Condo? Can do!
Condominiums are popular. But what documents do you need to check before you buy?
January 22, 2013, Jürg Zulliger (text) und Li Yu und Liu Bo (photo)
Just under 40 percent of all new buildings coming onto the market are condominium units. And Claudio Saputelli, head of Real Estate Research at UBS, expects demand to remain high: "Low interest rates, reduced risks regarding the economy, relatively little unemployment, and widespread preference for them all favor condo ownership."
Nevertheless, experts are amazed by how often people interested in buying are lured into making a snap purchase. Dominik Romang, a Zurich attorney and president of the Swiss Condominium Owners' Association (SSTV), says: "Probably only one in ten buyers actually seeks legal advice." Despite this being a big decision with far-reaching implications.
Study the deed of establishment
A key document is the public deed of establishment, which defines the individual condominium units and assigns each unit a quota or specific share of the overall value of the property. A separate partition plan, forming part of the deed, shows the individual apartments and their shares of the basement and garden areas. "Before buying you should insist on taking time to read the deed of establishment quietly at home," Romang stresses. This document sometimes grants existing co-owners the right of first refusal or the right to object should you later wish to dispose of your apartment, potentially making it difficult to rent or sell.
The regulations of the condo owners' association are just as important. These set out the rights and duties of the condo owners, such as the use of the garden, and the rules for the annual meeting. In addition, many properties also have their own house rules. As a condo owner you have to be able to accept living with all this.
Buyers are also well advised to carefully examine the purchase contract. This document governs all the key aspects of the sale: the handover date, price, and tax arrangements. One particularly important point is the extent to which the seller or building contractor can be held liable for defects in the property. For new buildings, the materials and interior fittings included in the price are usually listed in a separate set of building specifications. The more detailed and clear these are, the better.
Verify the purchase price
"It is advisable to have the purchase price verified and to consult an expert, to check whether the building needs any renovation," says Alfred Ledermann, head of Product Management Lending Solutions at UBS. Federally certified real estate appraisers, architects, or the local home owners' association (HEV) can assist. Individual condo owners are responsible for renovating and maintaining the interior of their own apartments. The supporting structure of the building, its facade and roof are the joint responsibility of the condo owners' association, which can approve necessary construction work at its annual meeting by a simple majority of votes.
Check the renovation fund
Renovation work is often required after 20 to 30 years. Condo owners have to finance this from the renovation fund or by directly contributing to the costs. So it's advisable to pay at least 0.3 percent of the building's insurance value into the renovation fund each year, until it reaches six to eight percent of that value. According to Saputelli, many funds are failing to reach this target: "Older rental apartments are often turned into condominiums, giving tenants the chance to become homeowners. However, there are often no reserves in the renovation fund."
Price increases despite headwinds
Price increases in the property market haven't been halted by either the stricter rules on withdrawing pension capital to buy a home, or by tightened lending conditions. Transaction prices for single-family houses rose in the third quarter of 2012, increasing by 0.9 percent compared with the previous quarter. Regional comparisons show Eastern Switzerland leading the pack, up two percent. Prices in Zurich stagnated, with an increase of just 0.2 percent. The comparison with last year offers a more even picture: prices for single-family houses rose in most regions by five to six percent
Transaction prices by region over the past five years for single-family houses, two to five rooms, quarterly Index 2006 = 100
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