------



## Mukhang pera (Feb 26, 2016)

yousufj56 said:


> Also, do you know who would provide me with the meeting minutes? Is it the management?


I would say ask the vendor or the vendor's agent to ask the strata council to provide them to you.


----------



## Just a Guy (Mar 27, 2012)

He manage to company will produce the condo docs (which should include minutes, reserve fund study, financials, bylaws, etc). The seller should provide them as they usually cost money. 

As I said, talk to the management company directly. Tell them you are interested in buying, but want some information. One of the questions you can ask is why such a high turnover. You can also ask about past renovations, future plans, etc. A 1980’s building would be looking at a roof, boilers, paint, carpet, windows, etc. Some of that may have been done already.

Those condo fees are quite high, so it could all be funded without special assessments. 

You should also check to see if the places were forclosed on or if they were just sold...sounds like something happened a few years ago, he property manager should be able to tell you. 

Hopefully there are no structural issues, since those are expensive and difficult to repair. Especially foundation issues.


----------



## yousufj56 (Oct 4, 2018)

Here are some parts of the status certificate. I've left out names


----------



## yousufj56 (Oct 4, 2018)

And some more:


----------



## Just a Guy (Mar 27, 2012)

Picture 3 looks like it was taken out of the reserve fund study. That is a “suggestion” not what was actually implemented.

I’d want a better explanation of the half million dollar deficit.


----------



## yousufj56 (Oct 4, 2018)

Just a Guy said:


> Picture 3 looks like it was taken out of the reserve fund study. That is a “suggestion” not what was actually implemented.
> 
> I’d want a better explanation of the half million dollar deficit.


Would the expense breakdown explain that? 6, 7, 8


----------



## Just a Guy (Mar 27, 2012)

They are transferring money in an odd way...Interfund balances seems odd. Why is money not in either the operating or reserve accounts? They are, I think, using these transfers to “account” for the shortfall in the reserve as outlined in section 12. Doesn’t explain why there was a shortfall though. 

Also their numbers aren’t broken down, some of the expenses seem a bit high, but what are they lumping into the vague categories...contracts for example...250k is a lot of contracts.


----------



## kcowan (Jul 1, 2010)

It would appear that they are trying to hide the facts. Congratulations on your digging. Don't get dissuaded by the obfuscation. You financial success depends on it.


----------



## Numbersman61 (Jan 26, 2015)

This is a condo with very serious financial problems. It’s a disaster waiting to happen. The extract from the reserve study is from an old study which was effective January 1, 2014. Notes 13 and 14 indicate that a new reserve study was done in either late 2017 or early 2018. The fact that you received an outdated study is an indicator that they are hiding a material fact. 
The old study indicated that recommended reserve fund contributions for 2018 should be 830,190; the 2018 budget provides only 240,000 in reserve funds transfers. It will be interesting to see the recommended contributions in the new study.
To get this condo into reasonable financial condition, requires much more than a 2,000 special assessment. I can’t tell how much more until I see a summary of most recent study.


----------



## Numbersman61 (Jan 26, 2015)

It would be useful to see details of Reserve Fund expenditures in 2017 and 2016.


----------



## Longtimeago (Aug 8, 2018)

I only had to look at the first JPG capture to know what I would do. RUN, don't WALK away. It's called 'dodging the bullet.' Congratulations on being smart enough to start asking questions before 'leaping into the fire'.

There have been some serious mistakes made in the past, what and why really don't matter. Numbersman61 is right to use the word 'disaster'. I would just disagree with 'waiting to happen', it has happened already. 

You could speculate or ask for more information on why there is a half million deficit and why their reserve fund is miles from where it should be but all you really need to know is that they ARE. I don't need to look at each tree to see the forest.

You don't need to understand everything that has gone on with this condo, you just need to know if you should buy or not. The answer to that question is now very clear.


----------



## Just a Guy (Mar 27, 2012)

I wouldn’t get to hung up on the reserve fund study, I’ve literally read hundreds of them and almost all of them say tend same thing. The building is underfunded, there are lots of repairs needed to bring things up to “as new” condition, etc. I could write them in my sleep. I don’t think, other than changing the pictures, the engineering companies do more than cut and paste these things.

That being said, the fact that they gave you an even older one, nice catch I missed that, is suspicious. 

In general, these reports need to be taken with a grain of salt, repairs can often be done with a plan that doesn’t require the dire advice these reports generally give.

As for this property, it may still be a good deal if you can find out the story. 5he prices are cheap because people are fleeing, but has the problem been solved already?

