Buying a Condo in Canada: Fees, Reserve Funds and the Red Flags to Catch Early

What you actually own when you buy a condo

In most provinces a condo (called a strata in British Columbia and a divided co-ownership in Quebec) splits the property into units, which individual owners hold, and common elements, which all owners share through the condo corporation. Hallways, lobbies, amenities, the building envelope and the mechanical systems are usually common elements. Some parts, like balconies or parking spots, can be exclusive-use common elements: you get to use them, but the corporation still controls them.

The governing documents spell out exactly where the line falls. The declaration sets out each unit's share of common expenses and who is responsible for maintaining what. The bylaws describe how the corporation is run. The rules cover day-to-day matters like amenity use, pets, noise and moving procedures. Read all three before you buy, because they determine which repairs you will pay for alone and which you will pay for through your fees.

The corporation is run by a board of directors elected by owners, and usually hires a property manager to handle the daily work. A well-run board with good records is one of the best things a condo can have. A board that is disorganized, in conflict with owners, or behind on maintenance is one of the most expensive problems you can buy into.

Condo fees: what they cover and why they rise

Condo fees (also called common expenses, maintenance fees or strata fees) pay for operating the building and for contributions to the reserve fund. Typical items include building insurance for the common elements, cleaning, snow removal, landscaping, security, management fees, utilities for common areas and sometimes utilities for units. What is included varies a lot from building to building, so compare what the fee covers, not just its size.

• Ask whether heat, water, hydro or hot water are included in the fee or billed separately to each unit.
• Check whether parking and storage lockers carry their own fees.
• Look at fee history over the past several years. Steady, moderate increases are normal. Flat fees for years followed by a sudden jump can signal that the board held fees artificially low.
• Remember that you pay for amenities whether or not you use them. A pool, gym and concierge you never touch still show up in your fee.

Lenders count condo fees when they assess how much you can borrow, so a high fee directly reduces what you qualify for. Factor the fee into your monthly budget the same way you factor in the mortgage payment and property taxes; our guide on how much house you can afford explains how lenders treat these costs.

Reserve funds and reserve fund studies

A reserve fund is money the corporation sets aside for major repairs and replacements of common elements: roofs, windows, balconies, elevators, boilers, garage membranes and the like. Part of every condo fee goes into it. A healthy reserve fund means the building can pay for big-ticket work when it comes due without asking owners for extra money.

To know how much to set aside, corporations commission reserve fund studies from qualified professionals. In Ontario, according to the Condominium Authority of Ontario (CAO), a corporation must complete a comprehensive study within its first year after registration, and updated studies are then done on an alternating basis at least every three years. In British Columbia the equivalent is a depreciation report; the province says strata corporations with five or more lots must obtain one on a five-year cycle, and since July 1, 2024 they can no longer vote each year to defer it. Other provinces have their own rules, so ask what applies where you are buying.

When you read a study, look past the current balance. Check the date of the study, the major items it expects to replace in the next five to ten years, and whether the board is following the recommended funding plan. A study is an estimate of future costs, not a guarantee, but a corporation that consistently contributes less than its own study recommends is setting owners up for a shortfall.

Special assessments: the bill nobody wants

If the corporation does not have enough money to cover a cost, it can levy a special assessment (called a special levy in British Columbia): a one-time charge to every owner, on top of regular fees, usually in proportion to each unit's share of common expenses. Special assessments can be modest or very large, and they are generally owed by whoever owns the unit when they are due.

Common triggers include under-funded reserves, major repairs that cost more than expected, insurance deductibles after a large claim, and lawsuits involving the corporation. A building can have an attractive fee precisely because it has been under-saving, which is why a low fee on its own is not good news.

Before you firm up a purchase, find out whether any special assessment has been approved or is being discussed. Board meeting minutes and the latest annual general meeting materials are often more revealing than the official documents, because they show what owners and directors are worried about before anything is voted on. Your agreement can also address who pays an assessment that is approved before closing — ask your lawyer or notary to look at this.

