Canada’s Most Widely Read Condominium Magazine
August 2009 • Vol.24 #5
Condos from
scratch
First Time Buyers Report Lessons in Real Estate Roles of the Manager PM#40063056
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Contents Focus: market trends
departments
20
Legal Protections against a Reneging Purchaser
22
Management Defining Roles for the Property Manager and Board
25
Retrofit Planning and Communicating Needs
8
First Time Homebuyers Report
10
Condos from Scratch Edited by Erin DeCoste
14
Lessons in Real Estate By Bob Aaron
28
Parking Space Solutions
17
The Future of Condos By Michael Mann
30
Smart Ideas
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editor's Letter
Publisher Steve McLinden Editor Amie Silverwood Editorial Intern Erin DeCoste Advertising Sales Paul Murphy, Sean Foley, Atif Malik Senior Designer Annette Carlucci
Slowing down
Designer Ian Clarke
Every week there’s a new story about the real
Contributing Writers Bob Aaron, Ranjeet Chugh, Erin DeCoste, Jonathan Fine, Richard Lyons, Michael Mann, Lindsay Meyer
estate market: sales are down, sales are up, people are shying away from luxury units, resales are on a roll, etc. Everyone has an opinion on the recession and whether we’re on our way out or still slipping deeper and deeper into it. Spring and summer have brought good news but do we have reason to be optimistic into the fall and winter seasons? That’s up for debate. In this issue, we’re looking at the condo market and what these ups and downs mean to our readers. One thing’s for certain, people are being more careful with their money and buyers aren’t feeling as much pressure to buy now. They want value and they’re less interested in the luxuries that were so important this time last year. The recession has made us all reevaluate our priorities and this is being reflected in the condo market. I’m reevaluating my priorities as a new baby forces me to slow down – something I’ve been learning throughout my pregnancy. Answers to emails may come more slowly but I am still interested in getting feedback, ideas and insights from readers and contributors. Though I may not make it to the office as often, I can still be reached by email. Amie Silverwood amies@mediaedge.ca
Production Manager Rachel Selbie
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market trends
First time home buyers report Royal LePage Real Estate Services recently
released
its 2009 First-Time Homebuyers Report. This annual report combines a national poll
of attitudes of recent or potential first-time homebuyers about getting into the property market, combined with an analysis of trends and activity in major real estate markets across Canada. A c c o r d i n g to t h e p o l l o f f i r s t - t i m e homebu yers, af ford abilit y is the most imp or t ant fac tor they c onsid er b efore purchasing their first proper t y. A mong those polled nationally, an overwhelming 7 2 p e r c e nt c i te d f a c to r s re l a t i n g to affordability as the key issue determining whether or not to purchase their first home. Replies from Ontario respondents mirrored the national numbers, with 70 per cent indicating af fordabilit y factors matter the most. Three issues related to affordability were cited by Ontarians as influential on their decision: lower housing prices, lower interest rates and the FirstT i m e H o m e b u ye r s Ta x C re d i t ( H B T C ) offered by the federal government. Almost one-third of Ontarians indicated that lower housing prices were a significant reason for them, and condo prices across the province bear this out. According to d ata from the sur vey, condo prices in many Ontario cities including Toronto have either decreased slightly in year-over-year comparisons or stayed flat. The marginal decline or stabilization of condo prices was welcomed by those eager to own an urban home at an accessible price point but a significant decrease in interest rates was also a big factor. Almost a quarter of respondents in Ontario stated that low interest rates were their top incentive to purchase their first home. Historically low mor tgage rates entice potential buyers with reduced borrowing costs, smaller monthly payments and the ability to qualify for larger loans. Recently created government incentives such as the HBTC and the Home Renovation Tax Credit (HRTC) are another group of
8 CONDOBUSINESS | www.condobusiness.ca
market trends
factors that affect affordabilit y. The HBTC enables qualified buyers to a nonrefundable tax credit (equivalent to $750 in 2009). Fifteen per cent of respondents in Ontario selected the HBTC as their top incentive for purchasing their first home. The HRTC offers a rebate of up to $1350 until February 2010 to those making improvements to their home. However, this government program was not that influential to condo buyers because popular amenities such as hardwood floors and granite countertops often come standard in newer condo units. As a result, only one per cent of Ontarians indicated that the HRTC was their top incentive. “When first-time buyers stepped out of the market in the fourth quarter of 2008, at the height of the global recession, their absence was profoundly felt,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services. “First-time homebuyers were back in full force this spring and with them the beginnings of a market recovery. While these consumers appreciate government incentives such as tax credits, greater RSP deduction limits and rebates on home renovations, it is markedly improved affordability that is proving to be the powerful drawing card.” The slowdown in the economy and a tougher job market also weighed on the minds of Ontario first-time buyers. Ten per cent of respondents cited job security as the most influential factor on their decision to purchase. Interestingly, condos are no longer simply a stepping stone to home ownership. In addition to the accessible price point offered by condos, buyers crave the lifestyle offered by urban communities. In Toronto, the downtown lifestyle is such a draw for condo owners that they are staying in their condos longer, now an average of three to five years, and with increasing regularity, young families are transitioning to larger condominiums rather than relocating to other types of lodgings. “In addition to af fordabilit y and government incentives, location is also a leading factor influencing condominium appeal. In Toronto, you can expect the trend for downtown urban living to b e signific ant. Lo c ation c annot b e underestimated when making decisions about where you want to live. First-time