There is a complex where we had a fire, it forced us to have a $1M special assessment over the insurance for “uninsured issues” like replacing he lower windows on the side not affected by the fire. My insurance covered the fire and the special assessment, but others didn’t have insurance and had to pay. The units were selling very cheap.

Two years after the fire another, much larger, special assessment was levied to bring the other three buildings up to the same look as the one in the fire. This forced even more owners into foreclosure. Our special assessment was worded that, should you miss two months of payments, the entire amount was due at once. Prices of the units went down even more...which was the perfect buying time because the banks paid the special assessment as part of the sale. Buyers got brand new renovated places, cheap as dirt, with no special assessments. The crisis had passed, the costs covered, and it was the perfect time to buy. 

Not saying that’s the case here, it doesn’t look clear from what you’ve shown, but real estate, like stocks are a buy when others are selling opportunity business.


----------



## Longtimeago (Aug 8, 2018)

Just a Guy said:


> I wouldn’t get to hung up on the reserve fund study, I’ve literally read hundreds of them and almost all of them say tend same thing. The building is underfunded, there are lots of repairs needed to bring things up to “as new” condition, etc. I could write them in my sleep. I don’t think, other than changing the pictures, the engineering companies do more than cut and paste these things.
> 
> That being said, the fact that they gave you an even older one, nice catch I missed that, is suspicious.
> 
> ...


Yes that's fair enough in such a special case Just A Guy. But I think if it were something like that, it would have come out quite easily by now. The real estate agent should have been aware of it for example. I'm quite sure they would have known about the circumstances in the example you give. It would have been a 'selling point' agents would have used to sell after the assessment happened.


----------



## Just a Guy (Mar 27, 2012)

We don’t know in this case, we’ve only had a little information presented. I don’t disagree that this particular case doesn’t look good, but I don’t have all the information. Buying distressed properties is a specialty of mine remember, I look at these things differently because I do it a lot...it’s not for everyone.

People shyed away from the fire place because they saw cheap prices, huge assessments, bad reputation (as everything sold cheap for years), a fire, etc. Realtors avoided the place. Many people missed a great capital gains play because they didn’t dig into the truth.


----------



## yousufj56 (Oct 4, 2018)

Just a Guy said:


> We don’t know in this case, we’ve only had a little information presented. I don’t disagree that this particular case doesn’t look good, but I don’t have all the information. Buying distressed properties is a specialty of mine remember, I look at these things differently because I do it a lot...it’s not for everyone.
> 
> People shyed away from the fire place because they saw cheap prices, huge assessments, bad reputation (as everything sold cheap for years), a fire, etc. Realtors avoided the place. Many people missed a great capital gains play because they didn’t dig into the truth.


The assessment amount hasn't officially been announced. The new budget is sent to everyone in December apparently. But the sellers realtor had insider info that the special assessment is around $2k, with no increase in condo fees. I would tell the lawyer to put this in the contract for us. So that if the per unit value of the assessment is much higher than $2k, we can withdraw without any consequence. 

Also keep in mind that this whole situation was caused by the prior management that was then voted out and replaced with this new one. 

Since you have experience in this field, can you paint me a picture of the worst case scenario please?


----------



## Numbersman61 (Jan 26, 2015)

Longtimeago said:


> Yes that's fair enough in such a special case Just A Guy. But I think if it were something like that, it would have come out quite easily by now. The real estate agent should have been aware of it for example. I'm quite sure they would have known about the circumstances in the example you give. It would have been a 'selling point' agents would have used to sell after the assessment happened.





yousufj56 said:


> The assessment amount hasn't officially been announced. The new budget is sent to everyone in December apparently. But the sellers realtor had insider info that the special assessment is around $2k, with no increase in condo fees. I would tell the lawyer to put this in the contract for us. So that if the per unit value of the assessment is much higher than $2k, we can withdraw without any consequence.
> 
> Also keep in mind that this whole situation was caused by the prior management that was then voted out and replaced with this new one.
> 
> Since you have experience in this field, can you paint me a picture of the worst case scenario please?


Without seeing the current reserve study and current financials, one cannot provide a worst case scenario but it will be bad. A special assessment of 2,000 is not nearly enough to cover the shortfall. The fact that there is no planned increase in assessment fees is disturbing. It indicates to me that the current Board and management company are incompetent. To get this condo into reasonable financial shape will take a lot of money. It may take few years but continuing the current practice will result in a very bad ending - insolvency.


