General Insurance Questions

Whose insurance will respond and who will pay the deductible?

If the unit or common elements are damaged, the condominium corporation’s insurance will respond and the Corporation will pay the deductible.
If damage to the common elements is a result of an act of negligence or omission on the part of the owner and contained within their unit, the condo corporation can charge back an amount up to an amount equivalent to the deductible. Owners may obtain insurance to cover the amount of the deductible through their individual insurance policy
If it is personal property or an improvement to the unit that is damaged, then a claim against the condo unit owner’s policy will be made and the unit’s owner will need to pay the deductible.

What is an insurance trustee?

The purpose of an insurance trustee is primarily to protect the interests of mortgage lenders as well as the owners. In the event of a large claim, the cheque is issued to the insurance trustee to ensure these funds are used solely for repairing the damage covered by the insurance policy.

Do I need to have a copy of the master policy?

You should supply a copy to your own insurance agent or broker so that they can evaluate what the Master policy covers and what you need to cover, otherwise you might be paying double for the same coverage of be under insured.


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Condominium Property Act

What is the Condominium Property Act?

The Condominium Property Act sets out the rules for operating and managing Condominiums in New Brunswick. The current Act, from 1969, will be replaced by a more modern Act on January 1, 2010. The new Act contains a framework created to protect consumers during the approval, purchase and sale process for Condominiums. It will be administered by the Director of Condominiums.

When will the new Condominium Property Act take effect?

The new Condominium Property Act c16.05 will come into effect on January 1, 2010. Until then, the Condominium Property Act c-16 (1969) will remain in effect.

Properties under construction before January 1, 2010, will be grandfathered under the old rules, providing that a building permit has been issued.

Why is the new Condominium Property Act c-16.05 being introduced?

The new Condominium Property Act will make Condominium development more in line with other Canadian jurisdictions. It will provide Condominium Corporation directors and officers with better tools for managing the Corporation, such as increased transparency, mandatory reserve fund accounts, better financial reporting, and the requirement for reserve fund studies (for larger corporations). Additionally, a 10-day cooling-off period will help potential buyers better evaluate the documents and rules governing the Condominium project they are about to become part of.


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What is a reserve fund and why does it exist?

A reserve fund is used to pay for the major repairs and replacement of common property, such as replacing the roof or painting the outside of the building. It is regulated that the monies from the reserve fund can only pay for major expenses and not for emergencies or unexpected expenses. A contingency fund should be set up for these purposes.

All owners must contribute appropriately to the reserve fund. Typically, a portion of each owner’s Condominium fees are directed into the reserve fund on a monthly basis, but some Corporations could choose to do it by special assessment on a quarterly or semi-annual basis. Condominium Corporations may not mortgage the common elements to raise money for major repairs and replacements; they are usually funded through reserve fund fees and special assessments only.

As of January 1, 2010, all Condominiums are required to have a reserve fund. However, the Act will allow Condominium Corporations existing before January 1, 2010, to have five years to build a reserve fund.

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What should I know before I buy a Condominium?

Before you buy a Condominium, you need to know how the complex is run and financed so you can make an informed decision. Understand what you will own.

There are several types of Condominium developments and, depending on the type you chose, it can make a difference in the type of information that might be available for review.

When you buy from a developer (called a Declarant under the Act), there are three possibilities:
The unit is part of a new building, also known as a new sale
The unit is part of a phased development project
The unit is part of a converted building, like an older apartment building or townhouse complex known as a conversion.
When you buy from an existing owner, things can be different. This is commonly known as a re-sale.
Depending on the options above, there are different documents that can be supplied to you and it is important you read them and/or get legal advice. Besides the questions common to the purchase of any property, here are some more questions that are also useful to ask when considering a Condominium:

What are the unit boundaries?
What will my maintenance obligations be?
Is the corporation self-managed or managed by a professional management company?
What are the Condominium fees and what do they cover?
How much money is in the reserve fund?
Are any major renovations or repairs expected in the next 10 years?
What are the rules regarding the allowable number of occupants, noise, pets, amenities, parking, etc., and how are these upheld?
Can I alter my unit’s appearance? If I want to change something, what procedure do I have to follow to get permission?
Can I decorate my deck, patio or my hallway door for the various holidays?
Can I have a clothesline or a satellite dish?
Does the Condominium Corporation have the insurance required by the Act to protect my investment in a unit?
What will my insurance obligations be?

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What should I know about buying from a developer?

If you are buying from a developer on a pre-sale contract, read the documents carefully and make sure you know what work still needs to be done on the Condominium development, and what the expected completion date is.

Before you buy, the developer must provide you with a copy of:

The agreement of sale and purchase which should include:
In the case of a new sale:
the Condominium plan or the proposed plan
the declaration or proposed declaration
the by-laws or proposed by-laws
In the case of a phased development:
a disclosure statement about how the project will take place
a statement that the Declarant is not required to continue the project after this phase
if applicable, an estimated timeline of the phases
if applicable, a statement describing the type of buildings and the number of proposed units
a statement of the proportions of the common interest and common expenses attributable to the units after each phase
a list of the facilities and services the owners will share
In the case of a conversion:
All the same documents as a new sale, but in addition:
if the building has 10 units or less, the agreement will have to contain a current building inspection report paid for by the Declarant
if the building has 11 units or more, the agreement will have to contain a reserve fund study paid for by the Declarant

After receiving all required documentation, the purchaser has a 10-day period to review the documents. If anything found in the documents affects the purchaser’s decision to buy the Condominium, the purchaser may make an objection to the vendor in writing within the 10-day period. If the vendor and purchaser can’t or won’t come to an agreement, the agreement shall be void, and the deposit shall be returned to the purchaser, without interest or liability by the vendor for any expenses or damages caused by the purchaser.

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Condominium Fees and Reserve Funds

What are Condominium fees and why do they exist?

