Information About Condominiums
If you're considering buying a condo, or even if you already own one, you may not be aware of many of the unique aspects of this type of home ownership. We do a lot of condo transactions and, over the years, have met many people who were forced to pay thousands of dollars because they didn't have the proper representation when they purchased and didn't understand the risks involved in this type of ownership.
The rest of this page is dedicated to giving you some basic information and is grouped into 4 categories:
It's a lengthy read if you cover it all, but you'll have a decent foundation of condo knowledge which will help you make good decisions and may just save you a lot of money.
What is a Condo?
Condominiums are often thought to be synonymous with apartments. This is not correct. A condominium is not a style of building, but rather, a type of ownership. Apartments, townhouses, villas, detached homes and even bare land can be condominiums. Conversely, some townhouses and attached homes might not be condos. It boils down to whether or not there is any shared ownership included.
When you purchase a condo you are actually buying two things.
- First, you're buying a unit which is your personal space be it an apartment, townhouse, house or plot of land.
- You are also buying a share of ownership in the condominium corporation. The corporation is responsible for the shared parts of the project (elevators, hallways, sidewalks, etc..). It is important to note, that in most condominiums, the shared parts incur operating and maintenance costs. As part owner, you have a share of those costs as well.
Condominium Corporation vs Condo Management Company
Some people confuse the condo corporation with the condo management company. They are very different.
- Condominium Corporations
- The legal entity that owns the condo project and is made up of all the different owners. Condo corporations have the responsibility to ensure compliance with all applicable regulations. They also have the power to enact the common rules (Bylaws) by which each owner must abide.
- Management Companies
- Offer services to condominium corporations, for a fee, when the owners don't have either the expertise or inclination to handle the responsibilities of the corporation on their own. The range of services offered will vary between management companies.
Owners generally don’t have the expertise to source out the specialized engineers and professionals who must inspect post tension cables or create reserve fund studies as required by legislation and in most cases have better things to do with their life than make appointments with tradespeople every time something needs fixing. This is why a management company is often a worthwhile additional expense for most owners, especially in larger condominium projects.Back to Top
Buying a Condo in Calgary
Finding a unit you're happy with is the just the first step in purchasing a condo. Because of the shared aspects of condominiums, there are rules which govern what you can and can not do and these are outlined in the condominium bylaws. Additionally, the financial health of the condo corporation is vital from your perspective because, as part owner of the corporation, if they fall short of funds you will be on the hook to cover your share of the shortfall. You'll want to engage a condo Realtor to ensure you receive sufficient documentation from the seller so you can review all those aspects.
Condominium Bylaws and Other Condo Documents
The condo documents you receive as part of your review will be substantial, often including hundreds of pages of hard to interpret financial statements and can be very boring reading. They can be most revealing however and could be the best chance you’ll ever get to walk away from a potential nightmare.
Documents you're likely to get will include most, if not all, of the following:
- a copy of the current
- bylaws of the corporation
- budget of the corporation
- insurance certificate
- a copy of the most recent financial statements, including the most recent year-end and month-end statements
- a statement setting out the amount of the monthly condo fee and the basis on which that amount was determined
- a copy of the most recent available minutes of the Annual General Meeting
- a copy of the minutes of meetings of the Board of Directors of the corporation for the past 12 months
- a copy of any lease agreement or exclusive use agreement with respect to the possession of a portion of the common property, including a parking stall or storage space
- the particulars of, or a copy of, any subsisting
- management agreement or
- recreational agreement
- the amount of any homeowner association fee
- a statement setting out structural deficiencies that the corporation has knowledge of, at the time of the request, in any of the buildings that are included in the condominium plan
- a statement setting out
- the amount of the capital replacement reserve fund,
- a copy of the most recent reserve fund report and
- a copy of the most recent reserve fund plan
- the particulars of any post tensioned cables located anywhere on or within the property
- the particulars of
- any action commenced against the corporation and served on the corporation
- any unsatisfied judgment or order for which the corporation is liable
- any written demand made on the corporation for an amount in excess of $5,000 that, if not met, may result in an action being brought against the corporation
For many buyers, the condo document package can be overwhelming. Most people are just not qualified to read and understand financial statements and other technical documents contained in the package. If a Reserve Fund has $2 Million, is that enough? If you feel overwhelmed, an experienced condo Realtor will know of several good condo document review services who can assist you.
Attempt to read the documents fully yourself whether you intend to hire a review service or not. You may find a service is not necessary and save yourself some money and, even if you do hire a service, reading ahead of time could identify specific questions to ask the reviewer about. Pay particular attention to the rules section of the bylaws as this will govern what you can and can’t do with the property such as:
- whether or not you can have pets, and what kind, size, etc..