----------



## Just a Guy (Mar 27, 2012)

I agree, there’s not enough information that you’ve provided. $2000 x 140 units is well short of 500k though. I’d be very Leary of this place. There are probably similar places available which have a lot less issues. Even though I buy places
Like this, I also walk away from a lot and I certainly don’t pay as much as these.


----------



## Just a Guy (Mar 27, 2012)

I agree, there’s not enough information that you’ve provided. $2000 x 140 units is well short of 500k though. I’d be very Leary of this place. There are probably similar places available which have a lot less issues. Even though I buy places
Like this, I also walk away from a lot and I certainly don’t pay as much as these.


----------



## yousufj56 (Oct 4, 2018)

Alright then, I'll wait for their updated status certificate. I don't want to rush this. 

It might take some time for them to get it but I'll update here once received.


----------



## Just a Guy (Mar 27, 2012)

You seem pretty determined to go ahead despite some fairly plain warnings...an Internet forum is probably not the best place to have a proper review of the documents either.


----------



## Longtimeago (Aug 8, 2018)

I agree with Just a Guy, you seem to WANT to buy this condo. I can only think the price seems so seductive, that your reasoning ability is being compromised.

There are plenty of other fish in the sea as they say, I would be looking for one that does not have this kind of unknown (if anyone really thinks it is still an unknown) hanging over it. Wanting to find a 'good deal' is not unreasonable but for example a condo that is being sold by a couple who are splitting up and want out, so they offer a reduced price, is not the same thing as wanting an 'incredibly' good deal.

What's that saying about, 'if it looks to good to be true, it probably is too good to be true.' It boggles my mind that someone would look at the financial situation of this condo and still consider buying it. There isn't only too much that could go wrong, there is too much that has gone wrong.


----------



## kcowan (Jul 1, 2010)

Maybe submit a really stink bid assuming all the unknowns turn out badly.


----------



## yousufj56 (Oct 4, 2018)

The thing is, the price per sqft is much lower than the other condos or houses I've seen. 

I would be getting it for 280k and 1100 sqft. Very quite condo. Relatively very few units. I can practically buy it completely paid off. Which means I only have maintenance fees to pay. I also spoke to people in the building and they were happy about living there. I'll take that with a grain of salt since they may be biased. 

I'm currently renting a 620sqft condo for $1400. 

I have my second child on the way and I have to make a decision soon. 

If I move out to a two bedroom, I would be paying 1800/month easily. The two bedroom rental in this condo is $2000/month. Worst case scenario, I can just rent it out right?

I also noticed that pricing is at it's lowest during December and January and that prices pick up in the summer. So then I would probably have to wait until next year to buy.


----------



## Just a Guy (Mar 27, 2012)

Worst case scenario is the building has major structural issues where it would be cheaper to tear down the complex and rebuild. I’ve seen that in condo units that are for sale right now.


----------



## twa2w (Mar 5, 2016)

Remember, there is no free lunch. There is some reason that that condo is cheap. It may be that the owner is desperate to sell ( divorce, job loss etc??) but more likely there are other less obvious reasons. Do you have a history of other sales in the building and area.
Is the condo poorly located, poorly laid out. Are there smells or are the walls thin and you can hear noise easily? What is the condo board responsible for? For example, in some townhouse condos, the owner is responsible for replacing exterior doors and windows, in others that comes from reserve.
Frankly a special assessment of 2,000 does not sound like a mismanaged condo but 20,000 per unit would.
Does the condo have very restrictive rules and high fines for owners? Are there lots of kids, crime, gangs.
If it was truly a bargain, the real estate agent would have bought it or sold to a buddy.
If there are isues, will you be able sell easily in a few years?
Has the assessment been announced- if so, the current owner should pay. If not, you might pay it.
Tread carefully.


----------



## Just a Guy (Mar 27, 2012)

The realtor selling to a buddy thing is more often than not a myth. Realtors who try to do that often times go broke. They are too close to the industry to see clearly. Besides, I often buy the cheapest places in the cites where I buy (I know because I appeal the taxes and pull out comparables).

I’d be more curious as to why there is no demand. Something this “cheap” shouldn’t last long on the market. 

As for renting it for 2k/month. Chances are it won’t really cash flow. It’s too expensive.


----------



## Numbersman61 (Jan 26, 2015)

yousufj56 said:


> The thing is, the price per sqft is much lower than the other condos or houses I've seen.
> 
> I would be getting it for 280k and 1100 sqft. Very quite condo. Relatively very few units. I can practically buy it completely paid off. Which means I only have maintenance fees to pay. I also spoke to people in the building and they were happy about living there. I'll take that with a grain of salt since they may be biased.
> 
> ...


