With the majority of condos built and being built in Toronto being built by disappointing and unqualified developers (unlike commercial development, there is minimal regulation and/or oversight in the residential condo industry).
Doesn’t that, in and of itself, make you wonder?
But it is true!
The residential condo construction market is “the wild west” as there is almost no regulation or oversight.
Amidst a fight with a Condoland developer I called the City Inspector (the City issues building permits) to ask him the last time he inspected the condo that I had purchased in and was having sound attenuation issues with the developer and making no progress.
He told me that he (the City’s “Building Inspector“) “doesn’t actually physically inspect the buildings“.
Apparently there are seven or so “scheduled inspections” (imagine how disreputable developers can run around this one!) but no “unannounced inspections“.
Talk about having “the fox guard the henhouse”!
So, today I’d like to introduce you to our fictitious Toronto couple (we’ll call them “Tim and Sara Toro”) and walk you through a scenario that truly exemplifies any consumers experience in Condoland.
Let me once again state for the record that there are a few (and only a few) “good/decent” developers out there.
But in a market where multiple offers predominate and Realtors sleep in line in parking lots at phoney “VIP Pre-Release Sales Events“, a chimpanzee in a suit could sell a condo.
Tim and Sara are millenials, both working at decent, but not high paying, jobs. Sarah is pregnant with their first child.
They’ve been renting a two bedroom apartment at a “good rent” just upwards of $2,250/month but want to stop throwing that $27,000+/year out the window, and pursue “the Canadian dream” of owning their own home.
Like the decided majority of condo buyers, they undertake doing their own research first by surfing the Internet.
They come across a web page of a young Realtor telling them that he is a “VIP Priority Realtor which, if they register with him for his services, will entitle them to an “Exclusive (exclusive to VIP Realtors) Pre-launch Sales Event”, where Tim and Sarah can get “prerelease access to the best selection of suites and buy at discounted prices BEFORE the project goes to the market”.
There is an easy to fill in “Registration Form” on the site and all they have to do is complete it and their “reservation will be made for them” (if they come across the developer’s web site and complete the developer’s form the are restricted from working with a Realtor).
But overall, so far, it sounds good doesn’t it?
What they weren’t told is that this Realtor just got their real estate license a few weeks back.
Real estate today has become a bonanza for entrepreneurs who are computer techie’s.
They take the three mandatory real estate courses and apply their technical skill and agility to capturing “traffic” on the Internet.
They have no background, knowledge or experience in the local real estate market but they have a license to “trade in real estate“.
They’ve don’t the market or any developer’s history.
They don’t know the right questions to ask to truly protect the best interests of a client, (such as are the ceilings smooth or stipple, what are the ceiling heights, are interior doors hollow core or solid core, etc.)?
Now, I’m all for entrepreneurialism, and seeing that there are no educational requirements at all to get a real estate license, I’m especially appreciative for this low threshold (I lack formal education but before I ever met with a client I invested massive amounts of time studying the market and visiting every condo in it).
Unfortunately, the Internet has set up a scenario where consumers are turning to computer techies (thinking they are experienced Realtors) for real estate advise and that is what bothers me.
So, the Toros complete the form, and receive an email from the Realtor with the full color brochure of the developers and all floor plans to study before the big event.
Man! Buying a condo is a an easy thing in Condoland, right?!
After meeting with the Realtor and signing a “Buyer’s Agent” Agreement (meaning that the Realtor is legally obligated to protect their best interests) they attend the “One Day ONLY Event” (BS – they’ve been selling them for months), an exciting, emotion filled champagne party in beautiful surrounding with the centerpiece of the professionally designed and appointed Presentation Center adorned with a magnificent, to scale, model of this magnificent (“to-be”) glass tower
They thought it strange that they had to wait in a huge winding line to get in, and were shocked to learn that there is only a small selection number of suites remaining” as reflected by this huge “Availability Board”.
Suites are selling so fast that those plans that the Toros had laboured over simply were not available, and if they want to buy a unit they had better buy whatever is available and offered.
I guess it didn’t bother them, or they just got caught off guard with the “hysteria atmosphere” (orchestrated by the developer) that “if this were a Pre-Launch Exclusive Sales Event, how did they ‘run out of suites’”?
So, they don’t see the unit that they were interested in but a two bedroom unit pop up on the “Availability Chart” and, being informed by their Realtor that they “are protected under the Condo Act and have up to ten days to cancel for any reason, without penalty” they agree to sign on the dotted line and go home, the proud new owners of a condo.
Feeling incapable of understanding this lengthy legal contract, they send their document package to a lawyer who runs a discount “flat rate” real estate law practice, to save money.
They make three payments to the developer of 5% over the first 90 days or so and then wait for the building to be built.
For the next couple, or few years they stop by the site and watch the building arise from a hole in the ground, and when it’s ready for “Occupancy” and the Toros receive legal Notice that their Pre-Delivery Inspection (“PDI“) has been set for such a date.
They were scheduled to be away at that time and asked the developer if they could “delay closing” but there request was shot down flat.
So, on that date, the Toros attend the building and amidst construction, navigate their way through the building (active construction site) to their unit in a plywood clad elevator full of construction guys, and through the concrete baron corridor to their suite, accompanied by representatives of the developer.
They are walked through the unit and given the opportunity to identify any/all “Deficiencies”.
All discovered deficiencies are logged on Tarion Forms, the forms are signed, and The Toros are able to move in.
Their “Occupancy Fees” are the total of the monthly maintenance fee, an allotment for property tax and a phantom mortgage payable to the developer”.
