Condominum Law: Some tips and tricks for your real estate purchase
Condominium Law: Buying real estate in Kitchener-Waterloo and surrounding regions It is interesting to see how many people tend to gravitate towards purchasing a condominium as opposed to a semi-detached or detached home. Whether you have just started shopping for real estate or have already signed an Agreement of Purchase and Sale, one thing is for sure: as a potential buyer, it is a good idea to understand what it is that you are buying, especially when it comes to buying into something like the condominium, knowing condominimum law it very important. It is no surprise that condominiums are a popular choice for those looking to get into the real estate market. This could be due to a variety of factors such as affordability (thanks to the sky-rocketing real estate prices over the last few years), availability or simply being able to ditch your shovel and lawnmower by having a property management company handle the exterior maintenance of the property. In our real estate law practice, we often close transactions involving condominiums and deal with buyers from all walks of life. However, many people buying a condominium for the first time do not know what is generally involved and what the key attributes of this form of ownership are. As a result, we share some tidbits: Source of Condominium Law: It is the Condominium Act, 1998 which governs condominium corporations and under which we find details with respect to how to create a condominium, the structure involved, the rules and regulations, the requirements with respect to owners, tenants, management and many other facets. The main documents that govern the condominium are the declaration and description, the by-laws, and the rules. In a sense, when you are buying a condominium, you are buying a form of legal ownership in your unit along with an undivided interest in the common elements. This means that typically, the portion of your unit entitles you to exclusive use and ownership. This use is limited within the boundaries of this unit. Your condominium also comprises of areas known as common elements which may include lobby areas, garage for parking, facilities shared between the unit owners such as a gym, party room and the like. These areas may be said to be owned in a communal manner for use of all of the unit owners. Boundaries and Common Expenses You may wonder exactly what you own within the condominium complex. To find that out, one must reference the declaration and relevant condominium documents to know the boundaries of their units and the areas that make up the common elements. The declaration will also tell you the percentage of maintenance fees or common expenses that each unit owner is responsible for. It is important to note that in many condominiums, a unit owner will pay for his or her pro- rated share of the expenses paid to maintain the common elements. This could include things like paying for maintenance, development, security, insurance, etc. Although it may sound obvious but generally, the more amenities a condominium has, the more likely it is to have higher common expenses. Typically, a high-rise will have many common element areas whereas a townhouse complex is likely to have less. The real estate scene in Kitchener-Waterloo appears to have many condominiums set up as townhouses and less high-rise buildings which are more commonly seen in and around Toronto. However, as we can see with the development projects that have started as well as those that are in the pipeline, the local skyline is set to adjust even more. Some condominiums may have parking, storage and lockers set up as separate units just like the physical space in which the buyer is going to own. However, in other condominiums, these areas may be designated as exclusive use for the by virtue of the buyer’s ownership of the unit. There are multiple types of condominiums that one may come across. You may have a common elements condominium, vacant land condominiums, standard condominiums, phased condominiums etc. They all derive their authority from the Condominium Act, 1998. Who runs this operation? Typically, a Board of Directors is elected which makes decisions related to operations as well as money management. The Board may hire a management company to see the day-to-day operations. Some smaller condominiums may not employ a property manager due to budgetary constraints and choose to be more hands on. The Board also plays a role in ensuring compliance of the rules and regulations in a condominium with the underlying idea being that through collective endeavour, all owners contribute to a good overall standard. The rules and regulations should be reviewed to ensure that you are comfortable with them and to identify any lifestyle concerns. What is a Status Certificate? Imagine you were buying shares of a company (publicly listed or private), would you want to know its’ financial merits and ensure it is not involved in any legal trouble? If the answer is yes, one may want to consider making an offer conditional to review of a status certificate by a lawyer for 3-5 days from receipt by the buyer. Either party (buyer or seller – usually with the help of the property manager or their respective real estate agent) can order the status certificate. In a nutshell, it provides a snapshot of the legal and financial health of the Condominium Corporation. It is often a very large document consisting of multiple components some of which have been mentioned above. It will tell us whether the condominium is facing major financial challenges (i.e. have there been any special assessments imposed recently on top of the current common expenses – which means more money out of your pocket as the potential buyer). It will also disclose if there are any lawsuits that have been filed or any other litigation that the condominium is involved in and whether there is adequate insurance in place. Further, it will also show details with respect to what kind of money is available for major repairs and replacements. If the condominium you’re buying into is dipping into the negative, it may lead to concerns for the possibility of higher common expenses. This is where the reserve fund study comes in which provides an indication from another professional (engineers) on the likelihood of major repairs. It’s a pretty good idea to let a lawyer look at this before you sign off on the dotted line. Conclusion All in all, becoming a homeowner (whether owning a condominium or a house) is major step. It is a good idea to know what it is that you’re buying and have an understanding of what is involved. Be sure to consult a professional to guide you every step of the way. For further questions about your real estate transaction, contact a Kitchener-Waterloo real estate lawyer.