The old reserve study which was effective January 1, 2014 indicated that the following annual contributions were required to fund the Reserve Fund 
2014 - $437,616
2015 - $539,143
2016 - $664,224
2017 - $818,324
2018 - $830,190
2019 - $842,228
2020 - $854,440
The 2018 budget only provided for Reserve Fund contributions of $240,000 which is $590,000 less than the required contribution. If the 2018 budget had included the full required reserve contribution (based on old report), the monthly assessment would have increased by $341 per unit. This why you must insist upon receiving the current reserve study.


----------



## yousufj56 (Oct 4, 2018)

The condo is in a great location. Near 8 minutes bus ride from Subway station. 2 minute drive to highway. I'm speculating that the price is low because it's old, near a co-op and special assessment. 

I am currently waiting for new status report. They said they'll have it in December. 

Condos here have been moving decently well. Prices have doubled since 2015 with average days on market similar to others (depending on initial price set).


----------



## Just a Guy (Mar 27, 2012)

That’s going to change as interest rates increase. It’s going to cost a lot more to borrow money, more than buyers can afford. Prices are going to drop going forward for a while and not going to increase. 

If this is such a good deal, why is it still on the market? You shouldn’t be able to wait until December to look at the new reports, someone would have snapped it up.


----------



## ian (Jun 18, 2016)

We rented a higher end condo for four years. We moved a year and a half ago. Prior to us moving, there had been two assessments. The first about $30K five years ago and another two years ago for $5K. 

Prior to leaving some of the buildings in another part of the complex were wrapped in plastic. They were part of a seperate condo assoc. Our former neighbour, who loved the complex, sold six months ago. She knew some of the key players on the board. I figure that she knew what was coming from her condo assoc. and quickly bailed. She also had a son who was a realtor. This may not apply to you, but some of the major issues for assessments are building envelopes/subsidence. There may be nothing official in the minutes even six months prior to an assessment. You really do need to have it inspected, and inspected by someone who knows what they are doing, who knows what to look for, and has their ear close to the industry. Some real estate salespeople will recommend inspections by firms/individuals who are perhaps not as diligent or professional as they should be. Their goal is to get a fast, postitive inspection so that the sale can move forward to closure and the commissions paid out. We are so thankful that we did our diligence and decided against buying in the complex.


----------



## Longtimeago (Aug 8, 2018)

OK, so now you are telling us you need to move for personal reasons and YES this appears to be an 'affordable' solution to you. However, from my perspective, personal reasons means that EMOTION is involved in what should be a LOGICAL investment decision. No one wants to live in a condo they don't 'like', but liking it for various reasons should not overcome LOGIC. Unfortunately, the saying is true that, 'when emotion comes in the door, logic goes out the window.'

Look at the numbers and facts that you do have available. As Numbersman61 has pointed out, even by the old reserve study, the monthly fees should have increased by $341 per month in 2018. But they did NOT. It doesn't take a math whiz to figure out that a new study isn't going to suddenly show that somehow their Reserve Fund is now in good shape. It can only look worse since they did not follow the 2014 study and increase fees as required.

It seems very clear to me that they have underfunded their reserve for years and the only way to get back on track is to increase monthly fees drastically. No doubt, that is part of why the old board got turfed and at least partly the reason for so many unit sales over the last couple of years. Owners could see where things were headed and got out.

You WANT to think the price is low because, "it's old, near a co-op and special assessment." But at the same time you say, "is in a great location. Near 8 minutes bus ride from Subway station. 2 minute drive to highway." Do you not see a contradiction in those two descriptions? If it is such a good deal, why is it still on the market as Just a Guy says?

The price is low for a reason yousufj56 and it isn't because it is old or near a co-op. The reason it is low is clear. The owner wants out before any assessment and before any drastic increase in monthly condo fees has to be imposed. It is NOT a BARGAIN. 

I will say it once again, I have read enough in the info you have provided to know that I personally would not consider buying this condo. If you want to 'self-justify' buying it based on 'emotion' rather than 'logic', then we are all wasting our time here.


----------



## yousufj56 (Oct 4, 2018)

Just a Guy said:


> If this is such a good deal, why is it still on the market? You shouldn’t be able to wait until December to look at the new reports, someone would have snapped it up.


The lawyer I saw told me that I can put my offer through but have a condition that if we don't like the assessment, we can opt out of the purchase. So he put the clause in and the seller accepted. 

