Handy Tips For Both Existing & Prospective Condo Owners in protecting themselves

Handy Tips For Both Existing & Prospective Condo Owners in protecting themselves

Buying a condominium is an excellent alternative to purchasing either a detached home in the suburbs or a townhouse. Condominiums (condos) are not just near to the main business and entertainment district of Toronto but are often more affordable in comparison to houses.

Condos in Toronto have at times, fetched the best prices seasonally and though sales have slowed down recently. They are also the most preferred residential units when buyers wish to live near downtown and entertainment cores.

However, whether you own a condo, or own it for the purpose of investment; it would be best for you to understand the risks associated with owning a condo.

Risks associated with owning a condo for the basis of personal use

If condo owners own it for personal use, then these are the things they need to keep in mind:

1. Unit improvements

Any improvements made to the condo (bathroom renovation, countertops added, etc.) may not be covered in case of an emergency as they are not covered by the condo corporation’s insurance policy. It is important to understand that they are usually obliged to repair the building to its original state.

Some condo corporations have policies that are unable to cover fixtures (like permanently installed lights, window covering, etc.) flooring, glass, ceilings or drywall. Hence, insurance providers should be aware of any improvements that you are responsible to insure.

2. Old standing units

Construction codes and regulations change with time, and older condo units are likely to have been built on the same standards as today. The leaky condo syndrome has affected many condos built on the western Canadian coast between the 80s and 2000s.

These condos weren’t made to withstand the amount of moisture and rain that area receives, and repairs caused owners to endure massive financial losses. Around 32000 units were affected. In terms of Toronto, it is still essential that owners double-check their condo and check if the building is rain screened and building envelope was recently inspected.

3. Risks associated with the building and condo corporation

Wear and tear in homes are natural. But, determining how the condo board deals with it can be different and revealing. Do they take care of problems as soon as they appear? When was the last time they fixed the roof and floors? If such is due, then the condo owner is in for an unexpected expense, given the condo’s reserve fund is going low.

What are the other large property investments or maintenance tasks the condo has moved forward with? These are the questions that should be asked as all the answers can significantly affect the risk of purchasing the condo.

Apart from worrying about the condo unit when buying it, risks related to the building and the condo corporation’s insurance are things to worry about which are often overlooked by first-time buyers.

4. Assessing a portion of the deductible portion of the property

Condo corporations assess a portion of the deductible property value to the owner of each unit whenever they make a claim for damage to the building or the unit. There are cases where they can assess the whole deductible to a single unit owner. Deductibles often range from $5000 to $75000 and even higher in some cases. If condo owners do not have the right home insurance coverage, then they are goners financially.

5. Liability coverage is inadequate

Condo owners need to have the best liability coverage package and must ensure their condo corporation has the proper coverage for the kinds of homes it contains too. They should always voice their concerns.

Why? Let us use the example of a soccer player who slips and falls on a set of wet tiles at the condo’s entrance that was not marked by a caution sign resulting in a serious injury. He is injured for a long time and eventually sues the condo corporation for injury caused by negligence.

What happens? The lawsuit is a multi-million dollar claim and when the condo corporation has no or inadequate liability insurance to cover all of it, assessments for this case are then made against each individual condo unit owner to pay the remaining part of the lawsuit.

If you are still unsure about all this, share a copy of the condo corporation’s insurance policy with your insurance provider. This will get you a good opinion on the additional coverage needed. In fact, never forget to ask your condo corporation to give a copy of their insurance policy as it’s your right.

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Risks associated with owning a Condo as a form of investment

Owning a condo as an investor has almost the same risks as owning it. It also relates well to the condo corporation’s insurance. But, when you invest in a condo unit that is either vacant or intended to be put on for rent, then you need to be aware of the additional risks mentioned below:

1. Units that are vacant

Vacant condo units pose a higher risk of getting vandalized and break-ins by intruders. In exceptional cases, owners might find squatters setting up camps in their vacant units. Ground floor units are often most vulnerable in this matter, but condo owners must often be extra vigilant and never underestimate the extent people will go to in order to avoid detection.

2. Risks with putting it on short term rental plan

Operating a condo on short-term rental (such as Airbnb) in the investment unit brings risks and rewards. One common issue faced is property getting stolen by travelers who leave after staying. This theft is not covered by regular condo insurance hence additional coverage is needed.

Some insurance providers do offer short-term rental insurance, but some providers may require the owners to have specific rental property insurance.

On an additional basis, condo owners need to consider the damages guests and travelers could do to other units in the condo building and how the ripple effect of these occurrences can affect your condo. For instance, if they damage the above floor’s unit in a rave dance party or cause damage to a neighboring unit due to excessive partying then both the guests and condo owners will be facing lawsuits.

If proper liability insurance is not present, then you as a condo owner will be stuck in a long & expensive legal process in defending yourself.

There is however good news in this regard. There are steps you can take to protect yourself and the condo. These days, everyone is online hence consider checking out the guests before agreeing to the BnB deal. They should have a history with the rental site and if they don’t then ask them in person or on the phone before signing any agreement.

Once the guests arrive, always check their ID and ensure they have no additional guests with themselves. Always check with the home insurance provider to ensure you have the right coverage for the condo when renting it out to others.

3. Risks putting it on a long-term rental plan

Long term rentals face almost the same risks as mentioned above, but the additional risk involved in the loss of rental income due to an insured loss.

For instance, if there is damage to the unit that makes it unlivable then the tenant won’t be held responsible for paying further rent. This loss of income can be avoided by purchasing a rental income loss protection through a good insurance policy.

Conclusion:

I am hopeful you have now understood the kind of risks that come in when purchasing a condo. Never ever hesitate to contact your insurance provider to see if your condo is covered or not. The condo corporation should be top-notch whenever you are buying a condo.

If you are buying a condo as an investment, from an ad placement of Toronto Condos for sale then you, as a buyer, must ensure that your condo is always protected whenever it is vacant. Be selective when giving it out on rent as it can save you time, money and prevent you from facing an unnecessary lawsuit.

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