Six Things You Need to Know Before Buying a Condo

If you're one of the tens of thousands of future homebuyers, thinking about buying a condo in Ontario, you need to read this.

The Ontario Auditor General's 2020 report on condominium oversight has exposed serious issues that could cost you thousands of dollars in unexpected fees—or worse, trap you in a deteriorating building with mounting repair bills.

With condos representing at least $300 billion in value across Ontario and serving as an increasingly vital housing option (especially in the GTA, one of North America's fastest-growing condo markets), understanding what you're really buying into has never been more important. The current state of Canada's condo market adds even more urgency to getting this decision right.

The Bottom Line: Why You Need a Real Estate Lawyer to Review Your Status Certificate

Before we dive into the details, here's the key takeaway: having a lawyer review your status certificate isn't optional. It's essential. The status certificate is the single most important document you'll receive when buying a condo, revealing the building's financial health, reserve fund status, and potential red flags that could dramatically affect your investment.

Given what the Auditor General uncovered, here's what you need to watch out for:

1. Beware of Understated Condo Fees

The Problem: Developers routinely understate initial condo fees to make units appear more affordable than they actually are.

The Reality: The Auditor General found that:

• 73% of condo boards experienced significant fee increases of 10-30% or more in just the first two years after registration
• 75% of condo owners surveyed (518 of 691) experienced increases ranging from 10% to over 50% within five years
• Some condos saw fees double in the first year alone

Why This Happens: Developers often:

• Exclude or understate maintenance costs in their initial budgets
• Defer expenses like elevator maintenance to the second year
• Shift costs for amenities (like guest suites) to future budgets
• Use the bare minimum 10% for reserve fund contributions

What You Can Do:

• Request audited financial statements from the first few years (for resale condos)
• Have your lawyer review the developer's budget statement critically
• Ask specifically what's NOT included in year one
• Get realistic projections for year two and three expenses
• Regardless of your findings, budgeting for your fees to increase by as much as 50% is a good practice. If your current fees of $500 a month go up to $750, can you still handle the monthly payments?

2. Check the Reserve Fund Status

The Problem: The report found that Reserve funds are consistently underfunded, leaving owners facing massive special assessments for major repairs.

The Reality:

• 69% of older condo boards surveyed didn't have adequate reserve funds
• Required increases ranged from 3% to 258%, averaging 50% over 1-10 years
• 29% of condo boards had to impose special assessments—additional payments beyond regular fees—within five years
• One building required over $15,000 per unit in special assessments for unexpected repairs

Why This Happens:

• Regulations only require reserve fund studies to look ahead 30 years
• Major expenses like boiler and window replacements (needed at 40-50 years) aren't initially budgeted for
• Developers typically budget only 10% of operating expenses for reserves, regardless of actual needs
• The burden shifts unfairly to future owners

What You Can Do:

• Request the most recent reserve fund study and have your lawyer review it
• Look at the funding percentage—is the reserve adequately funded?
• Check if major components (roof, elevators, HVAC, building envelope) are approaching end-of-life
• Ask when the last reserve fund study was done and when the next is scheduled
• Calculate how much the reserve fund contributions have increased over the past 5 years
• Be wary of buildings with low reserve balances relative to upcoming major expenses
• Learn more about what to watch for in older buildings

Pro Tip: A properly funded reserve should grow over time, not shrink. If the reserve fund balance is declining year over year, major increases or special assessments are likely coming.

3. Watch for Contract Red Flags

The Problem: Developers use non-standard contracts with complicated language that protects them, not you.

The Reality:

• 49% of new condo buyers in the survey reported their condo didn't meet expectations (square footage, parking, amenities)
• Contracts often give developers "sole discretion" to change:
  • Layout and size (square footage)
  • Balcony dimensions
  • Window locations and sizes
  • Number and location of elevators
  • Amenities and facilities
• Marketing materials explicitly state they're "not binding"
• 27% of buyers surveyed didn't get legal advice

What You Can Do:

• Always hire a real estate lawyer experienced in condo purchases
• Insist on square footage guarantees in your contract, not just marketing materials
• Question any clauses giving the developer broad discretion to make changes
• Understand your 10-day cooling-off period after receiving the disclosure statement
• Ask your lawyer to identify any unusual or particularly developer-friendly terms
• Review our complete guide to condo, co-op, and strata transactions

4. Verify Your Condo Manager's License

The Problem: Hundreds of unlicensed individuals and companies are managing condos.

The Reality:

• 316 unlicensed individuals and 156 unlicensed companies were providing condo management services
• These unlicensed managers were associated with 713 condo corporations (over 44,000 units)
• Unlicensed managers haven't completed required education, lack proper supervision, and aren't bound by the code of ethics

Why This Matters: Licensed managers must complete courses on condo law, building management, financial planning, and administration. Unlicensed managers lack this crucial knowledge and accountability.

What You Can Do:

• Ask if the building uses a property management company (and who they are using)
• Verify the manager's license through the Condominium Management Regulatory Authority of Ontario's public registry
• If the manager is unlicensed, this is a major red flag about the building's governance

5. Understand Condo Board Governance

The Problem: Many condo boards lack proper training and oversight.

