When buying a condo, it is important to learn everything about the condo corporation one buys into. The condominium documents are vital in providing needed information. These documents include the bylaws, the minutes of any board meetings and the AGM, as well as the financials.
It is strongly advised that a buyer hires a professional condominium document reviewer to analyze all these condo documents. Most buyers will understand the bylaws, but the financials are often more difficult to understand. And yet, those financials are crucial because insufficient funds in the ‘savings account’ could mean a special assessment down the road.
Know your terminology when buying a condo.
Following is an overview, in alphabetical order, of terminology used when buying a condo.
As the name says, this is an annual meeting and is for all owners to attend. During the AGM, the owners are brought up to date with the ongoing business of the condo corporation. They can ask questions and raise concerns, and a new board may get elected. It is important to attend the AGM because the AGM is the only meeting of the condo corporation where all owners can actually vote. If an owner cannot attend the AGM, another owner can vote by proxy.
The operation budget stretches over one year and is comparable to a household budget. This budget shows the funds that come in through condo fees, and what goes out towards operating costs. Every condo complex has costs such as general maintenance, monthly electrical bills for lights in the hallways, snow shoveling, garbage collection, etc. The board of directors prepares and approves this Annual Operating Budget. It is important to anticipate what a healthy budget is that will leave no shortfall at the end of the year, or the near future.
The Board of Directors are the decision makers for the condo corporation. The board can make decisions on small, daily matters and bigger future issues. A small matter can be, for example, a decision on placing cameras at the entrance. Bigger issues can be those regarding expensive upgrades such as new windows, or the decision to implement a special assessment.
The bylaws explain all the rules and regulations of the condominium corporation. To make the bylaws enforceable by law, they must be registered at Land Titles. The bylaws are different for every condominium complex, so it is important to always read them. The following are just a few examples that are written in the bylaws:
- The responsibilities of unit owners
- Any policies about allowing Air B&B rentals
- Obligations regarding repairs and maintenance within the owned unit
- Guidelines regarding any renovations to the unit
- Policies regarding voting, electing board members, changing the bylaws etc.
- Regulations on allowing any pets
- The rules regarding (visitor) parking and storage areas
- Rules on the use of BBQ’s, and so forth…
Common property, also referred to as common areas, are the areas that are shared amongst all owners of the complex. A clubhouse, the gardens and the parking area are examples of common areas in a townhouse complex. The common areas in an apartment building are usually the lobby, hallways, a fitness area, patios, social rooms, etc. Sometimes, balconies and storage lockers are also considered common property. If that is the case, an owner has ‘exclusive use’ of the balcony and storage locker. As mentioned, the Condominium Plan and unit factors shows these common properties and if any are for exclusive use.
Condo fees are also known as condominium contributions. They are monthly fees paid by the owners. Condo fees are usually divided into two different accounts. One account is for the operational cost; the other account is for the larger future expenses. Smaller repairs, weekly landscaping, snow removal and the monthly utility bill for the common areas are examples of operational costs. The other account is, in essence, a savings account, also called the reserve fund. This account is for larger, more expensive improvements, such as a new roof, new windows, new siding or new elevators. These large expenses are also laid out in the Reserve Fund Study.
The condominium plan lays out the boundaries of the complex and the units within. It also shows the exclusive use and common use areas, and this condominium plan lays out the unit factors per unit. In Alberta, it is most common to allocate 10,000 unit factors per complex. These 10,000 unit factors are then divided among all the units, usually by square footage. A larger unit has more unit factors and, therefore, higher condo fees. These unit factors also define the contribution to a special assessment. If the parking spots are titled, they usually have a unit factor of 1 or 2 per parking stall.
The Condominium Additional Plan Sheet, or CAD-sheet, is somewhat similar to the title of a single family home. The main difference is that the CAD sheet applies to the entire complex, rather than one unit. The CAD sheet gives a buyer the latest important information on the complex, such as:
- Charges against the corporation
- Any caveats
- The registration dates for the bylaws
- Change of the board of Directors
- Change of the management company
- Any special resolutions in place
The disclosure statement is somewhat similar to the E-stoppel certificate. The disclosure statement is issued by the management company and provided as part of the condominium document review, so within the condition days. The seller is responsible to pay for the disclosure statement. The E-stoppel certificate, on the other hand, is purchased by the lawyer just before closing, and the buyer must pay for the E-stoppel certificate. A few examples stated in a disclosure statement are:
- The amount of the condo fees for the unit
- If there are any known special assessments
- If the building has post tension cables
- If there any known structural issues
- If the corporation is being sued or suing somebody
- The current reserve fund balance
The E-stoppel certificate is a document in which a seller confirms a variety of some very important facts regarding the condominium. For example:
- What are the current monthly condo fees?
- Is there any special assessment?
- Is the current seller in arrears of condo fees?
- Are there any charges or court judgements against the corporation?
- Are there any penalties against the current owner?
This shows that the is E-Stoppel certificate a very important legal document for any condo buyer. It is signed by the condo board or the management company and can, therefore, be accepted as the truth. The buyer’s lawyer purchases this E-stoppel certificate on behalf of the buyer at the very last moment in the buying process. The buyer should expect to pay a few hundred dollars for the E-stoppel certificate.
The minutes of any meetings are official summaries of what was discussed, what was decided and what happened at the meeting. There are minutes of the AGM, the annual general meeting, and minutes of the monthly board meetings. When buying a condo, the (Alberta) contract states that the seller must provide the buyer with the minutes of the previous 12 months. A potential buyer can read about these past meetings to learn more about the condo complex. If a condo board only met, for example, 4 times, then a buyer can only rely on 4 recorded minutes.
