Buying an industrial condo bay

What an industrial condo is

An industrial condo is a multi-bay building split into separately titled units. You own your unit, and share the common property with the other owners through a condominium corporation. Depending on the plan, common property can include the land, parking, driveways and the building structure. In Alberta, condominiums are governed by the Condominium Property Act and each corporation's bylaws. An elected board runs the corporation, usually with a property manager.

The condominium plan decides where your unit ends and common property begins, and industrial plans vary. Some also assign exclusive-use parking or yard areas. Read the plan, not just the marketing sheet.

Who it suits, and who it doesn't

It suits owner-users with a stable operation that will fit one bay for years, who would rather build equity than pay rent and want control over their address and fit-out. It doesn't suit fast-growing businesses — expanding usually means buying a neighbour's unit, if one comes up, or moving. It also doesn't suit uses the bylaws restrict, or businesses that need their cash for inventory and hiring. Test your numbers with the rent vs buy tool.

What you get and what you give up

You get ownership: no landlord, no renewal risk, freedom to fit out within the rules, and an asset you can later sell or lease. You give up flexibility and some control. You share decisions with other owners, pay condo fees whether or not you agree with the budget, and are bound by bylaws that can change by vote. Your capital is tied up in the bay, and moving means selling first or becoming a landlord.

Bylaws and use restrictions

Industrial condo bylaws often go further than the municipality. Common restrictions cover:

• Permitted and prohibited uses — auto repair, assembly, retail traffic or food production may be limited
• Outdoor storage, parking allocation and truck access
• Noise, odour, hours and signage
• Alterations: mezzanines, new doors, openings and roof penetrations
• Leasing units to tenants, and what tenants may do

Condo fees, reserve fund and special assessments

Condo fees, called contributions, fund the operating budget and the reserve fund for major repairs such as roofs and paving. They're usually shared by unit factor, which is set out in the condominium plan. Fees commonly cover the building insurance, common-area maintenance, snow removal, landscaping and management; your unit's utilities and property tax are separate.

Buyers review the corporation's reserve fund study and plan. A reserve that's thin against the study's forecast can lead to special assessments: one-time charges to every owner. Read the study alongside the minutes to see what's coming.

Documents to review before you waive conditions

Your lawyer usually orders the estoppel certificate close to closing. For the steps around it, see how to buy a warehouse.

• Bylaws and any board rules
• The condominium plan
• The current budget and recent financial statements
• The reserve fund study and plan
• Recent board and general meeting minutes — look for roof, paving, disputes, claims and legal action
• The corporation's insurance certificate and deductibles
• An estoppel certificate, which confirms the unit's contributions, anything owing and any assessments

Financing, closing costs and Alberta notes

Condo bays are financed with a commercial mortgage. Lenders look at your business as well as the unit and the building, and commonly require more equity than a home purchase. Some ask for environmental information, depending on the building's history and uses. See financing a warehouse purchase.

Alberta has no land transfer tax, but Land Titles charges registration fees on the transfer and on the mortgage, based on value. The sale of commercial real property is generally subject to GST, and a purchaser registered for GST generally self-assesses. Confirm your position with an accountant.

Reselling or renting it out later

A condo bay can be sold or leased when you outgrow it. Resale depends on the building's reputation, the health of its reserve and how restrictive its bylaws are — another reason to read them before you buy. If you'd rather keep the asset, you can lease the unit to a tenant, subject to the bylaws and any notice the corporation requires; see leasing out a unit. Some owners hold the bay in a separate company that leases it to their operating business. Get legal and tax advice on the structure.

What to check before you buy a condo bay

• Your exact use against both the condo bylaws and the land use district
• The condominium plan: unit boundaries, common property and any exclusive-use parking or yard
• The budget, financial statements, and reserve fund study and plan
• The last few years of board and general meeting minutes
• The estoppel certificate, ordered close to closing
• The corporation's insurance and deductibles, and what your own policy must cover
• Power, doors, clear height, floor and heating for your unit specifically
• Parking and loading allocation, and the rules on outdoor storage
• Alteration rules for mezzanines, doors, signage and racking
• Leasing rules, in case you want to rent the unit out later