They said it was a freehold townhouse, and now we find out there’s a $90 fee every month. – SURPRISED
DEAR SURPRISED: Quite often, town homes are listed as “freehold” when in fact they have an associated fee. This is the bane of my existence. Like you, I wouldn’t typically expect a freehold home to come with a fee, and a true freehold won’t have one. That said, there are at least three other types of town home ownership which may incur a fee:
The first is a townhouse on leased land. I can think of one complex of this type in our area.
The second type is a Parcel of Tied Land (POTL). This ownership structure is commonly found in townhouse-style condominium complexes. Within the complex, each freehold lot has a home that sits on it. The unit is technically freehold, but because of its location with within the complex, it is inextricably “tied” to a share of the property’s common elements.
The third is a Common Elements Condominium (CEC). Most condo communities share common amenities that are managed by the condo corporation, such as roads, sidewalks, parking lots and playgrounds. Each of these must be maintained, hence the need for a fee.
While the POTL and CEC are separate by definition, they are purchased as a package deal (think burgers and fries). When a buyer purchases a condo in a complex with these fees, the POTL and CEC are assumed at the same time and under the same mortgage.
If you’re considering a POTL/CEC townhouse, you’ll want to review the status certificate with your lawyer and Realtor, to ensure you understand the scope of the associated fees. These must be considered when ruling a purchase in or out. Pro Tip: Have your Realtor to ensure that any freehold town home you may be considering is exactly that. Unfortunately, you can’t always go by the listing.
How much are closing costs? – RUNNING THE NUMBERS
DEAR NUMBERS: As a rule of thumb, you can expect the closing costs of your real estate purchase to fall within the range of 1.5 to 2 percent of the selling price. These expenses might include your home inspection (if it was a condition of the sale), land transfer tax and title insurance, along with legal fees & disbursements. Depending on your location and whether or not you have existing utility accounts, there may also be possible deposits for utilities. If the previous owner pre-paid property taxes or utility bills to cover a period of time when the home is in your possession, those payments will need to be reimbursed. Of course, you’ll also need to set funds aside for moving expenses.
Pro Tip: First time homebuyers may be eligible for a $4000 Land Transfer Tax rebate in Ontario, but some banks may still want to see that you can cover the full expense, whether you qualify or not. #Ask David