buyers, like many other purchasers, want easy access to shopping, restaurants, jobs and transit, and condominium living offers all of these options and amenities,” said Trish Manning, broker and manager, Royal LePage Real Estate Services Ltd. The past year has seen some fluctuation in the value of real estate in Ontario, and Toronto saw the most significant changes. Nevertheless, the value of Toronto condos has rebounded resiliently. The sur vey showed areas popular with condo buyers, including South Etobicoke and the Waterfront, witness marked increases in condo values in Q2 compared to Q1. “Given the grim shape that Canada’s real estate market was in this past winter, the turnaround we have witnessed in the second quarter is really quite remarkable,” Phil Soper said. Condo appeal remained strong enough that, despite the state of the economy, some areas in Ontario witnessed yearover-year price appreciation. Nowhere was this more evident than in Oakville as condo values increased 6.4 per cent over
last year. The Ottawa region experienced a similar increase, with downtown condo units increasing in value by 6.2 per cent. All of Ottawa’s surrounding areas and suburbs also saw an increase in the cost of a standard condominium. “Since the majority of jobs are in Research and Development and Government, the city does not experience as many job losses helping keep the market buoyant. Ottawa is also the second least expensive large city in Canada which remains an affordable place to buy,” said Pierre De Varennes of Royal LePage Performance Realty in Ottawa. The London area saw prices of the standard condominium stabilize in the past year. There was a modest increase in condo values of 0.8 per cent from April to June 2008 to April to June 2009. First-time homebuyers have long been a driving force in the Ontario condo market. Increased affordability in Toronto and the GTA and strong markets in Oakville, Ottawa and London have condo board members and managers hopeful that the trend will continue. CB
August 2009 9
market trends
10 CONDOBUSINESS | www.condobusiness.ca
market trends
Condos from
scratch
By ERIN DECOSTE
Picture four blank, primed walls with no appliances, no cupboards or flooring, now imagine this is a newly
purchased condo. The condo is empty, meeting only the minimum of municipal regulations and requires the buyer to do all of the extras, including countertops, tiling and even installing a toilet. Welcome to the white box phenomenon.
August 2009 11
market trends
A white box is a unit sold as a shell and usually described as decorator-ready. The owner moves in to a condo without any of the trimmings and must hire an interior designer or even a contractor to complete the home. The trend has not yet reached Canada but is a common occurrence in the United States in cities like Las Vegas due to the troubled housing market and driven by the need for lower prices. But, with the new Harmonized Sales Tax in Ontario scheduled for July 1, 2010, it could quickly reach our home and native land. Upon adoption of the HST, new homes in Ontario will be taxed at a rate 2% on the first $400,000 of value and at 8% on the amount in excess of $400,000. A condo unit priced at $500,000 would carry taxes of $16,000 – or double the tax rate on a unit priced at $400,000. Alternatively, a stripped-down piece of real estate could appeal to many cashstrap p e d first- time bu yers and the adventurous alike. “The white box is designed to bring the condo down from $500,000 to $400,000,” says Bob Aaron a partner specializing in real estate law with the firm of Aaron & Aaron. “You can avoid the 8% tax.” B esi d es the t a x s av in g s , b u yer s everywhere are looking to improve their odds of buying on the cheap and creating their own individual space. The white
box enables buyers to not only control, but to customize. However, there is a cost to customization and most white box units require extra time to complete, with usually another three months at least added to the move in date. The DIY approach allows owners of a white box condo to stand out from their neighbours, but also to opt out of higher- end furnishings, like granite c o u n te r to p s , h a r d w o o d f l o o r s a n d stainless-steel appliances. There’s an overall trend of scaling back in terms of appliances, furnishings and other aspects of condominiums right now. The current economic climate has made developers and builders of condos rethink luxury and new condos are being built with affordability in mind. “For the industr y as a whole, sustainability and greening, these are trends that people have been talking about a long time. I think that something else is coming to the forefront and that issue is affordability and cost control,” says Michael Mann, director of Strategic Marketing at Tridel Builders Inc. “In order to provide the maximum value to the buyer they have to be conscious of cost. Some of the trends that I think you’ll see going forward is a reduction in the level of finish of the suite, or perhaps maybe a reduction in the overall amenities that are provided. What we’re going to see going forward
Legalities of renovating a condo Make sure that permission from the condo board is granted. The application should be in writing and the board has the right to deny permission.