The status certificate or Form B: your best due-diligence tool

For a resale condo, the single most important document is the disclosure package the corporation prepares for buyers. In Ontario it is the status certificate. The CAO says a corporation can charge up to $100, including taxes, and must provide it within 10 days of receiving the request and payment; some buildings offer faster delivery for a rush fee. It typically includes the declaration, bylaws and rules, the current budget, the reserve fund status and study, and the unit's common expenses and any arrears.

In British Columbia the equivalent is the Form B information certificate. The province says the strata corporation must provide it within 7 days of a request, for a maximum of $35 plus up to 25 cents per page for copies. It discloses the strata fees, any amounts the owner owes, approved special levies, the contingency reserve fund balance, unfiled bylaw amendments, legal proceedings, outstanding work orders and a summary of insurance, and it comes with the rules, budget and most recent depreciation report.

Most buyers make their offer conditional on a satisfactory review of these documents and have a lawyer or notary read them. That review is where you learn about lawsuits, insurance problems, budget deficits and upcoming work. See our guide to conditional offers for how to word and time that condition.

Bylaws and rules that can change how you live

Bylaws and rules can be as important to your daily life as the unit itself. Read them with your actual plans in mind, not in the abstract.

• Pets: limits on number, size or type of animals.
• Renting: whether short-term rentals are prohibited, and any notice or registration requirements for longer leases.
• Renovations: approval requirements, permitted flooring (many buildings require sound-dampening underlay), and limits on work hours.
• Use of the unit: restrictions on running a business from home, smoking, barbecues on balconies or satellite dishes.
• Parking and storage: whether spots are owned, leased or assigned, and whether electric-vehicle charging is allowed.

Rules can change after you buy, because owners and boards can amend them. Look at recent meeting minutes for proposals in progress. If a specific rule is a deal-breaker for you — say, the right to rent out the unit later — make sure you understand both the current rule and how easily it could be changed.

Red flags to look for

None of these automatically means you should walk away, but each deserves a direct question and a clear answer before you commit.

• A reserve fund well below what the latest study recommends, or a study that is out of date.
• Repeated or recent special assessments, or a pending one.
• Lawsuits involving the corporation, especially over construction defects, since owners can end up sharing legal costs.
• Insurance trouble: a very high deductible on the building policy, difficulty renewing coverage, or a history of large water-damage claims.
• Many owners behind on fees, which strains the budget for everyone else.
• A high share of rented units if you plan to live there, or the reverse if you plan to rent, since it can affect the building's culture and some lenders' appetite.
• Board minutes full of unresolved complaints about leaks, elevator outages or management turnover.

Also inspect the unit itself. A condo inspection focuses on the unit's systems and finishes rather than the roof or foundation, but it can catch issues like failing windows, poor ventilation or plumbing leaks. Our guide to home inspections covers what to expect.

Insurance and closing costs specific to condos

The corporation insures the building and common elements, but that policy does not protect your belongings, the improvements you or previous owners made to the unit, your personal liability, or your share of the building policy's deductible if a claim starts in your unit. That is what condo unit owner insurance is for, and many lenders require it. Read the corporation's insurance summary and declaration to understand where the building's coverage stops; our guide to condo insurance goes into detail.

Closing costs are similar to any purchase — land transfer tax where it applies, legal fees, title insurance and adjustments — with a few condo twists. Your lawyer will adjust for prepaid condo fees, and you may pay for the status certificate or Form B. Our overview of closing costs, linked below, has the full list.

Finally, think about resale. Buildings with strong reserves, sensible rules and good maintenance records tend to be easier to sell. When you evaluate a condo, you are also evaluating how the next buyer's lawyer will read the same documents a few years from now.

Buying a pre-construction condo instead

If the condo has not been built yet, the process is different. There is no status certificate because the corporation does not exist yet; instead the developer provides a disclosure statement with the proposed declaration, bylaws and first-year budget. In Ontario, the CAO says buyers have a 10-day period to rescind the agreement after receiving the disclosure statement and the provincial condo buyers' guide.

First-year budgets for new buildings are estimates prepared by the developer, and fees often rise once the corporation starts paying real bills and funding its own reserve study. Pre-construction purchases also bring deposit schedules, occupancy fees and closing delays. Our guide to buying a new build or pre-construction home covers those risks in depth.

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