SO YOU WANT TO BUY A CONDOMINIUM SEMINAR  -  SLIDES

Seminar Aim

To inform prospective condominium buyers of the pros and cons of condominium living.

Objectives

1.  To make buyers aware of the basic terms related to condominium living.

2.  To inform buyers about some of the important questions to ask before buying a condominium.

Basic Concepts

Why are you buying a condo?

·        Lifestyle – do you want to be free to come and go as you please, not have to worry about maintenance and repairs?

·        Unit – are you buying an investment?

·        Think carefully about buying a condo. 

·        Condo living is not for everyone.

What is a condominium?

·        Shared property ownership.

·        Ownership of individual units and common elements.

How is a condominium set up?

·        Developer -- declarant.

·        Submits a declaration and property description.

·        Once building is complete and registered, condo corporation is set up.

What is a Declaration?

·        Creates the corporation.

·        Constitution for the corporation.

·        Defines unit boundaries.

·        Specifies rights & responsibilities of owners & corporation.

What are you buying?

·        Single home you own the area from the centre of the earth to heavens above within your lot boundaries.

·        Condo unit you own the space bounded by the walls, floor and ceiling.

·        Declaration defines your unit boundaries.

·        Balance of the condo complex including the exterior walls, windows, exterior doors, roof, parking area, landscaping are called common elements managed by the condo corporation.

·        Common elements are part of unit ownership as a percentage of the whole as set out in the declaration.

How is a Condo Governed?

·        Condominium Act gives the board the power to set budgets, hire a manager, hire/fire staff, deciding on maintenance and repairs.

·        Board runs the corporation on behalf of the shareholders.

·        Board enforces the Condominium Act, Declaration and rules.

·        The owners elect board of Directors once 51% of the units in a new development have been sold.

What is living in a condo like?

·        Condo living is more regulated than living in a non-condo home.

·        All condo corporations will have rules and by-laws that regulate what one can and cannot do.

·        Condo board is responsible for enforcing the by-laws and rules.

·        As an owner you are responsible to abide by the by-laws and rules.

·        Rule violation may result in a fine being levied.

·        Before buying a condo you should read the declaration, the by-laws and common element rules for that particular condominium.  If there is something in the rules you cannot live with then you should consider another condo that may have different rules.

·        Rules and by-laws can be changed by a vote of the owners.

How are condo fees determined?

·        Condominium Act stipulates that the board must set an annual budget to meet the year’s operating expenses and reserve fund contributions.

·        All owners pay condo fees based on the budget set by the board.

·        Fees each owner pays are stated in the declaration based on the percentage of the whole that one owns.

What should I know before buying a new condo?

·        Who is the builder and/or developer?

·        Ask for a copy of the declaration, common element rules, and by-laws.

·        Obtain a copy of the proposed budget.

·        How many units have been sold?

·        Is the project registered? If not, when will it be?

·        Say you will move in once building is registered and not before.

·        Be skeptical of completion dates, allow at least a 6 month buffer.

·        What expenses do the condo fees cover?

·        Is this project part of a phased development? If so, what is the overall plan?

·        Remember a phased development might change after you buy in.

·        You have a 10 day cooling off period.

Questions to ask builder/developer

·        How many condos have you built?  Names?

·        Who does your construction?

·        Do you have a project manager?  Name?

·        Are your projects finished by the stated completion date?

·        Are your projects registered by the completion date?

·        Who looks after your deficiencies?

What should I know before buying a resale condo?

·        Review the audited financial statement.

·        Review the annual budget. What are the fees?  What do they cover?

·        Is the reserve fund fully funded?

·        Have any major repairs been carried out?  Why?

·        Are any major renovations/repairs planned?

·        Review the previous year’s minutes.

·        Review the declaration, by-laws and common element rules.

·        Name of the builder?

Condominium terms one should be familiar with

Declaration – creates the condominium corporation.  Defines the boundaries of units, percentage of the total common expenses allocated to each unit. May contain conditions or restrictions regarding the occupation and use of the units or common elements.

By-Laws – are the rules that state how the condominium will be run and maintained.  By-laws can be changed by a vote of the owners.

Common Elements – common elements include the property remaining after the boundaries of the units have been defined.  They are owned in common with all the other unit owners.

Exclusive Use Common Element – portion of the common elements designated for the sole use of one or more unit owners, e.g. balconies, patios, storage locker.

Reserve Fund – fund set up by the corporation to cover major repairs and replacements as they come due e.g. roof, elevators, carpets, boilers, windows, etc.  Any part of the building that will eventually wear out and need to be replaced will be funded from the reserve fund.

Reserve Fund Study – each corporation must have a study done by an engineering firm that lays out the time line of when various building components must be replaced and what the cost will be.  It also specifies the annual contributions that must be made to fully fund the reserve fund.

Contingency Fund – is usually established for new corporations by assessing a levy on each unit purchaser that can be used by the new board to help balance its initial budgets.  The levy amount is usually three times the monthly condo fees.

Estoppel Certificate – is the certificate prepared by the corporation for a purchaser.  It indicates what the fees are, financial standing of the corporation, reserve fund balance, whether any major expenditures are planned, and if there are any law suits against the corporation.

Special Assessment or Levy – a special assessment may be levied in response to an unforeseen major expense that cannot be covered from the reserve fund.  It may also be levied to fund a  major upgrade to the common elements, e.g. installing solar panels.  If the reserve fund is not fully funded then a special assessment may be levied to meet major expenditures.

Occupancy  Fee – may be charged by a developer when a unit is ready to be occupied but the condominium has not yet been registered.

Phased Development – different parts of a condominium development can be built in phases, e.g. new additional units, recreational facilities.  As each phase is built it is added to the already existing condominium.

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