Condominium fees are the fees that Condominium owners pay to cover their share of the common expenses associated with running a Condominium and maintaining the common property elements. Common expenses could include insurance premiums, snow removal, gardening, repairs and maintenance to common property, property management fees, contributions to the reserve fund and more.

Condominium fees are often paid monthly, and can be divided into several funds. The fees are typically set based on an estimated annual operating cost for the entire Condominium.

What is a reserve fund and why does it exist?

A reserve fund is used to pay for the major repairs and replacement of common property, such as replacing the roof or painting the outside of the building. It is regulated that the monies from the reserve fund can only pay for major expenses and not for emergencies or unexpected expenses. A contingency fund should be set up for these purposes.

All owners must contribute appropriately to the reserve fund. Typically, a portion of each owner’s Condominium fees are directed into the reserve fund on a monthly basis, but some Corporations could choose to do it by special assessment on a quarterly or semi-annual basis. Condominium Corporations may not mortgage the common elements to raise money for major repairs and replacements; they are usually funded through reserve fund fees and special assessments only.

As of January 1, 2010, all Condominiums are required to have a reserve fund. However, the Act will allow Condominium Corporations existing before January 1, 2010, to have five years to build a reserve fund.

How much money should be in the reserve fund?

For small complexes with 10 units or less, the reserve fund must be equal to the annual budget. For large Condominium Corporations with 11 units or more, a reserve fund must maintain at least the minimum amount recommended by the reserve fund study for anticipated major repairs and replacements.

What is a reserve fund study?

A reserve fund study is an analysis of anticipated major repairs and replacements that the Condominium complex will need to undergo in the next 30 years, along with an estimated budget that indicates the needed contributions.

The qualified person who completes the reserve fund study must prepare a report on the common property. It should include:

information on what may need to be repaired or replaced within the next 30 years an assessment of the current condition of the common property estimates for costs of repair or replacement a  recommendation on the amount of money that should be in the reserve fund.

Why are reserve fund studies important?

Reserve fund studies are important in helping the owners determine how they must budget for upcoming major expenses. It’s a kind of a road map that details an estimate of the future major expenses needed to maintain the common property. Should the reserve fund not have enough money to cover a major repair or replacement, the Condominium owners may be asked to pay an additional fee to cover this cost through a special assessment – and it could be substantial.



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Condominium by-laws?

Every Condominium must have a set of by-laws, which governs the Condominium units, the common space, as well as the rights and responsibilities of all involved. These by-laws can vary greatly from complex to complex. For example, some may not allow children or pets to live in the complex. In other complexes, if you want to renovate the inside of your unit, you may need permission from the Condominium Corporation.

Collectively, owners can change the by-laws to suit their particular complex. At least 60 per cent of the owners must vote in favour to allow changes in the by-laws. Any amendments have to be registered in the Land Title Office for it to take effect. All owners and everyone occupying the units must abide by the by-laws of their Condominium Corporation. In some special cases, by-laws may allow the Corporation to fine its owners if they don’t follow the rules.

As an owner of a unit, you have the right and obligation to vote on matters presented at any general meeting, as well as changes to common property, regulations and by-laws. At most general meetings, votes are conducted by a show of hands, but you may also vote by proxy.

If more than one person owns a unit, their vote counts only as one. Check your by-laws for clarification on who has the right to vote.

All the owners of the Condominium units are the members of the Condominium Corporation.

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Condominiums and their Ownership

What is a Condominium?

A Condominium is a form of home ownership in which individual units of a larger complex are owned, not rented. Condominium owners legally agree to share ownership and maintenance of the shared property, while individually owning their own units. These unit styles are often townhouses, apartment-style units and cottages, but can also be commercial spaces, warehouses, a combination of residential and commercial units and, with the new legislation, could even be the land itself.

 What do I own when I own a Condominium?

When you own a Condominium, you individually own your unit and you share ownership of a percentage of common property with the other unit owners. Typically, your unit consists of the space within the finished walls of your living space. Unlike an apartment, this means that you own the kitchen cabinets, light fixtures, all the inside partition walls and even the flooring.

The common area that everyone shares or the ‘common elements’ can include halls, elevators, pools, septic systems, land, exterior walls and general structures like the windows, roofs, outside doors and more.

You may also have some ‘exclusive use’ rights over the common elements which are outside of your unit. This is not private ownership; rather it gives you the right to use it exclusively. These could include balconies, parking spaces, storage lockers, driveways and lawns.


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Condominium Insurance

Condominium Insurance 

Condominium insurance is a unique kind of insurance that integrates the interests of a condominium association with the interests of the individual unit owners. Even though each unit owner has a proportional interest in the Association, unit owners do have distinct and separate interests of their own.

The structure of the insurance policy is important, and this structure is normally defined in the Master Deed. One of the most important initial details is where association vs. unit ownership begins and ends… because insurance usually follows ownership.  Ownership is defined in the Master Deed. (When buying a condo unit, always get a copy of the Master Deed, as well as association by-laws).

All-in

The condominium structure commonly known as "All-in" includes everything right to the interior coat of paint inside the condominium units.  This “All-in” approach typically will include additions or alterations that a unit owner makes, such as adding new cabinets, alarm system, chandelier, and so forth, provided the unit owner alerts the association to these additional values. The association is then responsible for providing insurance for everything that is permanently attached within the condominium structure. A simple way of visualizing this concept is to imagine turning the building upside down and shaking it; everything that falls out, such as furniture and other personal property, is the responsibility of the unit owner. Everything else that stays attached to the structure is insured by the association policy. 

Bare walls 

The “bare walls” approach means the bare walls of the building, and leaves a greater responsibility on individual unit owners to insure their owned portion of the “structure”, building, or “real property”. In the Master Deed, the “bare walls” approach uses wording such as “on the plane of the interior studs”, or “the plane of the lower side of the roof rafters”, or ”the top surface of the sub-flooring”.  All these means is that the unit owner owns all the drywall, wallpaper, paint, flooring, etc. and is therefore responsible for insuring these items personally.   Even bathtubs, toilets, sinks, kitchen cabinets and counter-tops would not be covered.  Remember, insurance usually follows ownership.  The condominium association insures only the shell structure plus common mechanicals such as heating systems, common plumbing, and common electrical; the rest is the unit owner’s responsibility.