- what sort of renovations are allowed
- whether you can run a business from the unit or not
Board meeting minutes, while one of the more boring reads, can provide some of the most insightful information as this is where all the condo owners complain about problems and can tip you off to potentially major issues. For example, if you see "Mr. Jones in unit 201 complained of water staining on the interior wall below unit 301’s deck" you'll definitely want to investigate further. Just search the Internet for "Vancouver Leaky Condos" for an idea how expensive water intrusion repairs can be and you’ll see the value of giving extra attention to this part of the condo documents.
Parking is one of those things in condo transactions that can be particularly tricky for a Realtor who does not have specialized condo training. Too often a buyer will take possession thinking they have purchased a unit with 2 parking spaces only to find out that they now only have one. In Calgary, condos can have "Assigned" parking, "Leased" parking and "Titled" parking, sometimes even a combination of those within the same complex. Each type is dealt with differently in the contract and needs to be done right or you might not get what you expect.Back to Top
Owning a Condo in Calgary
Owning a condo is not the same as living in a rental. While some of the caretaker and management duties may be handled behind the scenes by a management company just like in a rental, the management company is paid by you, through your condo fees, as is every other aspect of the operation of the condo corporation.
Condo fees are often thought of as a type of rent which pays for the services and upkeep of your condo complex, and that really is a decent analogy, but while everyone likes low fees, if the condo fees are too low, it may leave the corporation with an inadequate Reserve Fund which can lead to very costly Special Assessments.
Reserve FundsReserve funds, when they are properly funded, will always have the money required to pay for maintenance and replacements (roofs, boilers, etc..) when needed. When equipment breakdowns occur before their anticipated end of life, or when new deficiencies are discovered, a special assessment may be necessary. Special Assessments can be in the hundreds of thousands of dollars and your share can easily be in the tens of thousands of dollars if the problem is severe.
Condominium Special Assessments
Special assessments happen when a condo corporation suddenly finds itself in a position of cash shortfall, either because of unexpected repair costs, poor planning or even lawsuits. Condo corporations make up the shortfall by forcing each owner to pay their share. Their share is based on the “Unit Factor” they hold.
All condo corporations have 10,000 “Unit Factors”. So if your condo unit has " 499 unit factors" and your titled parking stall has "1 unit factor" your share of a $1 Million Special Assessment would be $50,000.
This is money you must pay. If you don’t, it becomes a charge against your property title and has the same entitlements as a mortgage. Needless to say, you don’t want Special Assessments. If you discover discussion of special assessments when reviewing condo documents before a purchase you should proceed with extreme caution.
If you are selling a condo and the buyer has not specifically agreed otherwise, any special assessment applied against your unit up to and including possession day are the responsibility of the seller. For example, if you enter into a firm contract to sell your condo on July 1st, and prior to the possession day on September 1st, a special assessment applied in August, the amount of the special assessment will be deducted from the proceeds of your sale. Buyer’s lawyers will demand a special document called an "Estopple Certificate" at possession day to verify the existence of any outstanding condo fees and assessments.
Condo Board of Directors
The major decisions of the corporation are handled by the condominium board of directors. This is a group of owners that is elected by all the owners during a vote at the Annual General Meeting of the corporation. If you feel so inclined, and want to have more of a say in the direction of your condo corporation then you can run for election and even campaign to promote yourself.
Should you find yourself elected, you can expect to meet about once a month or so to discuss all the issues of the complex and participate in managing the condo corporation.
Save Your Documents!
As you'll see in the next section, condo documents are valuable. Save everything you ever receive from the board or management company.
Tip! If you are on the board, do your fellow owners a favour and scan every document and email them out to each owner.Back to Top
Selling a Condo in Calgary
If you are about to sell your condo, you will need to clean and stage your house as you would any property, but you will also need to do a few other things, the most important of which is to find a qualified condo Realtor who specializes in selling condominiums. They will guide you through the process including preparation of your condo document package.
Preparing a Condominium Documents Package
It is traditional in the Calgary condo Real Estate market for the documents to be provided and paid for by the Seller. Most condo boards don’t take the time to copy and distribute the documents to all the owners. The management companies capitalize on this and charge a small fortune for doing it for sellers who suddenly find themselves in need of them.
Nowadays, each document is scanned and turned into a PDF file that you’d think would be easy to distribute for free, but in practice the management companies charge upwards of $200-$300 for copies of all the various documents you’ll typically need when selling. It goes without saying that as an owner you should keep everything you’re ever given by the condo board or management company. If you know people on the board, ask them if they can email you copies. The more documents you can get for free, the better.
Tip! Don’t purchase any documents in preparation for listing before talking to us. In preparation for most appraisal or listing appointments we will already have purchased some of the documents you require, saving you a few dollars. We also know how you can obtain some of the documents you’ll need from less expensive sources than from your management company, again saving you some money. Lastly, we can review what you have saved and let you know which documents are still valid and don't require purchase.
If you would like more information about condominiums, we're happy to share our knowledge with you. Feel free to contact us anytime.Back to Top