Questions Buyers Should Ask When Deciding To Purchase A Strata Unit
- What is the monthly condominium fee and what does it pay for? The monthly condominium fee can range quite dramatically from condominium to condominium. The fee is a by-product of the number of units, the annual expenses to maintain the common area, whether the condo is professionally managed or self-managed, the age and condition of the project, and other variables such as litigation. For budgeting and financing you need to know the monthly fee and exactly what you are getting for it.
- What are the condominium rules & regulations? Condominium rules can prohibit pets, your ability to rent out the unit, and perform renovations. Make sure you carefully review the rules and regulations before buying. Needless to say, the buyer should review and approve all condominium documents, including the rules and regulations, by-laws, minimum 2yrs of minutes of all Strata Meetings, any engineer reports, Form B and strata plans.
- How much money is in the contingency fund and how much is funded annually? The contingency fund is like an insurance policy for the inevitable capital repairs every building requires. As a general rule, the fund should contain at least 10% of the annual revenue budget. If the contingency fund is poorly funded, there is a higher risk of a special assessment. Make sure you get an up to date copy of the financials to review.
- Are there any contemplated or pending special assessments? Special assessments are one time fees for capital improvements payable by every unit owner. Some special assessments can run in the thousands, while others can be in the millions. You need to be aware if you are buying a special assessment along with your unit.
- Is there a professional management company or is the association self-managed? A professional management company, while an added cost, can add great value to a condominium with well run governance and management of common areas.
- Is the condominium involved in any pending legal actions? Legal disputes between owners, with developers or with the association can signal trouble and a poorly run organization. Legal action equals legal fees which are payable out of the condominium budget and could result in a special assessment.
- How many units are owner occupied? A large percentage of renters can create unwanted noise and neighbor issues. You need to check the rental restriction and maximum units that are allowed to be rented at any one time in the strata.
- What is the condominium fee delinquency rate? It’s important to know if there are owners in arrears with their fees and how much.
- Do unit owners have exclusive easements or right to use certain common areas such as porches, decks, storage spaces and parking spaces? Condominiums differ as to how they structure the “ownership” of certain amenities such as roof decks, porches, storage spaces and parking spaces. Sometimes, they are truly “owned” with the unit, so the unit owner has sole responsibility for maintenance and repairs. Sometimes, they are common areas in which the unit owner has the exclusive right to use, but the maintenance and repair is left with the strata as a joint expense. You will need to review the Strata Plans for the building to confirm ownership.
- What Does The Strata’s Insurance Policy Cover? The Strata will carry an umbrella policy over the whole building with some form of liability as well. For buyer's own protection, they should also buy an individual policy covering the interior and contents of the unit, because the strata policy and condo by-laws may not cover all damage to their personal possessions and interior damage in case of a roof leak, water pipe burst or other problem arising from a common area element. Ask for a copy of the strata insurance policy and don't forget to check the fine print of the by-laws. Sometimes, there's language that would hurt a unit owner in case of a common area casualty.