Master deeds aren't always written on a 100% "All-in" vs 100% "Bare-walls" basis. Often there are shades of gray. Some master deeds with an All-in basis exclude betterments & improvements (e.g., upgraded lighting fixtures or cabinetry would not be covered).

Biggest Possible Problems where the association policy intersects with personal policies:

The biggest condominium insurance problems occur when there is a master deed and insurance program that calls for "bare walls" insurance, but unit owners do not know that it is their responsibility to ensure their portion of the building individually. When this happens and there is damage to interior walls, such as water damage from storms or plumbing problems in upper floors, there is no insurance in either policy for the interior walls. Depending upon the size and build within individual units, this can be significant value that unit owners self-insure by default, and without even knowing.

The second big problem can occur if a condominium association insures its building based on a “bare walls” replacement estimate, but the deed calls for “All-in” coverage; the result is a severely under insured property.  Valuations for “bare walls” condominium buildings typically run 30 to 40% less than valuations for similar sized all in policies because of the cost of finish work and interior walls. Imagine if you were handed the keys to your newly rebuilt unit, only to find rough plywood floors, studs for walls, and only joists for a ceiling. Lesson: review your master deed for ownership specifics. (Or work with a broker like Gordon who understands these things.)
  
The management of a condominium association can directly affect the cost of insurance, as attention to general conditions and safety concerns affects potential losses.  Because every association is managed uniquely, and because attention to these details does affect losses over the long run, insurance underwriters pay close attention to loss history with condominiums.  There is also the natural tendency for unit owners to prefer to have an association assume condominium losses, rather than file their own claims.  So, even though insurance generally follows ownership, it is understandable that there is pressure to have associations assume losses where possible. However, this is a shortsighted strategy for the association. 
  
Because of these issues, we usually recommend associations use high deductibles, and self-insure smaller losses to avoid these losses from affecting insurance claims experience. When associations have more skin in the game, attention to loss prevention is heightened, lowering the long term cost of risk.  With condo associations greater than four units, insurance companies usually will want to review condominium association financials to ensure the ability to pay for these smaller claims.  
  
Even when claims experience is good, insurance company initial inspection is rigorous. Talk to us about conditions honestly.  The most attractive pricing is reserved for the best-maintained (perfect) places. 
  
See our other blogs and whiteboard videos for more on how individual unit owners can address their interests as they may deviate from association interests and association management’s lack of understanding of some of these nuances.

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What Does Condo Insurance Cover?

What Does Condo Insurance Cover?

When you own a condominium, you are responsible for covering any and all damages within your unit, often including interior walls, flooring and ceilings. A condo insurance policy will also provide coverage for your personal property. If you should incur losses due to theft or experience property damage caused by such things as fire, water damage or tornado, you may be able to receive compensation through your condo insurance.

Your condo insurance will also cover you against liability claims. If a guest is injured while in your home and you are held liable, your condo insurance can cover some portion of the bodily injury claim, depending on your liability limit. If you are sued, most policies will also provide coverage for court costs and legal fees. Be sure to check the terms of your policy for full coverage details.

When shopping for a condo insurance policy, be sure to carefully review your needs, and inventory your personal belongings to understand their value if lost or damaged. Find out from your insurance company the specifics of your coverage and what exclusions apply to your policy.

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6 Ways to Make Your For-Sale Home Move-In Ready

6 Ways to Make Your For-Sale Home Move-In Ready

When to think like a buyer? The moment you even begin to think of selling.
Ever heard the phrase “walk a mile in someone else’s shoes?” When it comes to selling your home and boosting curb appeal, you need to walk every last inch of your home in the buyer’s shoes, from the front curb to the back fence. The moment you begin thinking of selling your home is the time to start thinking like a buyer.

Why?

Thinking like a buyer will help make your home move-in ready for just the right buyer (or maybe even a bevy of bidding buyers). The less work for the buyer, the shorter the time between the viewing and the closing table.

Here are seven ways to make your home move-in ready:

1. Host a prelisting party

Invite your trusted friends for a floor-to-ceiling review. In each room of the home, ask them if they would make any changes, or if they see any red flags from a buyer’s perspective.

This will give you an extra set of non-real-estate eyes on your home to help you create a solid list of potential improvements.

2. Consult with a great agent

Now that you have your friends’ opinions, run them by your agent. Determine which problems to address before listing and which fixes are of no benefit financially. If you’re looking for an agent, try this new tool from Trulia; it’ll give you a free estimate of your home’s value and connect you with an agent who can help you sell it.

3. Declutter

Closets get full, extra pieces of furniture get crammed into rooms, and bookshelves overflow with odds and ends. Allow the potential buyers to see your home and not just your stuff. Every closet in your home should show off the entirety of the storage space. Rooms should scream “possibilities” instead of “I can’t fit one more thing in here.”

Consider renting a portable storage unit that can be delivered to your home. Fill it with anything you don’t need at the moment and have it delivered to your new dream home when the time comes. In the meantime, you’ll be making room for someone else’s dreams.

4. Clean out the garage

Potential buyers want to know that their cars can fit into the garage. While it might seem harsh (and unrealistic since everyone you know uses the garage for storage), no one wants to see the garage filled with bike parts, boxes, and haphazard clutter.

Move the clutter to the portable storage unit and make some room for folks to imagine parking their dream car (or their own clutter) in the space.

5. Think neutral

It’s hard for potential buyers to envision themselves in a home that has you written all over it. Consider replacing bright or bold-colored walls, specialty wallpaper, or mural trim with neutrals.

A simple beige satin wall paint with semigloss white or off-white trim can do wonders for giving potential buyers the blank-canvas feeling. You want future owners to dream of their own personal touches — not be scared away by yours.