Consider the time involved – most condos will have restrictions on the time of the day and the days of the week renovations can occur due to noise levels.
Check the Condominium Act for bylaws and rules governing renovations.
Make sure to look at the long term costs involved and consider that there may be future costs to restore the unit to its original state.
Remember that renovating can cause damage to a common element (wiring, plumbing or windows).
12 CONDOBUSINESS | www.condobusiness.ca
market trends
is kind of a scaling back in order to pass those savings on to the purchasers who are a little more sensitive.” This scaling back in luxury is important in today’s market and reflects an overall idea that it’s important to get the most for your money. With the new HST, buyers will want to not only save money, but to save it wisely. “We are reaching certain price points that are in certain areas shocking,” Mann says. “The development industry is seeing a lot more cost increases from the various governments in the form of land transfer tax and the new HST. Developers are trying to provide an affordable product for first-time buyers. The only way to keep the price affordable is to try to reduce what the buyer might not necessarily need. You’re not going to see these ornate, elaborate Vegas-style hotel grand lobbies
now. I think we’re going to have to be a little more cost conscious going forward.” Mann is optimistic that developers and builders will plan to lower costs through other measures besides resorting to selling empty units. “I’m not sure if we’re going to see it. Never say never, it’s a possibility, but I think we can do things to bring down the overall cost,” he says. “You can build a smaller more efficient space to bring costs down. So hopefully we don’t get to the point where it’s completely empty with a hose line for your toilet and that’s all you get.” The white box is great for buyers looking to create their own space while saving money, but it’s not for the faint of hear t. Buyers need to be aware that doing it yourself, or perhaps more accurately, hiring someone to do it for
you, comes with risks. They must make sure that the contracting is done within a city’s legal parameters, ensure that the contractor is legitimate and honest and stay within a budget. It’s still to be seen whether this phenomenon will take Canada by storm or cause barely a ripple in the burgeoning condo market. With consumers looking to cut costs and developers trying to remain current and marketable, the condo world may be rocked by the white box or it may not even make a dent. “I’ve talked to builders and some of them say that it’s never going to happen. And some of them have said, well it’s a distinct possibility,” says Aaron. “So the answer is it remains to be seen whether we’re going to be involved in the white box phenomena. It’s a question of whether that trend will come here.” CB
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market trends
Lessons in real estate By BOB Aaron
In the course of my practice as a
real estate lawyer in Toronto, I often review
condominium status certificates for purchaser clients. Usually, this is a fairly routine function, where the lawyer looks for arrears in common expense payments, underfunded reserve funds, litigation by or against the condominium corporation, special assessments and other items which could impact on the purchaser or her bank account.
Unfortunately, the contents of about four out of every ten status certificates I examine are at odds with the advertised re a l e s t a te l i s t i n g , t h e a g re e m e nt of purchase and sale, or the seller’s registered title. The areas where the certificates differ from the other documents fall under several headings.
Common expenses More than half of the status certificates I see show common expenses which don’t match the adver tised figures. This is caused by sellers who fail to advise their listing agents of the correct amounts, or by real estate agents who don’t bother to verify the numbers with property managers.
14 CONDOBUSINESS | www.condobusiness.ca
Often, I’ve seen agents copy the numbers from old listings, without bothering to update them. As well, when a real estate listing runs through the corporation’s year-end and the common expenses are increased, the listings are almost never updated with the new figures. When the discrepancy is revealed, there is often a tug-of-war as to which party will
market trends
absorb the difference. It may be just a few dollars a month, or occasionally as much as $50 or $100. Often the real estate agent winds up eating par t of the difference and sometimes the transaction will die bec ause neither par t y is willing to back down. The solution is for condominium owners to be educated about providing correct information to their listing agents and for listing agents to verify the numbers with property managers. Sadly, this does not always happen.
