Buying a Condo WITHOUT a Condo Corp

[bizaro86]

Hello,

I`m interested in buying a condo in a building which does not currently have a condo corp. I understand that CMHC financing is not available, but what about conventional, would that be a problem?

Also, I was wondering what the typical pitfalls and costs are? Does anyone have any experience buying units in this situation, and what process happened? Can a corp be established by someone who doesn`t own all the units in the building, and how difficult/costly is that?

Any other experiences and insights would be greatly appreciated. The unit I`m considering is at a discount to its "normal" value, but I want to make sure the discount is sufficient to compensate me for the time/risk!

Thanks

Michael

 

[brentdavies]

Not sure what province you talking about, but unless you can buy the property and receive a certificate of title, from the provincial land title office

RUN AWAY!!!

Time shares do not have titles.

A condo always has a condo corp. IF the property is being subdivided and the registration of condo units is pending, that one issue.
IS this bare land condo?
If you not sure what you are buying, get some professionial advice, use a realtor, talk to your lawyer. This forum is helpful but unless you disclose all important information about the deal, how can someone give you good advice.

One thing to keep in mind, it is very easy to get married, and extremely costly to divorce. Same applies to bad real estate deals.

 

[bizaro86]

QUOTE (brentdavies @ Sep 24 2009, 12:21 PM) Not sure what province you talking about, but unless you can buy the property and receive a certificate of title, from the provincial land title office

RUN AWAY!!!

Time shares do not have titles.

A condo always has a condo corp. IF the property is being subdivided and the registration of condo units is pending, that one issue.
IS this bare land condo?
If you not sure what you are buying, get some professionial advice, use a realtor, talk to your lawyer. This forum is helpful but unless you disclose all important information about the deal, how can someone give you good advice.

One thing to keep in mind, it is very easy to get married, and extremely costly to divorce. Same applies to bad real estate deals.

Sorry, I certainly wasn`t trying to be cryptic, I`m just not quite sure what the situation is. I`m talking about apartment building conversions where the owner doing the conversion has run into trouble. The building has been divided into separate titles, but no condominium corporation is in service. This is in Alberta, btw. The units are cheaper because of that, but I want to make sure that the cost won`t outweigh the benefit before I get too involved, as I`m aware a RE deal gone bad can have significant consequences.

Michael

 

[Dan_Eisenhauer]

You can make your offer conditional upon reviewing ALL documents related to the supposed conversion, just to be sure he has done verything he said he was going to do.

Get a release from the seller allowing you to check with the municipality on the status of the conversion. I made an offer on such a property several years ago, with those conditions in place. The seller never did get me verifiable documents, and the city was not able to confirm the seller`s story. I walked away.

Other than that, treat it as a normal purchase. You do not have to activate the corp until you want to.

 

[jwilbrin]

QUOTE (bizaro86 @ Sep 24 2009, 02:15 PM) Sorry, I certainly wasn`t trying to be cryptic, I`m just not quite sure what the situation is. I`m talking about apartment building conversions where the owner doing the conversion has run into trouble. The building has been divided into separate titles, but no condominium corporation is in service. This is in Alberta, btw. The units are cheaper because of that, but I want to make sure that the cost won`t outweigh the benefit before I get too involved, as I`m aware a RE deal gone bad can have significant consequences.

Michael

Michael it is EXTREMELY IMPORTANT to remember when considering deals with a lot of hair on it (meaning complicated deals) do not rely on the advice of colleagues or fellow investors. Go to the experts for your advice; and by experts I mean LAWYERS. Particularly a lawyer who specializes in condo conversions, real estate joint ventures and contractual disputes. The money you will pay for a consultation will be well worth it.

There are just too many negative possible scenarios that could play out with a deal such as the one you are describing.

Just to clarify: Are you considering buying all the units in the building or just a few? If you are buying all the units then it`s definitely less complicated.

 

[Dan_Eisenhauer]

The last post makes a very good point. My earlier comment was based on the assumption that you are buying the entire building, not a few units within it.

It is my understanding and belief that you could not purchase individual units within a non-active condo corp.

 

[brentdavies]

A condo corp is started the day the condominium plan is registered at land titles.

The developer has 6 months to have the 1 st general meeting after 51% of the units are sold. In the new condo act, there are provisions for the other unit owners other than the developer to start the condo corp.