6. Make those hardwood floors spiffy

Send the kids and the dog off to the park for the day and get those floors gleaming. Wash all surfaces with mild, soapy water first (avoid Murphy’s Oil Soap — it leaves a residue). Next, use a hardwood floor polish like Bona or a product like Rejuvenate to bring the beauty back —all for under $40–$50 for the average-sized home. Use the recommended cleaning product for each flooring type to prevent buildup and to keep them gleaming through your whole listing.

It’s a deal killer if the perfect buyer thinks they have to refinish a few thousand square feet of hardwood. Help them see hope, not dollar signs.


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Are You Cut Out for a Condo?

Before you take the leap, consider the pros and cons of living in a condominium.
There’s a point where you can just sense it, you can almost feel it in your bones. It’s time to put down some roots — and a down payment too. You’re ready to take the plunge and graduate from crazy landlords and leases to legit property owner, but what kind of property?

You’ve got choices. Do you want that traditional house with a picket fence? Or do you want to commit to a condo? Decisions, decisions.

There’s a lot to consider before signing on the dotted line, so how do you know which one is for you?

Pro: The condo is all yours, yet you don’t have to fix everything

With a condominium, you’ve got the equity of a property owner and the benefit of calling someone else when (some) stuff falls apart. Score! Of course, you pay maintenance fees for this glorious service, but why not?

“The condo association takes care of shoveling, snowplowing, landscaping, roofs, painting the exterior, paving, and more — all of those things that can drain your budget and your time on a house,” says Joe Houlihan, managing partner of Houlihan & O’Malley Real Estate in Bronxville, NY.

Con: You must abide by the homeowners association’s rules

Meet your new circle of friends: the infamous H-O-A. They’re not necessarily a bad group; it just happens to be one that’ll determine the quality of your lifestyle in your condo. They’ll also hit you up for money.

“Let’s say the HOA chooses to change the landscaping or the color of your building to purple — then that’s the color it will be, and you will be required to pay for any assessments attached to any of these changes,” says home improvement consultant Heidi Baker. “For some, this lack of control can be quite freeing.”

But for others, it can be annoying. If you need to be in control of everything in your space, a condo is definitely not for you. Plus, when you have to listen to the board, or participate in its decision-making process, your HOA can become a second job.

Pro: Condos often have cool stuff to do — and a community

When I lived in the South, I often rented apartments in complexes with pools, tennis courts — the works. And that’s actually standard for condo living, which can foster a sense of togetherness.

“In a condo, you’re part of a community immediately,” says Kuba Jewgieniew, founder and CEO of Realty ONE Group. “Condos offer many perks such as pools, gyms, and events that bring residents together, which can be beneficial to a single person or young family.”

Con: Privacy? What privacy?

Unfortunately, condominiums still share walls with neighbors, along with parking and other common quarters.

You may even have a policy about having guests overnight and for how long (just as with a lease) or whether you can decorate your door during holidays. That’s something most house owners don’t have to deal with.

Of course, every complex is different, but Philadelphia-based Realtor Denise Baron of Berkshire Hathaway HomeServices Fox & Roach says you can always opt for a more intimate condo building — for a price.

“The question to ask is: How do you feel about community living in a large building with 100 apartments or so?” she says. “Or do you want a boutique small condo building with four or six units? Smaller buildings tend to have high fees, but they are more private.”

Pro: Condos have elevators

This isn’t one I was expecting. But, hey, the real estate experts have spoken. A lot of condo buildings have elevators and, well, houses just don’t — unless you’ve got a supercool house.

Hasmik Petrosian, a Toronto-based consultant, lived in a condo before buying a house with stairs and soon realized it was a major frustration.

“My experience with the stairs has given [me] newfound respect to elevators and the fact that condo living is virtually stair-free living,” he says.

Con: Condos don’t have yards you can make your own

Ever planted a garden, only to have it dug up by your kids and/or dog?

Well, you most likely won’t get that with a condo, which will dictate what you can and cannot do to your precious outdoor areas. And that’s one of the big differences between a home and a condo that prospective buyers need to consider, says Joe Houlihan.

“With a house, you have free reign to do what you like to the exterior and your yard, which is usually not the case with condos.”

Here are the pluses and minuses you need to weigh before handing over a big down payment. Still unsure? Talk to condo-living friends (or better yet visit them) and see if they can shed more light on the good and the bad of the condo lifestyle.

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Condo Insurance

Condos are a great alternative to renting or owning a single-family home, but they also have their own unique needs when it comes to insurance. Most condominium associations carry insurance for you. So you’re covered, right? Not necessarily. Condo association insurance typically only covers the building, any commonly owned property, and liability insurance for the association. That still leaves all your possessions up to you to insure.

Not all condo insurance policies are the same; however, so you want to make sure they contain some key points that will help you protect yourself financially. Check out some of the condominium coverages we offer at Pekin Insurance, including our enhanced coverages which are available with the purchase of the “Deluxe” endorsement.

• The Structure of Your Condo—In many cases, this coverage is offered through the association. But if it isn’t, you will want to make sure it is included to protect your investment. This part of your policy pays to repair or rebuild your condo if it is damaged or destroyed by fire, tornado, hail, lightning, or other disaster listed in your policy.
• Personal Belongings—Your furniture, clothes, and other personal items are covered if they are stolen or destroyed by fire, tornado, or other insured disaster. This also includes off-premises coverage, meaning under most circumstances, your belongings are covered anywhere in the world. We strongly recommend you also keep a home inventory.
• Additional Living Expense—If you can’t live in your home due to damage from a fire, storm, or other insured disaster, this will pay the costs of living away from home. It covers hotel bills, restaurant meals, and other living expenses incurred while your home is being rebuilt.
• Liability Protection—Liability covers you against lawsuits for bodily injury or property damage that you or resident family members are legally liable for. It also pays for damage caused by your pets. This coverage also protects you anywhere in the world.
• Medical Payments—If a friend or neighbor is injured in your condo, he or she can simply submit medical bills to Pekin Insurance under the no-fault Medical coverage. This ensures expenses are paid without a liability claim being filed against you.
• Deluxe Endorsement—For the most comprehensive coverage, you will want to choose the Deluxe endorsement package which includes: 1) replacement cost on contents, 2) equipment breakdown coverage [accidental breakdown of air conditioner, water heater, furnace, etc.], 3) $15,000 identity fraud expense coverage, 4) $1,000 refrigerated property coverage, 5) tree, shrub, and plant debris removal from storms, 6) personal injury liability coverage, 7) water back-up coverage, 8) up to 125% of replacement cost for dwelling, 9) lock and garage door transmitter coverage if keys or transmitters are lost or stolen.
• Additional endorsements—Special coverages are also available for canine/feline protection and water and wastewater line coverage should you need them.