they thought they owned, and disposed of comes to listing which owners own which the contents. parking and locker units. Much aggravation My recommendation to condominium could be saved if property managers corporations and property managers is verified their parking and locker records that where the posted numbers differ every few years. from the deed numbers, both should be disclosed in the status certificate. It would Unit mixups: the ultimate headache certainly save a lot of grief. Every so often I come across buildings In some cases, the records of the where two or more owners are actually CARMA_CondoBusiness_01-19-2009_CS2--F.pdf 2/3/09 5:41:35 PM condominium are not accurate when it living in units they don’t own. T his
Special assessments The same thing happens with special assessments. In Ontario, the standard form Ontario Real Estate Association (ORE A ) condominium agreement of purchase and sale contains a warranty that there are no special assessments c o nte m p l ate d by t h e c o n d o miniu m corporation. U n f o r t u n a t e l y, w i t h t h e a g i n g condominium stock in Ontario, special assessments are becoming more commonplace. The problem with the OREA standard form condominium offer is that a unit owner may not know that a special assessment is under consideration by the board. When a special assessment is later revealed in the status certificate, and it turns out that it was under consideration even though it hadn’t been formally announced to the unit owners, the seller often winds up eating the cost – sometimes with the real estate agent, who should have checked at the time of the listing. Parking and locker mixups For some unexplained reasons, many Ontario condominiums have numbers posted on parking and locker units which differ from the numbers on the deed. For example, a level A parking space with a painted number 99 on the wall may be shown on the registered title as unit 53 level A. The same thing happens with lockers. I have heard of new owners who have had their cars towed from parking spots they do not own. I’ve also heard of new owners who have cut the lock off a locker August 2009 15
market trends
Several lessons emerge Sellers and listing agents should be careful to advertise the correct common expenses and to amend them during the listing period if a new budget is passed. Unit and level numbers can and do get mixed up. Posted numbers for parking and locker units don’t always match the deeds. Property managers should make sure their records are correct. When special assessments are being contemplated, they should be disclosed to owners at the earliest opportunity and
usually happens at the time of title transfer from the developer to the first owners, and through sloppiness, is not discovered for years. That almost happened on a large scale in Toronto back in 2005. The project was a snazzy new downtown Toronto twin-tower development with 416 residential units. Through some fluke in the preparation of the floor plans, all of the units on floors eight through 25 were one number off from the correct unit numbers. By my
sellers should disclose this to their listing agents. As well, listing agents should check this out before advertising the unit for sale. Deeded unit numbers should always be compared with the plans for the condominium or strata levels. They’re not always right. Agents or property managers should always show buyers the physical location of the parking and locker units in advance. Based on my experience, this is a rare occurrence. The result is confusion, or worse.
calculation, the errors affected 124 units. The purchasers of each of those units were about to get a registered deed to the unit next door. Soon after I discovered the error for my own clients, a superhuman effort by the developer’s lawyers and surveyors and the land registry officials, resulted in a change to the floor plans and unit numbers on the morning of closing. T he moral of the stor y: never purchase a condominium unit - new or
16 CONDOBUSINESS | www.condobusiness.ca
used - without cross-checking the unit numbers on the deeds with the floor or strata plans. A few dollars invested in the floor plans are cheap protection to avoid a disaster. CB Bob Aaron is a Toronto real estate lawyer and board member of the Tarion Warranty Corporation. He can be reached at bob@ aaron.ca, or (416) 364-9366. His weekly Toronto Star real estate columns are archived on his website at www.aaron.ca.
market trends
The future of condos The emergence of
the condominium has
forever
changed the landscape of the housing industry. Housing markets have gone through a dramatic change in the past decade. To put things into perspective, condos represented 25 per cent of the new housing market in the GTA in 2000. Seven years later, the condo market eclipsed the low-rise housing market and achieved sales representing 52 per cent of all new homes sold. One year later, high-rise new home sales increased their market share to 54.4 per cent. Going forward this trend will continue.
By michael mann
August 2009 17
market trends
The current pattern we observe in housing behaviour and the future growth of the condo market is the result of a vast demographic shift. The major influencers are the baby boomers and baby-boom echo generation who represent the largest demographic segments. Baby boomers are increasingly travelling and want to live carefree in order to embrace new experiences. Similarly, the echo generation desires a low maintenance way of life, putting off having a family in order to spend more time developing their careers. In the GTA alone there are more than one million singles, 400 thousand couples without children and an ever-increasing population of empty nesters. These demographic segments will continue to grow and they will want to live in urban cores that offer a vast array of diverse neighbourhood amenities such as restaurants, shopping, theatres and other services. Condos are not a fad. They attract a wide range of buyers, including young first-time buyers, young families, moveup professionals and move-down empty nesters of all ages and ethnic backgrounds.