So technically it's not on the market since we've entered into an agreement. BUT, as per my lawyer, we can walk away if we don't like what we see in the new assessment. We won't even lose our deposit.


----------



## twa2w (Mar 5, 2016)

Just a Guy said:


> The realtor selling to a buddy thing is more often than not a myth. Realtors who try to do that often times go broke. They are too close to the industry to see clearly. Besides, I often buy the cheapest places in the cites where I buy (I know because I appeal the taxes and pull out comparables).
> 
> I’d be more curious as to why there is no demand. Something this “cheap” shouldn’t last long on the market.
> 
> As for renting it for 2k/month. Chances are it won’t really cash flow. It’s too expensive.


The few long time competent RE agents I know, have a few contacts( people that sound like yourself), who they contact if they think they spot a mispriced property. 
However, I don't know that many agents so it is just anecdotal. I probably shouldn't have used the word buddy.
I have a couple of agents who call me if they find something that falls in my criteria.( not my buddies though ;-)) 
Yes I have seen agents get blinded by the markets and get over involved. These are mostly the ones IMO that are short term thinkers. The ones that buy multiple properties for long term investments usually do ok.

Anyway, always enjoy your input and comments. I agree the lack of demand is the scary part- assuming this is in a city with strong demand.


----------



## Just a Guy (Mar 27, 2012)

Aside from the numbers, have you talked to the property manager like I suggested to get the history of what’s happened?


----------



## yousufj56 (Oct 4, 2018)

Just a Guy said:


> Aside from the numbers, have you talked to the property manager like I suggested to get the history of what’s happened?


Sorry, I thought you meant get the status report. So I should ask her why it was mismanaged? Like in particular? 

Also, I got the phone number of the president of the board. I've called him a few times and it goes to his voicemail. You think it would be too aggressive if I go to his home?


----------



## Just a Guy (Mar 27, 2012)

You can ask all sorts of questions of the property manager, I’d leave the president alone if he won’t answer you.

I’d ask what has been done, if there are bugs, what happened with the mismanagement, what issues are known, etc.


----------



## kcowan (Jul 1, 2010)

yousufj56 said:


> The lawyer I saw told me that I can put my offer through but have a condition that if we don't like the assessment, we can opt out of the purchase. So he put the clause in and the seller accepted.


I think you have learned here that we don't like the current assessment. What change will you need to see in the new assessment to bow out? Would you not need to assess the quality of the assessor?


----------



## Just a Guy (Mar 27, 2012)

As I said before, the independent reports are mostly cut and paste, don’t expect a huge difference in the new one...or even a huge difference between different buildings. The trick is to be able to read those documents, look at the actual building (since the documents work on strict timeslines like doors have a lifespan of X, then they need to be replaced exactly then at an unnegotiated price. In reality the doors may not need to be replaced exactly then and you could get a deal to lower the projected costs.

The question becomes how well you can understand and control such issues as far as those documents go. Important issues are usually roof, mechanical, structural, parking/pavement. Other issues can usually be delayed a bit to fit into a plan. 

That being said, there are other issues in this case to be afraid of, and I don’t see you trying to find out anything about them.


----------



## ian (Jun 18, 2016)

The condo president has no incentive to speak with you, and if he or she does, to give you the inside scoop. 

Don't forget, this person has a vested interest in either keeping the condo resale price high OR selling their unit before any required work or assessment numbers become available. The chances of you getting data or a heads up on potential issues is slim to non existent. Same for other owners in the building.

I spent much of my career in high end sales. The easiest sell was someone who was laser focused on price at the expense of value. Do not be blinded by price.

Think carefully about what you are considering and the principle reasons you are doing so. This is not just a new home for your family. It is an ongoing financial commitment. It may be you largest investment ever. If you make a poor choice it has the potential to negatively impact your family's day to day finances for a long time, not to mention your long term finances.


----------



## Numbersman61 (Jan 26, 2015)

It appears that there is no point in discussing the issue further. There was a conditional offer which was accepted. The only condition was that the buyer could back out if assessments changed significantly. It is unlikely that this will occur so our friend will soon own the condo.


----------



## Just a Guy (Mar 27, 2012)

He always has a way out. The condition was probably being happy with the reports, which can mean anything, you don’t have to say why, just that you didn’t like them.


----------



## Numbersman61 (Jan 26, 2015)

Just a Guy said:


> He always has a way out. The condition was probably being happy with the reports, which can mean anything, you don’t have to say why, just that you didn’t like them.