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What is the difference between a Condo and a rental apartment?

The difference between the two lies primarily within the ownership structure. A condo complex has units that can be purchased and owned individually. In rental apartment buildings, the owner of the building maintains the ownership of the rental units. Condos tend to be built to a higher quality standard than apartment buildings, because condos are not only a living space, but also a potential investment for the buyer. Renters tend to be less concerned about maintaining common areas. Renters usually have no long-term stake in rental apartments.

The condo unit is usually an apartment-like unit in a medium or high-rise building. Those buildings have elevators, whereas, condo townhouses are usually built on street level, and without elevators.

From their physical appearance, condo townhouses may resemble freehold traditional properties. However, they have common foundation connections to qualify for condo status. Therefore, their outside upkeep and maintenance is mandated by monthly maintenance fees, just like the condos in high-rise buildings.

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What You Need To Know About Your Condo Policy & HOA Insurance

HOA Insurance Vs. Condo Insurance

The condo lifestyle is all about sharing – sharing the fitness center, pool, elevators, garage, and insurance responsibilities. As a condominium owner, it is important that you know where the HOA’s insurance is limited and leaves you responsible. Gathered are a few essential HOA insurance questions to ask so that you can properly insure your new condo:

It is important that you ask the HOA what kind of condo master policy they have. The type of policy used will tell you what coverage they have and where coverage is limited.
Additionally, you will want to know how the HOA insurance covers liability. Since their policy will likely only cover liability concerns that occur within the shared areas of the complex, you will need your own liability insurance.
Does your HOA’s insurance cover renovations within your unit? HOA insurance policies vary, but they may cover any home improvement projects that you complete to your condo.
It is important for you to find out if you will need to obtain loss assessment coverage if the HOA insurance limits do not suffice.
Most importantly, ask if the HOA regulates your personal condo insurance policy. Knowing the answer to this question will allow you to make more informed decisions.

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Six Tips To Remember When Buying Your First Condo In The Philippines

Here are six things you must remember when buying your first condo in the Philippines.

Your broker is not your friend.  Unless you and your broker go way back (like childhood friends who grew up together), remember that brokers earn their keep by getting a commission out of your purchase.  That special attention you are now getting will exponentially decrease to near zero the moment you sign your contract to sell. Make sure that you have all the information you want (and need) from your broker before signing.  Once you sign it, your broker will move on to the next buyer.

Understand the payment scheme.  Most developers offer various types of payment schemes for installment buyers.  In choosing an installment plan, the payment scheme should match the flow of your income.  Most developers will require you to fully pay a condo before you are allowed to occupy.

A payment scheme with low flat monthly amortizations typically means that you will be left with a huge balloon payment at the end of the installment term. Be wary of built-in balloon payments in your installment plan.  Typically, you will need to make a payment (in addition to your monthly installments) at the end of each calendar year.

Before signing your contract to sell, ask your broker to breakdown your installment scheme and to give you a list of the amounts that you should pay every month.

There are other costs.  Owning a condo means that you will become a bona fide owner of real property.  Unfortunately, the costs do not stop upon full payment of the purchase price.

Your contract will normally state that you will shoulder the cost of taxes and of registering the title to your condo in your name.  This should amount to no more than an additional 4% of the purchase price.

Condominium buildings will also charge monthly or annual association dues for the maintenance of the building.  Costs will vary depending on the type of services and amenities available to residents, however, the broker should be able to provide you with a ball park figure.

Owning real property also means that you will need to pay for insurance and real property taxes annually.

There are rules. Your condo will be governed by a deed of restrictions.  The restrictions will dictate what you can and cannot do when you move in to your condo.  Ask for a copy of the master deed and restrictions of the project and read through it.  If you are a pet lover, you should know if the building will restrict or even prohibit pet ownership.  Some condominium buildings prohibit the use of LPG. If you plan on renting out the place, you need to know if the deed of restrictions will require you to course the leasing of your condo through an appointed exclusive lessor.

Location is key.  You should verify the location of your building and your condo before signing a contract.   Ask your broker to bring you on-site so you know the exact location of the building. Go there during rush hour traffic.  Chances are, the estimated travel time in the brochure you have seen will not take into account heavy traffic. Remember that you will need to travel during rush hour  and travel time to and from your condo should be an important consideration. If you are already looking at a specific development, pass by the location during heavy rains and check if flooding is an issue.

Apart from the location of the building, you should also choose the location of your condo within the building wisely.  If you work a night and need to sleep through the day, pick a unit on the upper floors so you can isolate yourself from street noise.  Units which are near the elevator or the garbage chute are cheaper for a reason – elevators opening and garbage plummeting down the chute make a lot of noise.

Always read everything. Yes, including the fine print. This is the most important rule of the lot. Good luck on your purchase!

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The Risks of Pre-selling Condo in the Philippines

A pre-sale contract is full of terms like “more or less” and “subject to change without prior notice”. The primary risk with pre-selling condo is that the finished unit may not be what you have in mind. There can be material changes in unit sizes, floor plan, finishing, features, or amenities about which you may not be notified. You might end up paying for a unit that falls below your expectations.