The dominant housing trend of the future will be vertical communities. Affordability Buyers look for proximity to neighbourhood amenities. However, the closer you get, the more it will cost. The limited supply and high demand of low-rise housing in the city has propelled pricing beyond the means of many people. It is affordability that makes condominiums an increasingly appealing home ownership choice. Condo prices will continue to increase as prime development opportunities close to urban amenities decrease. New York, Hong Kong and countless European cities are prime examples of this trend. Contributing to rising prices are increases in costs such as materials, commodity prices, labour cost, development charges, increased government taxation and escalating land prices. Another factor is that salaries have not had a corresponding increase, which is stretching the affordability ratio. In the wake of the economic recession, affordability and cost control has come to the forefront. Builders are attempting to
reduce costs so that they can pass the savings along to the purchaser. The situation will force developers to take a number of measures to offset rising home prices and maintenance costs including scaling down building amenities such as swimming pools, concierge services and grand hotel-style lobbies, building more functional suites that use space more efficiently and deleting construction premiums associated with sustainable development. In the early days of condo development, condos were simple buildings, offering few amenities. Then there was a shift to hotel - st yle buildings with grand lobbies and amenities such as theatres, demo kitchens and bowling alleys. With affordability in mind, we may see some of these amenities disappear. Condo space efficiency In an effort to drive down the overall price, the designs of condos are getting more and more efficient. The result is an exceptionally functional and visually pleasing space. Lighting, appliances and multipurpose furniture are all more unobtrusive. “The linear kitchen is now a feature wall in our open concept plan where living room meets kitchen area,” says Stella Salvador, an interior designer with Tridel. “They feature built-in appliances that are behind cabinets with a finish that is durable and aesthetically pleasing.” Another example of this is to use sliding panels instead of conventional doors. The doors provide flexibility enabling the owner to create an open or closed concept. In some cities like New York or Hong Kong, condos are being built without kitchens. They function more like pods where owners simply “hang their hat” and spends the majority of time living outside the confines of their walls. The potential emergence of the three -bedroom design The City of Toronto is drafting an Official Plan Amendment to go before council in the fall proposing that all developments of 100 units or greater contain a minimum of 10 per cent three bedroom suites – which it is calling family units. Downtown Toronto is the area in consideration, specifically the area from Bathurst to Bayview and south of Dupont to the Gardner Expressway. If the market dictates, this suite type will evolve gradually as it did in Europe, New
18 CONDOBUSINESS | www.condobusiness.ca
market trends
Condos are not a fad. They attract a wide
range of buyers, including young first-time buyers, young families, move-up professionals and movedown empty nesters of all ethnic backgrounds. York and Hong Kong. However, the city wants this to happen right away. Historically there has been little demand. Less than one per cent of this product type currently exists and the readiness and acceptance of this product by the buyer remains uncertain. Sustainable development Green buildings are smar t, high performance buildings that integrate the latest energy and mechanical systems technologies, enhancing performance and translating directly into cost savings. Builders are slowly shifting to sustainable design in an effort to reduce overall carrying costs for the homebuyer. The next trend will be a mass movement of educated purchasers who understand and demand the benefits of sustainable green design. Consumers want to participate in making choices that will provide benefits to their local and global community. Even for those not motivated by a desire to lead a healthier lifestyle or environmental concerns, they will nonetheless make the same decisions because the outcome translates into substantial cost savings. These trends along with other factors such as future development hotspots, the evolution of exterior building design and many others will undoubtedly impact the market. As always the consumer will dictate the rate of change. What is certain is that condos will become the dominant housing form of the future. CB Michael Mann is the director of Strategic Marketing at Tridel Builders Inc. Michael has experience in land acquisition, project financing, development, sales and marketing. Michael received a Masters in Business Administration (M.B.A) from the Schulich School of Business at York University specializing in real estate development and finance.
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install, every customized Duro-Last roofing system is delivered to the job site with up to 85 percent of the membrane seaming already completed in our factory. So your roof goes on faster and delivers superior, watertight protection. Best of all, Duro-Last’s proven performance means your investment will continue to pay off for years to come, with significant energy savings, little to no maintenance, and the best warranties in the business.
The numbers all add up: Duro-Last is the best roofing system for your building.
To find out more, call us or visit www.duro-last.com/value and request our free brochure.
800-248-0280 • www.duro-last.com “Duro-Last” and “The World’s Best Roof” are registered marks owned by Duro-Last Roofing, Inc.
August 2009 19
legal
Protecting yourself from a purchaser who wants to walk away from the deal
A drastic change in
the real estate market can be a scary thing,
especially when you are counting on the closing of your sale to fund your purchase. It is not uncommon to see a chain reaction of transactions that do not close (followed of course, by a chain reaction of law suits). It is no excuse for not closing your purchase, to say that you were unable to do so because the Buyer of your home defaulted.
I sold a house a couple of days prior to the stock market crisis on October 19, 1987, commonly known as Black Monday. Scared and not knowing how to protect the closing funds in order to close my upcoming purchase, I took the cash out of my bank account and put it in a large safety deposit box. Whether this was an intelligent move or not is debateable, but it does demonstrate the anxiety that one has about being able to close one’s dream home. So what, if anything, can you do to protect yourself against the Buyer of your home attempting to walk away from the purchase transaction that you so
By Jonathan h. fine desperately need to close the purchase of your dream home? A brief primer on the law The first thing that you need to know is that contrary to the popular belief of some, a Buyer cannot just walk away from his or her deposit without further ramifications. The law is that a defaulting Buyer is liable to compensate you for any difference (loss) in the sale price (and associated costs as a result of the default) between
20 CONDOBUSINESS | www.condobusiness.ca
the sale price agreed to between the two of you, and the resale price that you are able to obtain. The deposit stands as a credit to such amount and in many cases, can be retained in any event even if the loss is less than the deposit. Therefore, if your loss is greater than the deposit, you can sue the Buyer for damages. If you win, and the Buyer has assets that you can seize, then you will be able to collect the difference. Make sure you have good title to your property The easiest way for a Buyer to resile from a transaction is because of a defect in
legal
title. The time and the place that you usually ensure that you have g o o d title is w hen yo u p u rc h a s e yo u r property, however, for various reasons, it is not uncommon to see defects in the title to a piece of property. T herefore, pull the reporting letter that you received from your law yer on the purchase and see if there are any qualifications as to title. There shouldn’t be, but sometimes, you as a Buyer might have been willing to accept something less than a perfect title. It is also possible that your lawyer made a mistake or failed to register some document, resulting in a title defect. The next thing you can do for peace of mind, is to have your present lawyer conduct a search of title to your property to see if there is anything there that would permit a Buyer to resile from the transaction. If there is something there, it is better for you to find it out early and cure it, rather than wait for a Buyer who may be waiting in the weeds to spring the title defect on you at a late date making it difficult if not impossible to cure in time for closing.