This was what was posted:
“The lawyer I saw told me that I can put my offer through but have a condition that if we don't like the assessment, we can opt out of the purchase. So he put the clause in and the seller accepted.”
I don’t see any other conditions like “being happy with the reports” mentioned.


----------



## Just a Guy (Mar 27, 2012)

Key words are don’t like the assessment. May not like for any reason. There is always an out as long as there is a condition. It’s impossible to force someone to buy if they have a condition which gives them an out. Even if there was no assessment or the seller offered to pay it. You don’t need to state a reason but it could be the assessment is too low, to high, not needed in their opinion, whatever.


----------



## yousufj56 (Oct 4, 2018)

Just a Guy said:


> He always has a way out. The condition was probably being happy with the reports, which can mean anything, you don’t have to say why, just that you didn’t like them.


This is exactly what my lawyer said.


----------



## yousufj56 (Oct 4, 2018)

Plot twist: My realtor has informed me that the sellers side has requested an amendment to our contract. They want to be able to show and sell the unit to others while we wait for the status report. 

My realtor and I think it's a tactic to twist our arm into buying blindly. 

So considering all your advice, this was the last straw for me. I told my realtor to walk away. He said he will take care of my deposit etc. Since we're both withdrawing mutually, there won't be any legal issues. 

Thank you all for your advice!


----------



## Numbersman61 (Jan 26, 2015)

yousufj56 said:


> Plot twist: My realtor has informed me that the sellers side has requested an amendment to our contract. They want to be able to show and sell the unit to others while we wait for the status report.
> 
> My realtor and I think it's a tactic to twist our arm into buying blindly.
> 
> ...


Good move. This a condo that’s at least 30 years old and does not appear to have been well managed. My recommendation is to never make an offer until you have received the complete status report. When you do receive the documents, make sure you carefully scrutinize the Reserve Study. Some of these reports are virtually worthless since they often are just “desk updates” from prior studies. When was the last field inspection conducted? I recently reviewed a flawed Study which was based on an old field inspection done in 2008. The new Board commissioned a new Study with a different expert with a scope that included a detailed field inspection. The new Study concluded that the Reserve Fund was 65% funded; the prior Study had concluded that the Reserve Fund was 122% funded. Instead of levying a special assessment to immediately fully fund the Reserve Fund, the Board developed a plan to have the Reseve Fund at 100% in five years. Of course, this resulted in an increase in Reserve Fund Assessments.


----------



## ian (Jun 18, 2016)

You really do need to take a look past and current condo special assessments and come to a conclusion about not only the funding levels but also the integrity of the building vis a vis the potential for future assessments.

Just spoke to our neighbour in our former rental condo (2002 build). Just prior to moving in, 5 1/2 years ago the owner had a $32K assessment and because of remediation had a vacant rental for four months. Three years ago there was a $5k special assessment. There is another assessment due next month for $11K. Monthly condo fees have increased 50 percent over four years. Price for the units has been stagnant for four-five years. 

We considered buying into the complex at one point. We were fortunate. We happened to meet a lawyer at a social event whose firm specializes in condo litigation. After some chit chat about our plans he looked at us and suggested that we keep looking. That was enough of a hint for us.


----------



## james4beach (Nov 15, 2012)

The experiences several of my family members have had with condos (huge special assessment for unnecessary cosmetic overhauls, and very unpleasant experiences with the board & management firm) have made me swear off ever buying a condo -- no way.

I'm in the "right" age group and demographic, but I will never buy a condo. I'll either keep renting forever, or buy a proper house where I am fully in control of the property.


----------



## Just a Guy (Mar 27, 2012)

Why not join the condo board and control the situation? Most people can’t be bothered, and then complain bitterly, makes no sense to me. I, or my reps are on a lot of condo boards. I keep them fiscally responsible and make improvements which increase the value of my investments. It’s usually very easy to establish control if you don’t have some personal agenda and are out for the good of the building.

I’m always amazed at how many people abdicate any responsibility for managing probably their biggest investment.


----------



## sags (May 15, 2010)

It is probably worth noting that the word "condo" applies to a lot of different building structures.

I assume the special assessments are primarily the problem of "apartment condos" where the collective liability is higher than a townhouse or linked home condo.

In our city, there are a relative few apartment condos compared to the much more popular townhouse or linked home complexes.

The odd townhouse complex has a concrete underground parking lot which can be quite expensive to maintain or replace. I would avoid those and opt for homes with their own garage.

As to assessments and condo boards, good luck trying to convince people they should pay higher condo fees.