Another risk is the delay in completion and turnover as the developer may not deliver on time. Pre-sale contracts have delay clauses that allow the developer to be late for up to a year or more. The bigger risk, however, is that you may not get a refund for your deposit in case the pre-selling project does not push through or the developer goes bankrupt.

OFWs who plan to buy pre-selling condos from abroad run the biggest risk. Many have lost their deposits and payments through corrupt representatives or agents who take advantage of their absence and use the complicated paperwork to collect “fees” from them. One sure way to lessen the risk of being duped is to research. Read our ultimate guide on buying properties in the Philippines from abroad.

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Benefits of Pre-selling Condo in the Philippines

Cheaper prices, flexible payment schemes, promising investment
According to the Global Property Guide, with the Philippine mortgage market relatively underdeveloped, “most of the houses are sold for cash or pre-sold”. In the condo market, it’s a toss between ready-for-occupancy (RFO) units and pre-selling ones.

Many buyers go for the pre-selling option, due largely to its much lower introductory price, which can be 30% cheaper than a finished unit. On top of that, developers throw in a 10%-15% discount or offer flexible payment schemes where the down payment can be as low as 10% payable for 3 years, with the lump sum to be paid either through a bank financing, government sponsored home loan (Pag-IBIG), or the developer’s in-house financing options.

If you are a real estate investor, pre-selling condos are a promising investment since their market value can increase by the time they are finished. Given favorable market conditions, you can resell the finished units for twice the price you put down when they were in the pre-selling stage.

Better options, new features
You may also have more options when buying a condo in a pre-selling stage. You get to choose your preferred unit location and floor plan, not to mention the better views, easier access to amenities, and lesser foot traffic. Depending on the pre-sale contract, you can also inspect your unit at the end of every construction phase and inform the developer of the unit’s defects or of any adjustments you may want. Pre-selling condos give you the time and opportunity to customize your condo unit according to your preferences.

In terms of condo development, pre-selling condos usually offer something new, if not the latest, in terms of design, features, or amenities. Whether this might be a state-of-the-art waste management system, resort-style amenities, or eco-friendly materials and construction, new features are not only appealing but also necessary if the changes they bring matter to you.

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8 Things First-Time Home Buyers Need to Know About Condominium Association Dues

Now that you’ve bought your own condominium and moved-in, you suddenly received a statement of account saying you have to settle your association dues for the month. But what is it exactly and why do you need to pay this? Many first time-time home buyers are not familiar with this monthly fee that is part and parcel of owning a condominium.

Here are the things you need to know about association dues:

1. Why do you need to pay association dues?

Association dues are monthly payments made by the unit owner or tenant to contribute for the overall operational expenses of the entire condominium building. This is mandated by the homeowners’ association.

A home buyer automatically becomes a member once:

the unit is turned over to him or her,
he or she has signed the Deed of Absolute Sale,
or the title is transferred to the buyer’s name.

2. Who collects your payments?

The property management office is responsible for collecting association dues and other condo fees. The condominium developer employs them to manage and to maintain the building. They provide the services that residents need, including security personnel, maintenance personnel, janitorial services, and other necessary services for the building’s upkeep.

3. What do association dues cover?

One of the best things about owning a condominium is that you can take advantage of amenities such as swimming pools and playgrounds and not worry about its upkeep. You can also have a peace of mind knowing your family is comfortable and safe. But someone has to do the maintenance or man the building for you, right? That’s where your association dues come in.

Your association dues are used for building maintenance and repairs, taxes and licenses, wages of condominium employees (property management staff, maintenance staff, security personnel, etc.), utility expenses for common areas, and other miscellaneous fees needed to keep the building and all shared spaces well-maintained and working properly. Whenever the building is in need of repair or repainting, these funds will be taken out from the association dues that you’ve paid for.

4. How much do you need to pay for the association dues?

The cost of association dues vary in every project, depending on the operating expenses of the building. If the building offers more amenities, then it is more likely pricier. It is then computed based on the size (total area in square meters) of your unit. This includes the balcony space, if you have one.

For example, in One Serendra, the association dues cost Php 96 per sqm excluding VAT. Thus, if you own a 70 square meter unit, you have to pay Php 6,720 per month plus tax. So for those who have or are planning to buy a bigger unit (two- or three-bedroom), you would have to shell out more.

5. What are the possible penalties if you fail to pay?

You may be charged a penalty, depending on the condominium developer, when you fail to pay your association dues on time. Some developers charge 3 or 4% interest. And if you continue to not pay at all, developers such as DMCI Homes will consider your account as delinquent. When this happens, the building management will have the right to cut-off or deny your basic utilities. In some cases, they may also prohibit you from using the shared amenities.

6. When do you start to pay?

Once the unit is turned over to the owner, he or she is obliged to pay the association dues. Whether you have moved in or not, or even if no one is occupying the unit, you need to pay the dues. For example, the unit was turned over to you in May, but you only moved in on July, you still have to pay the association dues for May and June.

7. Are association dues subject to tax?

Yes. Earlier this year, the Bureau of Internal Revenue released Revenue Memorandum Circular No. 9-2013 which states that association dues and other fees collected by the homeowner’s association are now subject to Value-Added Tax (VAT). Although this has been contested, BIR noted that the recent rulings remain valid.

8. What will happen if I don’t want to become a member of the association and not pay the association dues?

Pursuant to Section 5 of Resolution No. 770 Series of 2004 (Framework for Governance of Homeowners Association), membership should be voluntary unless otherwise stated or stipulated in the contract, Deed of Sale, or property title.

As such, you may opt not to become a member. However, Republic Act 9904, or the Magna Carta for Homeowners and Homeowners’ Association, stipulates that a homeowner will get the

right to enjoy the basic community services and facilities, provided that he/she pays the necessary fees and other pertinent charges.
The operative word here is provided. As long as you pay association dues, you will not be denied the use of the shared amenities and facilities. But if you don’t, then you can’t use them.