of provisions which you may not be able to comply with, a forfeiture of deposit provision in the event of default by the Buyer and more. Get a large deposit The reasoning behind a large obvious. The larger the deposit less likely a Buyer will be walk it and the more incentive the have to close the transaction.
deposit is at risk, the away from Buyer will
Have your lawyer keep in contact with the other side’s lawyer Request that your law yer advise you of any thing out of the ordinar y. The Buyer’s lawyer is not likely to reveal to your lawyer that the Buyer is thinking of resiling from the transaction but a sharp Seller’s lawyer who is paying attention may be able to discern danger signals from what the Buyer’s lawyer does or doesn’t do. So, if you are concerned
about the possibility of the Buyer resiling from the transaction, discuss it with your lawyer and ask that he/she keep an eye out for danger signals and report to you at the first sign of smoke. Arrange bridge/alternate financing Just in case worrying in the middle of the night is unpleasant and can be avoided, arrange alternate financing. If you really want to be safe, arrange standby bridge or alternate financing that is not dependant upon the sale of your home. Not everyone is in the fortunate position to be able to do this, however you may be one of the lucky ones who is able to arrange such financing from a financial institution, family or friends. CB Jonathan H. Fine is a lawyer with Fine & Deo. He can be contacted at 1.888. FINEDEO or through his website at www.finedeo.com.
Have your lawyer review your agreement of purchase and sale I find it strange that when agreeing to the most expensive purchase of most persons’ lives, they do not hire a lawyer to review the agreement of purchase and sale prior to signing it. There are many things that a lawyer can suggest to you to insert into the agreement of purchase and sale to prevent or to dissuade a Buyer from resiling from the transaction, or to alert you to problems which may permit a Buyer to resile if not cured. For example, a lawyer might suggest a larger deposit, the proper wording for conditions, an early requisition date (the date when title defects must be brought to the seller’s attention), the proper legal description of the property, the deletion August 2009 21
management
Confusion can crop up over roles of manager and condo board
A property manager’s day often begins at daybreak with a
flood of messages and continues at a frenetic pace until evening board meetings. But no two days are alike and each day poses a new challenge.
22 CONDOBUSINESS | www.condobusiness.ca
management
By ranjeet cHugh
M anagers must respond to email messages about dog poop, investigate missing keys and negotiate contracts for trash removal while maintaining a c o o l a n d c o l l e c te d m a n n e r t h a t instills confidence in residents and establishes credibilit y. A manager is also the individual who is responsible for inspecting the property to ensure that everything is in working order and contact repair workers should anything need to be fixed on the property. The proper t y manager should be able to take a concrete role with regard to fixing items and making frequent inspections to see that everything is working in a safe and appropriate manner. To sum it up, a manager helps the board to maintain the assets of the corporation on behalf of owners and governs the condominium under the Condo Act 1998. The ancient African proverb says it takes the whole village to raise a child. The same philosophy can be applied to managing a condominium. It’s all about team work at the end of the day. Management contracts typically spell out the manager’s role but other team members, known collectively as the board, are volunteer residents who, in some cases, can also take on roles in managing the property. Confusion often arises over the extent and limitations of a manager’s duties versus those of a board. Understanding what’s expected To b e t t e r u n d e r s t a n d a p r o p e r t y manager’s role, a clear understanding of the difference between the roles of a property manager and the board must be established. One of the most basic points which is often overlooked is that the management company works for the board. The management company makes no decision without the prior approval from majorit y of the board but the management company doesn’t need to go to the board with every little detail. Most of the items that can be
decided by the management company An offsite property manager trusts are established upfront. Usually this t h a t t h e b o a r d m e m b e r s w i l l b e in c lu d e s d e c i d in g o n t h e re c u r r in g his eyes and ears to repor t the ins annual maintenance items like window and - outs of what’s going on. Nightly washing, carpet cleaning and chiller trash violators or residents misusing a star t up and shut down. In a lot of common element are just a couple of cases, a spending limit without approval situations property managers must rely of the board clause is added into the on information from owners in order JermarkHRISE_Condo_Apr09.pdf 5/1/09 4:17:41 PM management contract. to resolve.