----------



## Just a Guy (Mar 27, 2012)

You’ve obviously never been on a condo board, or understand what’s involved. On townhouse condos, you’re still responsible for the exterior of the buildings and sometimes a private road and sewer system...talk about expensive repairs. 

As for convincing people, there is a legal responsibility to maintain the property, they don’t get a choice about paying. You don’t pay, the lawyers come after you to pay. 

The only real choice you get is to pay regular condo fees and build up the funds slowly, or keep the condo fees low and do special assessments to cover the costs as they come up. 

As a homeowner, you’d probably prefer to pay a little each month. As an investor, I’d rather not have my money sitting around in a reserve fund, so I prefer special assessments.


----------



## sags (May 15, 2010)

LOL.........Condo pathways are littered with the dried up carcasses of former condo board members who wanted to raise the monthly fees.


----------



## sags (May 15, 2010)

The difference between townhouse condos and apartment condos is the upkeep costs for common areas....lobbies, hallways, gyms

There is much more liability in apartment condos. Water leaking above drains down into other units. Bug infestations spread from unit to unit.

I see no compelling reason to buy apartment condos when other forms of condo housing are readily available and affordable.


----------



## Just a Guy (Mar 27, 2012)

sags said:


> LOL.........Condo pathways are littered with the dried up carcasses of former condo board members who wanted to raise the monthly fees.


Self-admitted “expert” with no actual experience...keep telling those of us who are doing it how it works...

Kind of like having money in your case.


----------



## sags (May 15, 2010)

You sit down with people who own $50K apartments and inform them how their apartments will require higher monthly fees to retain their value ?


----------



## heyjude (May 16, 2009)

sags said:


> LOL.........Condo pathways are littered with the dried up carcasses of former condo board members who wanted to raise the monthly fees.


Oh really? I’ve had a lot of board experience. When the Board knows what it’s doing, establishes goals, manages efficiently without waste, and communicates well with owners, most owners will understand that it’s in their best interests to keep on top of maintenance and upkeep. Our budgets never have any trouble passing.


----------



## Just a Guy (Mar 27, 2012)

Sags, as a renter you probably don’t understand that every homeowner actually needs to do something called maintenance. Maintenance costs money. If you don’t do maintenance, properties fall into disrepair. Also, we have something called inflation. This means costs tend to go up each year, which means you need to contribute more money each year to do something called maintenance. 

Some maintenance issues cost more than others. If you don’t save up the money before, it doesn’t mean the maintenance doesn’t need to get done. 

A proper board does something called planning. This means it makes decisions to lower the impact for the required maintenance to be done on time, on budget and with the least amount of impact on the owners. 

So yes, you sit down with owners, regardless of the price of their condos and inform them usually yearly if you’re responsible, that their condo fees will be going up. 

Welcome to reality where people actually don’t expect others to pay for their stuff.


----------



## heyjude (May 16, 2009)

Just a Guy said:


> Sags, as a renter you probably don’t understand that every homeowner actually needs to do something called maintenance. Maintenance costs money. If you don’t do maintenance, properties fall into disrepair. Also, we have something called inflation. This means costs tend to go up each year, which means you need to contribute more money each year to do something called maintenance.
> 
> Some maintenance issues cost more than others. If you don’t save up the money before, it doesn’t mean the maintenance doesn’t need to get done.
> 
> ...


Hear hear! 
Condo board members, the depreciation report is your friend!


----------



## twa2w (Mar 5, 2016)

sags said:


> You sit down with people who own $50K apartments and inform them how their apartments will require higher monthly fees to retain their value ?


A question came up a while back on how condos fees are supposed to work but it didn't get answered I don't think.

If condos work the way they are designed, there should rarely be special assessments. 

A portion of the fees should pay for the regular work such as grass cutting, cleaning of common areas, snow removal insurance and the like.
A portion of the fee is set aside for longer term items. All buildings require longer term maintenance. Lets just take the roof on a town house. if the roof is estimated to last 15 years, the replacement costs are estimated and inflation is factored in. Each owner pays a little each year so that in 15 years there is money to pay for the roof.

If the original owner sells after 13 yrs, he has paid his portion of the depreciation or wear and tear on the roof and the next owner has paid 2 years

If the condo board does not collect money to put in reserve for a new roof, they will have to declare a special assessment to pay for the roof when it is needed. In my example, the new owner has only lived there 2 years but he pays full cost of the roof. SO the board calculates the total cost of the roof and asks each current owner for their share based on size of unit.