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Philippine Condominium Buying Advices to Share to Condo Buyers

Things Not To Do Before Buying a Condo in the Philippines,
Condo Property Connsiderations:
• No Major Purchases of Any Kind, Appliances, Car, Jewelries and Travel
• Don't Move Money Around
• Think about: Should You Change Jobs?
• Check your Possible Reasons to Delay Buying a Condo Property

Buying a Condo With Resale Value: Location
• Most important factor is - Location, Location, Location..
• Condominium Location : Local Community, Town or City
• Condominium Location: the Local Neighborhood
• Condominium Location: the Residential Neighborhood

Buying a Condo With Resale Value: the Condominium is your Home
• A Condo With a View?
• Condo Floor Cut, Type
• Condo Size
• Bedrooms & Bathrooms
• Closets, Parking & Laundry
• Health and Fitness
• Kitchen Area
• Amenities and Security

Know Why Buying a Condo is a Good Idea
• The Best Investment
• Stable Monthly Housing Costs
• Forced Savings
• Freedom and Individuality

The Business Cycle and Buying a Condo 
• Know the Supply and Demand
• Recession and Expansion
• Should You Try to "Time the Market"?
• What's More important - Buying a House? Or a Condo?

Don't Buy a Car - or Did You Already Got One?
• When Income Grows and You Want to Buy "Stuff"
• Debt-to-Income Ratios and Car Payments
• How Buying a Car Reduces Your Purchase Price

Importance of having A Realtor Broker?
• Finding an Agent in the web
• Listing Agents vs. Selling (Buyer's) Agents
• Should You Call the Listing Agent?
• Agent's Advertising - Is the Purpose What You Think?
• Try Finding Your Own Realtor
• Some Basics about the Search
• Know How to Conduct the Search
• Discussion with a Good Realtor

Issues Affecting Your Rea Estate Condo Offer Price
• How Property Condition Affects Your Offer
• How Condo Improvements Affect Your Offer
• How Market Conditions Affect Your Offer
• How Seller Incentive Affects Your Offer
• The Final Conclusion on Your Offer Price

Overview to Purchase Real Estate: the Basics 
• Introduction and Overview
• Contingencies in a Purchase Offer
• Earnest Money Deposit
• The Closing Date
• Transfer of Possession

How Financing Facts Affect Your Offer 
• Down Payment
• Interest Rate
• Closing Costs and Financing Incentives
• Seller Financing
• Cash Offers

Characters of an Offer: Protect Regarding the Property
• Disclosures from the Vendor
• Condition of the Property upon Transfer
• Condominium Inspections You May Require
• Final Walk-Through Inspection

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Danger! 5 Warning Signs To Beware Of

Even after an investment has gone through copious amounts of due diligence, it is still very possible that the project is going to be a dud. Here are some clear warning signs that you should consider:

1. Trouble with the city/planning department.
If you find that a developer is having difficulties with the city’s planning department, it is usually for a good reason. Even if they resolve their issues, the project timing would be extended and at the very least, your capital will be tied up and not earning money. On the more aggressive side, you could lose your entire deposit to an unfinished project.

2. Slow sales.
Ever wonder why a developer pushes Realtor commission to 5 per cent or offers a Mercedes as an incentive bonus? It is because sales are slow so they do everything in their power to attract buyers and their agents. Unfortunately, sometimes it works. But a project should sell itself. If buyers are currently staying clear, what will happen when it is built?

3. Terrible curb appeal.
Selling real estate will never change – some developers get it and some do not. It sounds simple but some developments fail because of the curb appeal.

4. Extenuating circumstances
Some developments just can’t get away from extenuating circumstances , either by design or due to the building code. For instance, one building in Toronto was prohibited from having any operating windows on the north side of the building. This does not hurt the south facing suites, but the building now has a negative reputation. Using common sense is the best way to avoid involvement in a building that has the potential to gain negative publicity.

5. Too good to be true.
If you find a building or development that is selling far below the market and neighbourhood value, and it seems like it is too good to be true – it usually is and will likely attract the wrong investors. Every market has these developers and they usually mask their awful products with great marketing. Be cautious of below market prices.

The important point to remember is that investing in real estate can still be very risky. It is a big commitment to understand and find the right opportunities in the market place. The good news is that there are professionals that can help you with this.

Whether you decide to work alone or hire a professional, make sure that you have a solid plan; one that is dynamic and flexible enough to shift with the changing markets. The plan should have a timeline, projections, milestones and goals. It is very similar to crafting a comprehensive business plan with your ultimate goal as the underlying motivator. Your strategy and processes will most likely adapt but your goal should not.

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Costly Mistakes Investors Make

We will take a look at some issues that are often overlooked by investors. Failing to consider these issues could be disastrous.

1. Not understanding the tax implications.
The whole point of investing is to make money, correct? Before you jump into any investment, you must understand the tax implications of buying, owning and selling that investment. Using an accountant that specializes in real estate will help you understand terms such as Recapture of Capital Cost Allowance.

2. Assuming that it will appreciate.
Over the past three years, Canada has seen some explosive growth, especially in the major cities. But appreciation is never guaranteed. Aggressive growth investors looking to buy and sell under three years of ownership could run into problems if they don’t consider this fact.

3. Not double checking surrounding real estate lots.
There is nothing worse than buying real estate only to find out that your view and building will be completely obstructed by a new building. Any sign of cranes or even a zoning amendment application can be detrimental to the value of the property. Even if you are surrounded by protected heritage properties, do some research with the city.

4. Not running the numbers.
Real estate is a game of numbers. The upside is that these numbers make real estate investments predictable and controllable. Running the numbers before taking the plunge puts you in control of the situation and ensures that you maximize your capital placement.

5. Ignoring the market signs and signals.
Ignoring the market signs and signals is an amateur move that can be devastating to your bottom line. Ignore the media, read industry reports and ask the right questions.