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August 2009 23
management
A lack of trust may lead to failure. Sometimes there are boards that do not trust the management company to handle a particular project and opt to do it on their own. A year later, the project fails miserably leaving the board open to liability under section 37. It is always better to have the management company or a professional organization oversee JermarkPIPE_Condo_Apr09.pdf 5/1/09 the project. At the end of the day, it’s
money well sp ent. A lso, m anag ers should never make legal or engineering recommendations. Leave that to the licensed professionals. Handling Conflicts Even af ter ever yone knows what ’s expected of them, it is still possible to run into conflict now and then. Conflicts can 4:00:12 PM arise between the board and manager
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24 CONDOBUSINESS | www.condobusiness.ca
over whose responsibility it is to carry out some task or handle some issue. Common types of conflicts include a lack of understanding on a certain issue. For example, board members discuss various issues in a board meeting and they give direction to management on what is to be done, but the manager understands it differently than the board meant it. In this case, it is a good idea to refer back to the minutes of the meeting but do not refrain from clarifying when in doubt. Another type of conflict is when expectations are not met or are not clearly outlined. To avoid confusion and disappointment for both board and management, the adoption of an annual plan is critical. This is an agreed upon itemization of projects and issues to be addressed in the year and should be accompanied by clear processes, which have been reviewed and accepted by the board. A failure to have agreed upon mutual expectations will lead to uncertainty and frustration on everyone’s part. The Condominium Act clearly states that the board of directors shall manage the affairs of the corporation. Each corporation has a number of tasks and in most cases these tasks are passed on to a professional management company. The manager’s job is to complete all the duties set out in the management contract. Focus on the fact that the board is ultimately responsible for decisions and the manager is responsible for executing according to the requirements of the board. The bottom line is that the manager in essence works for the board. The board, at the same time, should make sure it listens to the experiences of the manager and appropriately weighs the pros and cons of the manager’s recommendations. Often, the members of the board have outside jobs and their own areas of expertise. Managers should take advantage of this and take their opinions and recommendations. Hopefully, everyone involved in managing a condominium wants to do their jobs well and within its proper limitations for the sake of the residents. CB Ranjeet Chugh is a property manager at Enhanced Management Services Inc. He can be reached at ranjeet.chugh@ enhancedmanagement.ca.
retrofit profile
Extreme makeovers require diligent plans By richard lyons
Rejuvenating, re decor at i n g,
retrofitting or refurbishing
all deal with the
same underlying principal: rebirth. Not in the metaphysical sense like a phoenix from the ashes but from a more practical stand point. In today’s competitive condominium marketplace, especially in the Greater Toronto Area, older condominium buildings must rise from the ashes in order to be reborn! And the most cost effective means is through refurbishment. Refurbishing provides the building with a new identity and the residents with a new outlook.
August 2009 25
design profile retrofit
A s the old adage goes, ‘ There is more than one way to refurbish a condominium building.’ The first course of ac tion for the b o ard is to k now and understand the building, not the physical structure but the residents within its walls. This initial step is key and the potential lynch pin to the success of the project. If the board understands the residents, then they can decide whether to include them
in the process through either consultation or the committee structure. In many cases the committee structure is the perfect vehicle for resident participation. Furthermore, many corporations have multiple committees that need to be consulted, and should be consulted, as many hands make for light work. It is becoming more common for corporations to have a Conservation Committee that can make recommendations
26 CONDOBUSINESS | www.condobusiness.ca
on energy saving systems such as LED lighting or even the use of occupancy sensors in low traffic areas. An Amenities Committee may have input on what activities go on in the amenities spaces and how the design should complement those activities. These are two examples of how resident participation can enhance the refurbishment planning process. T h e b i g i s s u e h e re d e a l s w i t h communication through participation. As the residents participate, they take ownership of the process and the board is less likely to get resistance from the residents, especially during our current economic climate. Committees do not work for every corporation but should be considered. The next stage in the planning process is the development of the scope of work. If the board has access to a committee system then the board will need to review all the committee reports and compile the information accordingly. If the board is working alone, then the board will need to develop the scope of work. Good planning makes all the difference for a successful project. The board should have all the background planning completed before launching the project. The reserve fund is typically the impetus for a refurbishment project but other issues can also influence the timing. The latest federal budget provided condominium residents with a renovation tax credit which can play a part in the timing of a refurbishment project. Also the provincial government has influenced the process by announcing the harmonization of the Goods and Service Tax with the Provincial Sales Tax adding additional costs typically not budgeted for in the reserve fund report. These two issued aside, a board should not rush into a refurbishment project without careful planning. Any perceived financial gain by advancing the timing of the project to take advantage of these issues could be offset through poor planning and execution leaving residents extremely unhappy. Once a refurbishment project is completed, the result will last 12 to 15 years so the impact of poor planning can be felt far into the future. Good planning will start with a good understanding of the scope of work, not only for the immediate project but also for future projects. A single plan should be developed to deal with the transition
