Buy & Sell Recreational Property in Canada. Geraldine Santiago
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In any type of rental activity, there will be some risk of damage to your property, so make sure that you have the proper documentation, insurance, and permits to allow for renting.
Strata or condominium restrictions
Buying a condominium involves a type of housing ownership that is more formally known as strata title ownership. In addition to ownership of a unit, you share ownership of common areas, such as hallways, garages, and elevators, and share financial responsibility for their maintenance with the other owners of the building. This is reflected in monthly maintenance charges.
If you are interested in purchasing a property such as a condominium, find out about the bylaws and other rules that govern that property. You may also want to ask for documentation on the history of the property and include, in your offer to purchase, a statement that you are satisfied with the disclosure statement that the seller has provided. (Property condition disclosure statements are discussed in Chapters 11 and 15).
Restrictions vary from one housing development to another. Find out what the restrictions are and whether there are strata corporation bylaws, rules, or regulations that impose restrictions or prohibitions. It is very helpful to obtain strata council meeting minutes going back as far as possible — at least for the past 12 months — and including the most recent annual general meeting.
Common restrictions include age restrictions, which, for example, specify that some developments are designated for adult-only residents; rental restrictions, which limit the number of residential strata units that can be rented; and restrictions on the size, weight, number, and type of pets. Restrictions are not necessarily a negative issue for homebuyers. For example, although there may be restrictions that limit or prohibit rentals, this may be a positive factor for buyers, in that most or all the occupiers of a building are also owners.
Most strata corporations also place restrictions on the following:
• “Use” — specifying what activities cannot take place on the property (such as running a business)
• Window coverings — imposing uniformity of colour of window coverings
• Waterbeds — prohibiting, requiring damage insurance, or restricting their location within the building
• Hot tubs — prohibiting placement on roof decks because of potential damage from leaks or weight
• Hardwood floors — prohibiting them because of noise, especially in frame buildings
Zoning
Under the authority of the municipal government, zoning specifies the types of buildings that may be built on particular properties and how those buildings may be used: as residential property (a single-family unit, a multi-family unit, and/or a duplex), as recreational property, or as a commercial or industrial building. Look for zoning information on your MLS feature sheet. Ask about the zoning of surrounding properties to determine if, for example, a factory or condominium development might suddenly appear nearby. Also be aware of the possibility of zoning changes in the future. If you purchase a home with a view, for example, check to see if that view is legally protected. Find out whether there are height restrictions that will keep someone from erecting a building that will block your view.
Zoning and developments
Zoning in areas where there are recreational properties differs significantly from zoning in a more established community or city. Most homes in a city are found in subdivisions. There are highly developed city plans, and residences are developed in predictable patterns. Lots are usually based upon subdivision agreements registered on the title of the property. These agreements set out the pattern of the building, confirm water, sewage, and other utilities, and establish the layout of roadways, sidewalks, and parks.
Cottage developments rarely follow a predictable pattern or plan. Cottage properties that border waterfronts have often been subdivided over the course of many years. Development in the area may be sporadic. In many cases, municipal involvement is kept to a minimum and most of the day-to-day concerns are handled by cottage associations.
Some municipalities in cottage country have passed seasonal zoning provisions. This could very well prevent the conversion of a cottage into a year-round recreational property or retirement home. If this is in your plans, be sure to verify the zoning bylaws (or ask your realtor to verify them for you). Plans for expansion or winterization may be futile. Without being able to use the cottage year-round, the cottage’s marketability can be adversely affected.
Zoning restrictions on rentals
If the recreational home is not your primary residence and you are planning to use it only for limited periods of time, you may wish to consider renting your recreational home to generate extra income. This income can help pay down your mortgage or contribute to costs of maintenance, utilities, insurance, and so on.
However, you must be aware that district bylaws vary from municipality to municipality. For example, in a resort community properties can be located in several different zones. This could mean that some properties are located in zones that allow for both residential and tourism use, while other areas do not allow rental periods that are less than 28 consecutive days because that is considered tourist accommodation and is not allowed in some residential zones.
Some regions don’t specify rental periods in their zoning bylaws. In some areas where tourism is promoted (for example, in areas near a ski resort) daily rentals are allowed. Some recreational properties are purchased solely to provide rental accommodation.
In some areas there are no formal restrictions on short-term rentals; however, bylaws are subject to change. Make sure that you know what the municipal bylaws and zoning restrictions are pertaining to your property.
New-home warranties
There are pros and cons to consider when deciding whether to buy a new recreational home or a resale. Buying a new recreational home means that you may be able to choose or upgrade the finishing materials, flooring, cabinets, and electrical features. As well, the building will comply with the latest building and electrical codes and energy-efficiency standards, which will result in lower maintenance costs.
But more important, recreational home-buyers may want the security of new-home warranty programs that are available in most provinces. Contact a new-home warranty office or visit its website for a list of registered builders in the area where you are considering purchasing. Although warranty coverage varies from one province to another, typically the programs guarantee labour and materials for your new home for at least one year after completion. The warranty also ensures that major structural defects will be corrected for a minimum of five years (and up to ten years in some provinces).
At present, warranties are required by law in Ontario, Quebec, and British Columbia, and are voluntary in most other provinces. In British Columbia, the law requires consumer coverage to be provided in the form of home warranty insurance, which is a bona fide insurance product that can only be sold by government-approved insurance companies.
Comprehensive warranties on newly built recreational homes are readily available and easily obtained. Even in provinces where the warranty is not mandatory, many lenders will not grant you a mortgage unless you obtain a warranty. Clearly, a warranty is a good thing to get, as it offers you peace of mind.
Homes Directly for Sale by the Owner
Sometimes you will find that a recreational property you are interested in is being sold by the owner, as a “For Sale by Owner” (FSBO, pronounced “fizbo”), usually because the seller wants to save on agents’ fees. You should be aware of the advantages and disadvantages of purchasing a FSBO.
First, FSBOs tend to be priced according to what the owner would like the homes to sell for, rather than what the market is willing to pay. If you are looking at various types of properties, including FSBO properties,