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Four Traps To Avoid When Buying a Condo

With signs of uncertainty in the market, it has never been more important to analyze your next real estate investment. Jumping into the unknown and hoping for the best is risky business. While this tactic may have worked over the past three years during Canada’s lucrative real estate market, it is no longer the case. Real estate has never been a fool’s game’ and now is the time to switch strategies and become diligent for a greater chance of success.

It is also unwise to sit on the sidelines in cash. Downward market shifts are healthy for a number of reasons because it amplifies the good, the bad, and weeds out the average.

Tactical investing is the act of leveraging a strategy behind every decision. All too often, real estate investors make decisions based on past performance or success – the same type of mistakes are found in capital markets. As an investor, it is important to treat every decision independently, and perform the proper due diligence with the right set of tools.

Just because Uncle Joe bought on speculation and got lucky, doesn’t mean that you have a sure bet. The only certainty in real estate is that the market can take it away as fast as it can give it. By taking a few simple steps, you will put yourself in a better position for success and maximize your working capital. Below, we examine some very relevant tools for performing your own due diligence, common traps in the market, some issues that are often overlooked, and some warning signs that the development will fail.

None of these tools are meant to make you invincible, but they will definitely help to put you in a position to take advantage of potential market changes. If you’re an expert already, they are likely to reinforce your current investment strategies.

Four critical test of a good condo investment

These Four core filters are the bread and butter of investing in real estate. If your next purchase does not pass at least four of the five filters below, it is likely a good time to reconsider the investment.

1. Developer experience
The problem with heated markets is that it attracts amateurs that want to get in on the action. But, more often than not, these products lack quality and design. They may look good on paper, but the underlying issues will make you want out faster than the ink can dry. Try to buy from a local developer that has a portfolio of successful products in the neighbourhood.

2. Location and neighbourhood
Condo investments, resale or new, hinge on their location and the neighbourhood that surrounds them. The neighbourhood makes the condo and not the other way around. This doesn’t mean that the neighbourhood has to be completely gentrified; it just means that it has to have the foundation for resale and rental capacity.

3. Pricing
The old proverb remains true: you make money in real estate by what you pay for it, not what you sell it for. Pricing is the easiest way to ensure that you are on the right track. If you are buying in a heated market or in a ‘hot’ neighbourhood, it is likely that you’re buying at the fifty two-week high (or three year high in Toronto’s case). Stay away from inflated prices.

4. Development logistics
Even if the price is right and the developer is great, you will still need to examine the size of the project, layouts, designer, amenities, etc. If the project is reaching for the stars, you can bet that it will feel less like a community and more like a transient bus station.


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CONDO IN THE PHILIPPINES

Condominiums are changing the way we live, or at least changing the way we want to. Real estate in the Philippines has never been this bullish. In 2013 alone, 51,000 new high-rise units were unveiled based on the data released by property consultancy firm, Colliers International Philippines.

This boom in the real estate industry may be attributed to affordable payment terms, according to National Real Estate Association Inc. president, Benigno Cabrieto. In an interview with the Business Mirror in February 2013, he said that low interest rates and Pag-IBIG fund have helped boost the condo industry. Cabrieto mentioned that more Filipinos are now embracing vertical living because land is scarce and expensive. The seemingly unstoppable urban migration also has a hand in this.

He also pointed out the increasing demand from Overseas Filipino Workers. Estimates show that 30% or P240-billion of the $20-billion remittances was invested in real estate, mostly to condominiums in Metro Manila.

The demand, he adds, is dictated by the need and affordability. For example, OFWs buy for investment while professionals for location and convenience. Starter families are also encouraged to leave their apartments because they may find that the rent is almost the same as the monthly amortization cost for a condo.


Rock Star Economy

Local real estate developers and foreign investors have never been more confident with the Philippine economy. In 2013, the Philippines recorded the second highest economic growth in Asia with a gross domestic product (GDP) of 7.2%, next only to China. The National Economic Development Authority is confident that the trend will continue this year.

True enough, even the International Monetary Fund hiked the country’s growth forecast this year. The initial forecast of 6.3% was increased to 6.5%. Credit rating firms Moody’s and Standard and Poor’s also raised their forecasts. Moody’s analytics are so optimistic that they even predicted that the Philippines will be the economic leader in Asia in 2014.

Thanks to the robust economy, the business of real estate is showing no signs of slowing down. According to the World Bank, there is an increase in consumer confidence to buy real estate properties. The WB latest Philippine Economic Update stated that low interest rates are mostly to be credited for the boost. Furthermore, the report also put emphasis on the luxury residential segment that is significantly picking up largely because of OFWs and expatriates.

This is phenomenal because in 2013, the average price of a luxury 3-bedroom condominium in the Makati Central Business District soared by 12.92%, nearly P129,000 per square meter, according to Colliers International. In other high-end districts like Bonifacio Global City and Rockwell, the average price of a premium 3-bedroom unit was pegged at P127,000 and P132,000 respectively.

We can measure economic progress through the real estate industry’s success. It can also measure how foreign investors are perceiving Philippine markets now. In a survey by the Urban Land Institute and PwC, Manila ranked 4th out of 23 Asian cities as a real estate market and investment prospect, next only to Tokyo, Shanghai, and Jakarta. In the survey, the country edged out Sydney, Guangzhou, Singapore, and Beijing. The fast growing economy and increasing popularity as an alternative to traditional markets allowed the Philippines to jump from the twelfth spot to fourth place. Specifically, in the category city development, the Philippines ranked 8th and received a “buy” rating for the capital’s residential sector.

Foreign investments show a positive outlook for the real estate industry despite typhoons, earthquakes, and even traffic. In an interview with Inquirer Business, Managing Director of real estate firm KMC MAG Group, Michael McCullough, said that Metro Manila is a perfect place for business. “Metro Manila remains the best value city to do business, largely because of the relatively low real estate costs, and Makati remains to be the location of choice of luxurious residential spaces.” Although there are risks, he said the benefits outweigh them.

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