retrofit profile
The latest federal budget provided
condominium residents with a renovation tax credit, which can play a part in the timing of a refurbishment project. from project to project. The plan, in this case will be the design. A master design involving all the major areas of the building will act as the master plan. The plan can be staged over time reflecting how the reserve fund schedules each project. With a master design, the building will now have a homogeneous appearance even if different contractors do different projects. There is nothing worse than walking into a building where the design was piecemealed with the project and the designs of the various projects do not work together. To populate the plan, the board will need to itemize all the areas that should be included. For example: the entrance lobby, all amenity areas, parking levels, corridors and even the elevator cab interiors. Once the board has developed the overall scope then the board should analyze each area outlining all the issues and concerns regarding that area. An example with residential corridors might be how the carpet hasn’t performed to expectations and has even worn out in the elevator lobbies. Or the light level is too low and inconsistent and should be increased without increasing electricity consumption. The more the board analyzes each area, outlining its concerns, the easier it will be to develop a design. The opposite side to this coin, and just as important, is to make a list of the things the board doesn’t want to see. This list will save the corporation time and money as the designer will know what not to bring to the board. A thorough preplanning will save countless hours down the road and avoid costly mistakes. Once the preplanning is developed, then the board or Committee c a n b e g i n to i nte r v i ew d e s i g n e r s and design build firms and start the refurbishment process in earnest. CB August 2009 27
case study
Condo parking gets a double take When Rory Gibson
wanted to purchase a second spot in the
parking garage at his downtown Calgary condo, The Manhattan, he was informed nothing was available. How about a waiting list, a modicum of hope, where seeing your name rise By LINDSAY MEYER
Gibson loves the downtown condo living lifestyle: proximity to all that is of importance to a rising professional, the ease of being steps away from the office tower where he is employed and the abundance of choices with regards to night life, culture and recreation. But Gibson is an avid sports car aficionado and he needed to find a solution in order to facilitate storage of his second vehicle. Storing it off site and out of sight didn’t appeal to him, having to drive to a secondary
(however slowly) keeps the dream alive? No waiting list. No possibility of ever obtaining another space. location in order to have access to his car and having to pay ongoing storage fees were not options he would entertain. Up up and away When Gibson visited the Calgary Auto Show in 2008 he was intrigued by the automotive hoists he saw at one of the booths and was convinced he had found a viable solution to his problem. But prior to having an automotive hoist installed in the parking garage at The Manhattan, he did have some
work to do in getting the installation of a lift approved for his parking space. The board at his condominium was amenable to approving the lift units. It was the board’s opinion that offering innovative parking solutions was of prime importance for the daily convenience of tenants but also the positive effect with regards to resale value of units in the building. Two parking spots for the price of a life unit, (around three thousand dollars) was seen as proactive, even if more parking was available to purchase. The competitive nature of the condo market in Calgary requires proactive thinking in order to gain ground on the competition. Gibson had to measure the height of the ceiling in the garage to ensure adequate clearance. Due to the fact that automotive hoists require electricity, Mr. Gibson made sure The Manhattan was outfitted with the appropriate electrical capacity. Safety is a priority that cannot be ignored. Lifting cars is serious business and many points must be taken into consideration such as the grade of the steel, the quality of welds, integrity of locking positions and the gage of wire used for cables. A warranty that comes from a company that actually manufactures the product was also a very important part of the decision. The original hoist can also been modified so that the upper area can be used as lockable storage. “Having a second parking spot on site is great. Knowing my sports car is safe and accessible was pretty important. My neighbours have also purchased a lift, so they don’t have to take turns finding parking on the street.” CB For more information of parking lifts, call Lindsay Meyer, Lift King Condo Specialist at meyer.lindsay@shaw.ca.
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6
August 2009 29
SMART IDEAS
Lock it up Encourage residents to use their storage lockers effectively so they’re not tempted to store items in their parking spaces or other areas outside their units. Bicycles, boxes and motorcycles are among the belongings most likely to be found stashed conspicuously in underground parking areas.
A place for everything: check bike racks regularly for abandoned bicycles that take up precious space and find proper storage for the overflow of bicycles.
Think vertically: using the entire height of the locker allows for more room to move around.
Put shelves in: tall storage shelving units are easy to assemble and can hold heavy loads.
Light up the place: keep the locker area well-lit. Keep an extra flashlight handy for everyone’s use.
Keep it clean: maintain the storage space and to keep it free of excess dust and litter.
30 CONDOBUSINESS | www.condobusiness.ca