April 9, 2020

Wary of catastrophe, experts provide tips for future condo buyers

By SARAH O’DONNELL, edmonton journal
The Leduc fire department issued a fire safety codes order on February 22, 2012, to evacuate all residents of this Bellavera Green condo complex by March 31, 2012, due to critical life-safety concerns.

EDMONTON – Lakbir Bains is busy packing.
On Friday, one day after the 27-year-old hotel front desk supervisor signed the papers to buy a fourth-floor, two-bedroom unit in a Mill Woods condominium, he started boxing up his Westridge apartment for the move.

“It feels great,” Bains said. “Rather than paying someone else’s mortgage, I’d rather pay my own.”

Bains’ confident jump into the condo market comes at the same time as owners of Leduc’s Bellavera Green condo complex attempt to determine the fate of their unsafe building, which the City of Leduc ordered them to leave by March 31.

The tangle of safety problems at Bellavera is the latest high-profile crisis involving a condo in Alberta. Last year, residents were forced to evacuate the Penhorwood Condominiums in Fort McMurray due to serious safety concerns.

There are also reports across the province of condominium owners in relatively new buildings forced to pay thousands of dollars in special assessments to cover unexpected, urgent repairs.

Those stories are one of the factors that make future condo buyer Carolyn Skoworodko a little nervous about some of Edmonton’s condo stock built during the last boom.

Skoworodko, currently living in Kingston, Ont., as she finishes a master’s degree in urban planning at Queen’s University, is already researching the market for her move back to the city this summer.

She’s looking at a condo, rather than a single-family home, because they’re more affordable and she wants to live in Edmonton’s core.

The 27-year-old also isn’t seeking a lot of square footage or the major maintenance that comes with a house and a yard.

“A condo is more practical at this stage,” Skoworodko said.

There seems to be a consensus in Alberta that provincial legislation needs sharper teeth to help protect consumers. Municipal Affairs Minister Doug Griffiths promised last week that changes are coming by fall.

But there are steps experts connected to the industry say potential buyers like Skoworodko should take right now to protect themselves as they enter the condominium market.

Here are a few of their tips:

Play detective

As manager of ATB Financial’s Rabbit Hill branch in southwest Edmonton, Allan Michael sees a growing number of clients coming in seeking mortgages for condos. One of his key pieces of advice is that they can never ask too many questions.

“Never be satisfied by asking two or three questions and saying ‘It’s OK,’ ” Mitchell said. “Go to multiple sources for the information because everybody is going to have a different perspective.”

Internet searches are an easy place to start. For an older building, you might find online chatter about the building’s history. For a new project, learn who the builder, designer and developer are.

Are they all reputable firms familiar with residential condo construction? What is their history with the Better Business Bureau, an organization that monitors and mediates consumer complaints?

Nick Trovato, a structural engineer and managing principal with Reid Jones Christoffersen Consulting Engineers, said it is worth asking developers if someone experienced in condo exteriors, known as a building envelope specialist, is involved in the project.

That matters, he said, because “a lot of the problems we’re seeing are either construction-related problems tied to workmanship or building envelope problems — water and air leakage.”

If the building is covered in scaffolding and tarps, ask why repairs are underway, Trovato said.

Extend your investigation to the courthouse, said Robert Noce, a corporate and commercial lawyer whose specialties include condo-related matters.

If the condo isn’t completed, search for any cases connected to the builder and developer. If the building is older, do the same kind of search on the condo corporation.

“Numerous lawsuits against a builder should be an immediate red flag that this builder has issues with respect to his developments.”

Dig as deep into a building’s background as you can, said Noce, who writes a column on condominiums for the Edmonton Journal.

If the builder is listed as a numbered company, find out who its shareholders are and run similar searches on them.

“There are things you can do to get information, but the onus, unfortunately, is on the potential purchaser to make those inquiries.”

Assemble your own team

There are plenty of people who can help you research a condominium and interpret your results. Darlene Strang, an Edmonton Realtor who specializes in condos, said part of her job is to help decipher condo-related documents and research the building’s history.

There are other people worth having on your team too.

A lawyer can help conduct legal and corporate searches, review condo bylaws and provide feedback on the documents. There are also companies that review the background dossier on the condo which should be available to any buyer.

Noce recommends hiring a home inspector or even a structural engineer to scrutinize the building and the unit.

“I would spend $1,000 to $1,500 to save me hundreds of thousands of dollars in misery.”

If no worrisome signs appear after all those checks, that’s good news.

Put the documents under the microscope

For Strang, a careful review of any documents connected to a condo is key. “I always tell people you’re buying the building before the unit,” she said.

Because condos include shared property — such as roofs, exterior walls, parking lots — for which all owners are responsible, every condo corporation elects a board of directors.

Potential buyers should analyze the health of the building, its condo board and the condo corporation’s finances before they worry too much about a specific unit, Stang said.

Review minutes from the last several years worth of condo board meetings, as well as from Annual General Meetings. That will give you a flavour for what’s happening.

Check the condo corporation’s insurance policy to see what it covers and what it excludes. Read the condo bylaws and find out who is on the board of directors.

On the financial side, learn what the monthly fees are and analyze the size of the reserve fund. All condos are required by provincial law to maintain a special trust account to cover major repairs.

Established condos also must complete a “reserve fund study” every five years. That study, which must be conducted by a qualified person or company, identifies what may need to be repaired or replaced in the next 25 years, assesses the current health of the property, estimates the cost of repairs, and analyzes how the board can cover those expenses.

New buildings have two years from the date of the corporation’s registration to complete a reserve fund study and approve a plan.

If your research finds that a majority of people in the building are behind in paying their condo fees, or there have been several special assessments (mandatory one-time charges to cover repairs) in just a few years, those are warning signs, Noce said.

Buying new? Find out about the warranty

Right now, it is not mandatory for new developments to carry a warranty, although Alberta’s minister of municipal affairs said about 80 per cent have one.

“When you’re talking to the sales people and the builder, ask them which home warranty program they’re involved in,” said ATB’s Michael. “Once you know which one it is, call that home warranty program and ask if they can provide feedback and a rating of that builder.”

Members of the Canadian Home Builders Association must have a third-party warranty on their projects. It also is important to learn more about the warranty company, since coverage varies by company.

Take advantage of resources already out there

Last year, Service Alberta, the provincial department that handles consumer-related issues, logged more than 1,000 calls related to condominiums.

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