The Reality:

• 17% of directors (about 6,420) hadn't completed mandatory training within the required six-month timeline
• 26% of directors who accessed online training didn't spend sufficient time to properly understand their obligations
• 1,083 directors were serving on multiple boards (some on over 30!), overseeing 19% of all Ontario condos

Why This Matters: Your board of directors makes crucial decisions about maintenance, repairs, budgets, and rules. Undertrained or overextended directors may not protect your interests effectively.

What You Can Do:

• Ask about board member training and experience
• Check how many units each director oversees (serving on multiple large boards is a warning sign)
• Review meeting minutes to assess board engagement
• Look for boards with diverse skill sets (financial, legal, building management)

6. Know Your Rights and Limitations

The Problem: Owners have limited recourse when problems arise.

The Reality:

• The Condominium Authority Tribunal can only hear disputes about records access (as of the report date)
• Other issues require private mediation, arbitration, or court proceedings—expensive and time-consuming
• Nearly half of owner complaints to the Management Regulatory Authority received limited action
• Complaints about leaks, floods, and repairs often remained unresolved for over 12 months
• Warranty claims against developers must be filed within just 30 days of receiving audited statements

What You Can Do:

• Document everything from day one
• Understand your condo corporation's dispute resolution process
• Join your condo board or attend AGMs to stay informed
• Act quickly on warranty issues—don't wait
• Consider whether the building has a history of disputes (check meeting minutes)

Red Flags to Watch For When Buying a Condo

When reviewing a status certificate with your lawyer, be especially alert to:

1. Financial Red Flags:
   • Declining reserve fund balances
   • Recent or upcoming special assessments
   • Significant year-over-year increases in condo fees (above inflation)
   • Outstanding loans or mortgages on common elements
   • Large accounts receivable (owners not paying fees)
2. Building Condition Red Flags:
   • Major repairs deferred or underfunded in the reserve study
   • Recent or ongoing legal action involving the building
   • Multiple pending warranty claims against the developer
   • High turnover of property managers
   • Incomplete or missing financial records
3. Governance Red Flags:
   • Board positions frequently vacant
   • Poor meeting attendance
   • Vague or missing meeting minutes
   • Frequent turnover in board membership
   • Unlicensed property management

For New Construction Condo Buyers

If you're buying pre-construction:

• Read everything carefully—all 100+ pages if necessary
• Get firm commitments on square footage, finishes, and amenities in your contract
• Understand what's specifically excluded from the developer's budget
• Ask for the preliminary reserve fund study
• Budget for 25-40% fee increases in years 2-5
• Set aside emergency funds for potential special assessments
• Consider the developer's track record on other buildings

For Resale Buyers

If you're buying a resale condo:

• Review at least 3-5 years of financial statements and budgets
• Get the complete reserve fund study, not just the summary
• Look at the trend in reserve fund contributions over time
• Check the age of major building components
• Ask about any completed or planned major projects
• Review the last few years of meeting minutes
• Talk to current owners about their experience if possible

Why Professional Legal Review Is Essential

A lawyer experienced in condo law can:

• Identify financial red flags you might miss
• Interpret reserve fund studies and their implications
• Spot unusual or problematic contract terms
• Calculate your true cost of ownership
• Advise on your legal rights and remedies
• Help you understand the building's governance structure
• Negotiate better terms with the seller
• Protect you from making a costly mistake

The cost of a legal review (typically $300-600) is minimal compared to the tens of thousands you could lose through special assessments, underwater reserve funds, or hidden defects.

The Bottom Line

Buying a condo is one of the biggest financial decisions you'll make. The Ontario Auditor General's report reveals that the current system doesn't adequately protect buyers. Issues with understated fees, underfunded reserves, and limited oversight mean you need to be your own advocate.

Don't skip the status certificate review. Don't waive conditions. Don't rely on marketing materials. And most importantly, don't proceed without a qualified real estate lawyer who specializes in condominium law.

At Deeded, we believe every homebuyer deserves to understand exactly what they're purchasing and we're happy to help with the legal review of your condo purchase. Simply contact us and we'll make the process easy. The complexities revealed in the Auditor General's report make professional guidance not just helpful, but essential.

Take the Next Step

Considering buying a condo? Here are resources that can help:

• The Complete Guide to Understanding Condo Status Certificates - Learn what to look for in this crucial document
• What You Need to Know Before Buying a Condo - Don't miss these critical legal considerations
• Special Assessments: What Condo Buyers Need to Know - Understanding unexpected costs
• Do Older Condos Always Have Large Special Assessments? - Separating myth from reality
• Contact Deeded - Connect with experienced real estate lawyers

Thinking about a condo purchase? Protect your investment with professional legal guidance. The peace of mind is worth far more than the cost.

This article is based on the Ontario Auditor General's December 2020 Value-for-Money Audit on Condominium Oversight in Ontario. While we've distilled the key findings relevant to condo buyers, we encourage reading the full report for complete details. This article is for informational purposes only and does not constitute legal advice.

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