Real Estate

Condo pitfalls avoided with pre-purchase legal advice

By Staff

Consulting a lawyer before a condo purchase can help buyers avoid nasty shocks after closing, Toronto condominium and commercial litigator Megan Mackey tells

While buyers are required to have legal representation on any real estate transaction, Mackey, a partner with Shibley Righton LLP, says it won’t always be enough to successfully navigate a condo purchase.

“The reason you should have all your documents reviewed by a condominium lawyer, rather than just a real estate lawyer, is that condominiums come with all sorts of limitations on what you can and can’t do,” she says. “That’s the nature of living in a condominium community; there have to be rules otherwise you will encounter problems.

“Each purchaser has their own list of requirements they're looking for in a condo, and a lawyer can help make sure that what you are buying meets your specific needs,” Mackey adds.

Some of the most commonly problematic restrictions involve smoking, pets and parking, she says, adding that first-time dwellers may not be aware that corporations can dictate rules on each of those issues to unit owners.

“Someone with an oversized vehicle will have to make sure it meets the parking restrictions of the condominium. For some people, smoking in their home is very important, but it’s not always allowed. It’s the same with pets,” she says. “It’s important that a condominium lawyer looks into it for you.”

When the building in question is brand new and purchased directly from the developer, Mackey says there is another set of issues buyers must be aware of.

“Developers can build income streams for themselves into the condominium when it’s set up, some of which could last for 25 years or indefinitely. While these costs are usually disclosed to purchasers, they will normally be more interested in models and countertops than reviewing the budget statement to see what costs the corporation and individual unit owners will have to pay going forward,” she says.

“A condominium lawyer will be able to review it carefully and identify anything out of the ordinary or outrageous.”

In addition, newly constructed buildings can include a number of price adjustments to pay for things like utility connections or other development fees, resulting in potentially substantial unexpected closing fees.

“These are in addition to land transfer taxes, appearing on statements of adjustments that purchasers are required to pay,” Mackey says.

The good news for buyers is that many of the adjustments are negotiable, but those who haven't consulted with an experienced condominium lawyer may not know to challenge them, she warns.

“If you retain a lawyer, they would hopefully recommend a cap on the development charges,” Mackey says.

In one 2016 case, she acted for a number of buyers improperly charged thousands of dollars at closing. They each paid around $2,500 for the installation of water meters to measure consumption in residential units that were never actually installed.

The unit owners launched lawsuits in small claims court that were heard together in a single trial, where the judge ruled in the residents’ favour.

“They got some of their money back, but it is not a cost-effective way of doing things. There were many purchasers who didn’t need to bring a lawsuit because their lawyer had negotiated a cap on development charges,” Mackey says.

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