The pre-purchase inspection
by Mᵉ Yves Papineau, PAPINEAU AVOCATS Inc.
Buyers normally do their homework before acquiring valuable goods. They will gather information before buying an audio system or a flat screen television set. They will read magazines or consult the internet before buying a new car. A mechanical inspection of a used car is performed automatically whenever they consider buying one.
A real estate transaction should follow the same logic. It is therefore surprising to find that some buyers complain of defects or wear or inadequate contingency fund after the purchase even tough they neither inspected the building nor checked on the syndicate of co-owners' management.
It is also surprising to find that some buyers think that the inspection cost of a good worth over 150 or 250 thousands dollars is too onerous while they will spend a lot of time and money for an "iPod" worth only 5 hundreds.
Moreover, the total cost resulting from necessary repairs or increase of the condo fees is likely to be well over the cost of an inspection.
So it is a good idea to check on the following points before buying a condo.
The object of the purchase.
When buying a condo, the buyer gets an appartment, parking and storage areas, access ways to them and all of the building's common portions. He is also buying a fraction of the lot, the siding, the roof, the windows, the foundations etc. Whenever these common portions need repairs, renovation or replacement, he must contribute in proportion to the relative value of his fraction.
Accordingly, when buying a condo, one must be aware that the purchase includes a fraction of all the common portions of the building and that it is necessary to have them inspected.
Who should perform the inspection?
People often confuse the qualifications of a lender evaluator with those of a building inspector. An evaluator is not trained to determine the state of a building, but he is an expert in assessing its value. His experience could help him notice a few defects but his role is different. A building inspector, whether technician, architect or engineer, is trained to determine the quality and state of a building. Therefore, he should be in charge of the inspection and have liability insurance to cover for eventual mistakes in his inspection.
The syndicate's financial balance.
By becoming a member of the syndicate of the co-owners, the buyer must contribute in proportion to the relative value of his fraction to the common expenses arising from the co-ownership. If the balance sheet of the syndicate shows a deficit, the buyer will have to pay for his share in it.
The contingency fund.
When buying a condo, one must consider that work will eventually have to be performed on the building and that the money must be available in the contingency fund. So, is the contingency fund large enough? It all depends on the state of the buiding and on its age.
The buyer should verify with the administrator if a building maintenance record is kept and if a report on the contingency fund adequacy was made.
Any building over ten years of age will require costly maintenance and renovation during the next ten years and the buyer will have to pay a contribution that could be high or low, depending on the state of the building and on the value of the contingency fund.
The purchase price should therefore never be established without taking the contingency fund's adequacy into account.
The certificate of location.
The question of the certificate of location in divided co-ownership is a funny one.
Contrary to the bungalow buyers, typical condo buyers rarely ask about the certificate of location for the building in which they want co-ownership and, when they do, most of them seem interested only by a certificate concerning their future appartment.
They just won't bother to ask for a certificate of location for the whole building, which could well have been erected on part of an adjacent lot. Only a certificate of location for the common parts and for the building allows for this kind of verification.
This protection is almost never asked for by condo buyers and even the standard offer to purchase form of the ACAIQ (Association des courtiers en immeuble du Québec) only asks for a cerificate for the private portions.
Why is the exact location of a building on its lot required for a 125 000$ house while it is omitted for a 300 000$ or 1 000 000$ condo?
Legislative amendments in the matter of the certificate of location are to be discussed soon. Like the pre-purchase inspection, a complete certificate of location must be available for the condo buyer.
The by-laws of the immovable.
As a condition in the offer to purchase, the buyer should obtain a copy of the by-laws. Are parabolic dish antennas or pets allowed? Check it out before buying.
The buyer must be aware that the cost of a condo includes both the acquisition price and the expenses to come. The fees for a certificate of location are charged to the buyer when the certificate reflects the actual state of the building. Otherwise, those fees are paid by the seller, so the buyer should take advantage of this protection.
If the cost for an inspection appears to be too high, the buyer should ask himself if he can afford a condo or any other kind of house. Whatever the age of a building, it may require costly work that will have to be paid for one day.
When buying a new condo, the best garantee is often the contractor's reputation.