There is little protection for the 1 owner of the 10-50 units in a condo if the other units are still owned by the developer.

I am assuming this project is an old rental project being converted.

Just like buying another condo, you must look at the reserve fund study. What major work is required in the next few years. Roof, boiler, balconies, etc.

Ask any seller of converted 3 story walkups in edmonton on the ease of selling the units. Not an easy job. ( Sorry to all you condo flippers)

 

[Thomas Beyer]

QUOTE (bizaro86 @ Sep 24 2009, 02:15 PM) Sorry, I certainly wasn`t trying to be cryptic, I`m just not quite sure what the situation is. I`m talking about apartment building conversions where the owner doing the conversion has run into trouble. The building has been divided into separate titles, but no condominium corporation is in service. This is in Alberta, btw. The units are cheaper because of that, but I want to make sure that the cost won`t outweigh the benefit before I get too involved, as I`m aware a RE deal gone bad can have significant consequences.

Michael
50-80% discount may be appropriate. the price has to be WELL BELOW the price of an apartment building per unit. So, if the apartment is worth 80,000/unit as a whole functioning building.. then 60,000/door might be appropriate for the condo .. maybe $50,000 even.

All cash purchase price only as mortgage is hard to impossible to come by.

EXTREMELY HIGH RISK as the building might be very poorly managed, may have 60%+ vacancies, no upkeep, rats, no heat in the winter, vandalism, huge deficiencies (boiler, roof, hallway carpets), no reserve fund .. thus this makes sense only if you have a high confidence that the bank will turn things around once they take possession and sell it off to someone competent like us for a discount. Then companies like ours would come in and buy the remaining condos at a STEEP discount to the building price to turn it around.

Buying defunct condos or into a condo conversion gone bad is VERY HIGH RISK .. and usually needs a lot of money to turn around .. and as such the price has to be LOW .. VERY LOW for it to make sense !

What price per sq ft did you have in mind ? Less than $80/ft hopefully (depending on location and upgrade status) !

Where is this ? Edmonton ? What part of town ?

 

[bizaro86]

QUOTE (brentdavies @ Sep 25 2009, 12:04 AM) A condo corp is started the day the condominium plan is registered at land titles.

The developer has 6 months to have the 1 st general meeting after 51% of the units are sold. In the new condo act, there are provisions for the other unit owners other than the developer to start the condo corp.

There is little protection for the 1 owner of the 10-50 units in a condo if the other units are still owned by the developer.

I am assuming this project is an old rental project being converted.

This is a potential deal where the condo conversion has gone poorly, and not all the units have been sold. So I guess, based on this post, there probably is a condo corp, which has not yet been activated. I would only be buying a few units, not the whole building, for the simple reason that I think it probably would need to be an all cash and/or huge downpayment type deal, and some units have already been sold.

In terms of "little protection for the 1 owner" which would be me, what type of abuses could the developer inflict? The listing agent has said that no condo fees are currently payable, but obviously you`d have to pay for your own utilities. I`d build a contingency for a special assessment into my numbers, since no reserve fund would be in place, but other than that are there any problems I should be aware of?

Also, wondering if anyone has bought 1-2 condos in this situation before and can describe how it unfolded for them. Although I suppose for the last few years in Calgary, most condo conversions were successful until about last October.

Michael

 

[Thomas Beyer]

QUOTE (bizaro86 @ Sep 25 2009, 11:29 AM) ....

In terms of "little protection for the 1 owner" which would be me, what type of abuses could the developer inflict? ...
no or poor management, non payment of gas utilities: aka frozen pipes in winter !
rats, deterioration of building value, vandalism, huge vacancies, graffiti, foreclosures by banks i.e. the chance to buy a depreciating asset !

If you know what you are doing AND if your discount is large AND if the developer is keeping a decent management in place I`d say it may be worth the risk. Otherwise: stay away !

 

[PaulPoulsen]

QUOTE (brentdavies @ Sep 25 2009, 12:04 AM) The developer has 6 months to have the 1 st general meeting after 51% of the units are sold. In the new condo act, there are provisions for the other unit owners other than the developer to start the condo corp.

So are you saying that owners can start a condo board on their own without the developer once 51% of the units are sold? Or that the owners can start the condo board on their own without the developer regardless of how many units have been sold?

Thanks for the clarification.