Of course the condo board has to account for how often roofs, paving, windows, siding and so forth have to be replaced and the costs. They also have to have some funds for unexpected stuff .

All this goes into a condo fee. The reserve fund goes up and down. Most units are assessed their reserve portion of the condo fee based on size of condo relative to the whole.

Condo fees may include different things so you just can't compare the dollar amount. Some include some or all the utilities. Some only include landscaping and grass cutting and snow removal - all the building expenses are the owners. Others include roofs but not windows and doors. Some make some income by having cell equipment on the roof or some sort of commercial income. Some of this will vary by building or condo type.

Many have codes you must follow. I.e. no bikes or storage on balconies or decks, all exterior window blinds must be 1 inch white slats. No pets over 20 pounds and hey must be preapproved by the condo board.

So you don't have the option in theory of deferring maintenance like a roof like you would on your own house and you are trusting the board to shop around, get good quotes and have to rely on their judgement as to when it needs doing.

Condos do get rundown and if the owners and board are OK with it so be it but values suffer usually. When siding needs upgrading is often a matter of opinion or style and only necessary things are done like roofs. So some buildings look very dated due to old color schemes or styles or being build with cheap siding - still works, just doesn't look pretty.

The legislation varies by province as to condos and boards authority. As a condo purchaser you need to know the status of the reserve fund and the extent of maintenance required. The reserve fund may be low due to just upgrading the whole building - that is OK. It may appear to be large but if it is a large building with a lot of upgrades needed, it can diminish pretty quick.
Nothing worse than buying a unit then getting hit with a big special assessments. I have seen these in the 6 figure range. In most places the assessment can be placed as a lien so you can't just ignore and sell. 

In some cases special assessments are not for deferred maintenance that was not properly planned for but for unexpected expenses. In the town of Cochrane Alberta, there was a series of very nice villa condos built on a slope. The slope gave way and started to slide. Over a series of a year or so, starting with a 20K assessment, then 40 K, then yet another, the special assessments were about 120K per unit to drill and anchor the land and shore up the houses - none were damaged as far as I know. Of course they sue the developer and the town but that takes a long time and more assessments for legal fees with no guarantee of success.. Some units were in a different section and were not affected but as they were part of the condo corp, they got hit with the assessment as well.
Just before this happened, a client had just listed his condo for sale and moved to a retirement care facility because he was too frail to look after himself. he couldn't sell and couldn't afford both so he had to move back in to the condo.

No one wants to buy these properties as who knows how long this will go on and how many more assessments and how long before money is recovered if ever.

Condos can be great because someone else does all the yardwork and maintenance etc is all taken care of for you. But There is a cost. Although some people think a condo can get deals on maintenance they don't always and boards are taken advantage of just like homeowners can. 

In the example of the Cochrane properties, if they had been individual homes, not condos, each owner would be on their own and they would have to get together to try to resolve the issue.

So pick your poison.


----------



## kcowan (Jul 1, 2010)

twa2w said:


> So pick your poison.


Yes I think that many here think there is some other path. Like get the government or someone else to pay. There is a condo complex in West Van that is on Indian land and 2bed/2bath units sell for $1 million. There is an engineering study from 2009 that states that the building envelope needs rehabilitation and their estimate of them was $20 million by 2020. It is disclosed but totally ignored by many buyers. And eventually they will have to replace all their copper piping (30 year life). These costs are so enormous that people have difficulty comprehending the implications.

I think the average buyer needs to avoid condos because they do not have the financial capacity to understand the issues.


----------



## Numbersman61 (Jan 26, 2015)

kcowan said:


> Yes I think that many here think there is some other path. Like get the government or someone else to pay. There is a condo complex in West Van that is on Indian land and 2bed/2bath units sell for $1 million. There is an engineering study from 2009 that states that the building envelope needs rehabilitation and their estimate of them was $20 million by 2020. It is disclosed but totally ignored by many buyers. And eventually they will have to replace all their copper piping (30 year life). These costs are so enormous that people have difficulty comprehending the implications.
> 
> I think the average buyer needs to avoid condos because they do not have the financial capacity to understand the issues.


This is why the average buyer should pay a condo expert for advice before making an offer to purchase a condo.


----------



## Just a Guy (Mar 27, 2012)

The sad thing is, people thing a house is diffferent, like the pipes will last longer somehow because it’s not a condo, or the roof, windows, doors, etc. are somehow magically better and never need replacing. The only real difference is, with a condo repairs are often done on a schedule and not ignored.


----------