No portion of this Phantom Mortgage is applied to the purchase price. The Toros are in fact renting the place they understood that they had bought.
Occupancy can, and frequently does in my personal experience take up to one year, and during that time the Toros pay the equivalent of “rent to the developer”.
They become frustrated that the developer is not attending to the deficiencies set out in the PDI Tarion Forms completed at Occupancy.
They are shocked to learn that the developer has up to 90 days to remedy those deficiencies, and good luck with additional deficiencies that they discover during occupancy.
They have an additional “30 Day Form” for the Tarion Warranty Program to list any other deficiencies that they discover (again remedying the deficiency gives the developer up to 90 Days before they can complain).
So, the single largest and most emotionally significant investment in their lives has put them living in a construction site while paying rent to a developer who is not even responding to remedying those deficiencies.
So they go to Tarion with a complaint.
They are now in the midst of a “bureaucratic shuffle”.
After the 90 days they are required to submit a Complaint Form to Tarion and they have only 30 days to do this or their claim will not be dealt with.
They discover that the garbage separator (three individual shoots in the garbage disposal room on each floor) is not working and report it to their property manager, who logs the deficiency into the condo corporation’s file for Tarion.
John volunteers to become a board member (a very smart idea) and is told that the election will take place at the “Turn Over Meeting” (first Annual General Meeting “AGM“).
It takes nine months for the building to be “Registered” and throughout that time the chaos of construction takes its toll and they are relieved, after paying Occupancy Fees for the entire time, to finally receive “Title” to their home and have some control over their new building.
John is surprised to learn that the condo corporation can only start the Technical Audit (an engineer is brought in to study they construction of the building and make a formal report) after six months following the AGM.
The board is shocked to discover a long, long list of material deficiencies, (including but not limited to “the garbage chute having been installed backwards and rendered totally inoperable” this is an actual case) not to mention a developer that refuses to even take their phone calls (so is this)!
So the volunteer board members (none of whom have experience in condos or negotiations) labour to get this massive list of material deficiencies remedies through imposed negotiations with the developer (who’s been at this a very long time).
The very fact that they have to “NEGOTIATE TO GET MATERIAL DEFICIENCIES REMEDIED” is ridiculous to the Toros and everyone else involved.
Didn’t the developer promise a “quality building“?
So, now it has serious flaws and no-one is going to make him fix them?
John discovers that the condo corporation is paying a mortgage on those “guest suites” that were offered in the brochure as such an enticing feature, and he was shocked when he saw that the condo corporation actually had to buy out the developer’s mortgage in three years paying him the full amount!
On the home front John becomes frustrated fight with no only the developer but also with Tarion who constantly takes the developer’s part in most disputes!
Wasn’t the Warranty supposed to protect the consumer?
John and other board members feel that the property manager, throughout the year following the AGM has served the interests of the developer over the board and condo corporation (this frequently is the case because the property manager wants future buildings from the developer).
They are shocked at the “termination clause” in the property manager’s contract required excessive “Notice” to replace them (I’ve published for decades that the best first move of any newly formed board is to give termination notice at the AGM).
John looks deeper into the industry on the Internet and comes with article after article exposing Fraud and Theft in the Residential Condo Property Management field.
Studying the Budget John is further shocked by the amount the condo corporation is paying the property management company.
In rental buildings they hire an individual and pay them a reasonable administrative wage in the $40,000 – $50,000/year range.
In their building the property manager is receiving $240,000/year!
Then comes the gravy!
Sara, discovers my blog (simplycharles.com) were I am presently exposing a very serious flawed logic behind Window Wall (those all glass walls incasing residences in the sky) that gives these walls 15 – 20 year life spans.
Nowhere in the Budgets or “Reserve Fund Study” is there a line item or even talk of potentially completely replacing the exterior envelope of the building.
She was more shocked to learn that there is a very good possibility that, due to the developers building these glass towers without regulation or oversight and building them using on “lowest bidder contracts” by unskilled licensed trades people (and potentially companies flourishing in the “Underground Economy”), these walls may very well NOT live up to their life expectancy.
These glass walls consist of two 1/4″ pieces of glass separated by a 1/4″ of “heavy gases” that are sealed in.
When the seals fail (at either 15 years or through negligent installation at any time) the heavy gases escape and the only thing separating owners from the elements is the glass which carries absolutely no insulation value!
With fierce winters and hot summers (like today’s 34 degrees) energy bills will go through the roof!
Legal issues will arise like, who’s responsibility for restoring this is it?
Is it the owners?
The condo corporation?
I can envision the litigation!
And it’s not a question of “if“ these seals will one day fail!
It’s simply a question of “when” these seals will fail!
All the Toros were doing was looking for a home.
Now they are asking “what have we gotten ourselves in to“!
PS if you haven’t been reading my blogs about Window Wall, search them on my site at simplycharles.com and each article will come up.
And please, if you have thoughts or ideas that you would like to share please do!
And please click “FOLLOW” at the top right corner of my page to be sure to keep up with where all of this goes.
HI. Thanks for this article. We are going to buy condo in Toronto, and I am really afraid to make wrong choice. I read some articles about problems with property management companies in Toronto, and want to ask your opinion about few of them:
LandLord – http://www.landlord.net/
Property Management Toronto – http://www.propertymanagementto.com/
ICC Property Management – http://torontino.ca/places/261-icc-property-management.html
And Dash Property Management – http://www.dashpropertymanagement.com/index.php
(These companies are managing buildings which we really like).