Condos can be fixer-uppers too.

Home inspections can warn prospective buyers of upcoming critical costs — such as a new roof or a leaking basement — but buyers in the condo market might not have the same clarity.

First of all, they have to parse through the current finances and legal position of the condo corporation. Second, they have to size up the reserve fund set aside to pay for major upkeep and repairs for the future of the building. Financial disclosure documents will show what costs are coming up.

And lastly, buyers have to do the math: How old is the building? How many repairs have already been done? Is this fund enough for the future?

Almost no prospective buyer knows this complex calculation. It varies between markets, and provinces and territories each have their own condo laws. But owners are on the hook for those costs.

“A lot of the contingency reserve funds are different from city to city, or province to province, on what is normal,” Ian Watt, a Realtor with Heller Murch Realty in downtown Vancouver.

“When I research a building … I always look for $2,500 to $5,000 per unit in their reserve fund. That’s what I feel comfortable with, because I know the norms for most of the buildings in downtown Vancouver, right? It might be different for townhouses in the suburbs, but for condominium complexes that have underground parking, concierge, swimming pool, all those things -- and 200 units --  that’s what I look for.”

Buyers need to factor the age of the building too, Watt added. A brand new building won’t have a large reserve fund built up yet, but an established building should have more cash set aside for repairs.

He said, in general, buildings should have the roof replaced around the 25-year mark, boilers should be replaced every 10 years and elevators have a roughly 20-year lifespan.

Dollar figures might not tell the whole story though, said Lyndsey McNally, director at the Condominium Lending Group, a firm in Ontario that secures loans for condo and strata boards.

“If I have $10 million in the [reserve fund], well, $10 million is great, but if I need $15 million for a project, it’s not adequate,” she said.

“But I could have a condo corporation that has $500,000 in the bank, and that’s OK because they’ve recently done all their projects, and they don’t need any money for a long period of time.”

There are limited options when condos don’t have enough money for repairs, McNally said, speaking from an Ontario perspective.

The corporation can levy a special assessment-- essentially a cash call from all the unit owners in the building -- or they can borrow the money, which requires a simple majority vote of owners.

This brings a new wrinkle to considering the health of a condo’s financial situation — a loan on the books.

Buyers should understand what work was done and have an expert weigh in, said Armand Conant, a senior partner heading up the condominium law group at Shibley Righton LLP, with offices in southern Ontario.

“In one case, the whole underground garage of the townhouse complex was redone and they borrowed $1.6 million,” he said.

“A lot of people see a liability, they see $1.6 million, and they run from the deal — no, not necessarily. [The condo] completely redid the underground garage, the concrete walkways, the front steps — like, that complex was basically rebuilt.”

Instead, Conant ensured the buyer could afford the monthly common element fees — which included paying down the principal and interest — so he didn’t advise against the purchase. Major repairs done recently may mean no major repairs in the near future.

But some buyers walk away from deals if the condo finances seem risky, Watt said. In some cases, it might even be the lender who torpedoes the deal. If a building has a lot of problems — such as frequent flooding and a very high deductible for any insurance claims — a lender might be reluctant to mortgage the buyer for fear they can’t handle the anticipated higher costs.

Advice to buyers? Work with realtors and lawyers with expertise in condos, said Conant.

Don’t max out your finances to buy, he added. There’s the mortgage, there are the monthly fees, but you should still have wiggle room in your budget to absorb potential new costs.

“All you need is one bad thing to happen to the building, a bad board, a bad group of owners, or the building is 40 years old and there’s a repair that nobody expected, and now you need a million bucks,” Conant said.

And go to your condo meetings, McNally said.

“You’re investing in this real estate asset — it’s important you have some say over how that real estate asset is managed long term,” she said. “It’s not maybe the most fun thing to go to the owners’ meetings during your personal time at night. But it is important to do.”

And vote for upkeep, Watt said.

“The health of a strata (condo) property is only as good as the people make it,” he said.

“You can buy a brand new home, and if you don’t maintain it, it’ll be deteriorating in 10 years. If they have a vote to keep the building updated, you vote for it, even if it costs you more money to put in the contingency, it will pay off in the end.”