Parking can be assigned, leased or owned. If the parking stall is titled, it means it is owned, and the owner pays property taxes on the parking stall. Technically, an owner can sell the parking stall. However, often the bylaws state that a parking stall can only be sold to another unit owner within the complex.
If the parking is assigned, the board of directors can designate a parking stall and can change the location if needed. Leased parking stalls are guaranteed for a certain time, as per a lease agreement.
Some complexes have storage lockers in the parkade. These storage lockers can also be titled or owned. However, in Calgary, most lockers appear to be assigned.
The Reserve Fund Study lays out all the capital expenses that can be expected for the next 25 years. Capital expenses are considered large improvements such as new windows, a new roof, new elevators, new siding, new fences and so forth. A corporation needs to save money in a special bank account to pay for these large expenses. If a building needs a new improvement and there is not enough money in the reserve fund, then a special assessment can be the result. A reserve fund study and plan need to be done every 5 years. In most cases, a reserve fund study is done by a professional company. Only if a complex has 12 or fewer units is a board allowed to create their own reserve fund.
When a condominium corporation does not have enough money in the Reserve Fund to pay for certain common expenses, it may collect a special contribution or payment. This is called a special assessment. Every unit owner must pay a contribution, which is determined by the total cost divided by the unit factors.
The Board of Directors decides on a special assessment, as well as the extent of the assessment. The purchase contract between seller and buyer states that any known special assessment is the responsibility of the seller. Read more about special assessments here.
Sometimes, owners or the board want a change in the bylaws. This change in the bylaws is achieved through a special resolution. To validate a special resolution, it needs at least 75% of the votes. The difference between a special resolution and an ordinary resolution is that a special resolution needs the approval of 75% of votes, while an ordinary resolution requires approval of only 51% of the votes. A special resolution becomes valid after registration at Land Titles. A few examples of special resolutions are:
- Windows and doors become the responsibility of the unit owners
- The pet policy changes (from no pets allowed to, for example, one dog allowed)
- Any decision regarding the corporation borrowing money for expenses
Most asked questions in condo living:
Where to get the condominium documents
According to the Alberta purchase contract between buyer and seller, it is the seller’s obligation to provide these condominium documents. The list of condominium documents is quite extensive, and a realtor can help navigate these to make sure that all the correct documents are provided.
Management companies are the main source for purchasing the condo documents, and most management companies charge for these. It is not uncommon that a seller is required to pay several hundred dollars for the correct documents.
Condo bylaws can restrict renting out condos via short term rental sites such as an Air B&B. Therefore, it is very important to check the bylaws for rules on short term rentals. Also, realize that bylaws can be changed and updated at any time. So, renting out via an Air B&B might be allowed now but may not be allowed in the future.
Can I rent out or sell my parking stall in my condo?
As long as the parking stall is owned by title, renting out a parking stall is allowed in condo corporations. However, always verify this with the the bylaws.Often, bylaws state that the stall can be rented out, but only to someone who lives in the same building or complex. Selling a parking spot is usually allowed, but, again, only to other unit owners within the same complex.
What is included in my condo fees?
Every MLS listing states what is included in the condo fees. However, it is important to verify this with the condo management. What is included in the condo fees can vary a lot from one to another condo complex. For example, some buildings offer internet or cable tv, a concierge, a swimming pool etc. Heat, water and sewer are often included in the condo fees of apartment buildings. This only leaves the electricity bill for the owner. Townhouses usually have their own furnace and hot water tank, which means these costs (and maintenance) are paid for the owner.
Can I rent out my condo?
Every owner is allowed to rent out their unit. The Condominium Property Act of Alberta (the government) does not allow any restrictions on renting out. However, when renting out a condo unit, a few notes need to be taken into consideration. A landlord must inform a condominium corporation when a unit is rented out. Like owners, tenants are restricted to all bylaws. Both the owner and tenant can receive a fine if the tenant does not comply with a bylaw. The condo corporation may request a deposit for wear and tear on common property while the unit is rented. A corporation also has the right to evict a tenant. Always consult with the bylaws and management company about the rules regarding renting out.
Can I have pets in my condo?
Regarding pets, it is always important to consult with the bylaws, as well with the management company. Every condo corporation has its own set of rules regarding pets. Dog allowance can vary from one or two dogs to height or weight restrictions. Some corporations allow more than one cat. Also, fish tanks and terrariums can be subject to different rules. In general, apartment buildings tend to be stricter about pets than townhouse complexes. Find condo listings where pets are allowed.
How many units are tenant vs owner occupancy in a complex?
Most bylaws stipulate that an owner must inform the management company when the unit is rented. Usually, the management company is the best source to learn how many units are renter vs owner occupied.
How do I know if there are any special assessments?
It is best to contact the condominium management to learn if there are any current special assessments in place. The contract states that the seller must provide the buyer with a long list of condominium documents regarding the condo corporation. One of the documents is called the disclosure statement. This statement is provided by the management company, and indicates if there are any special assessments currently in place. However, a special assessment must pass a resolution first, and, therefor, may not yet be in this disclosure statement. Thus, it is important to interpret all the provided financials, including a reserve fund study, as well as all the minutes. With all the provided condominium documents, a buyer, before deciding to buy, can make an informed decision on the (financial) state of the condo corporation.
Am I likely to fully understand the condominium documents myself?
In Alberta, it is strongly advised to hire a specialist to review all the condominium documents. For most buyers, the bylaws are fairly easy and straightforward to understand. However, the financials of a corporation are not that easy for everyone to understand. The Reserve Fund Study, Operational Budget, etc, need to be scrutinized and understood by a buyer. Specifically, those financials can show any upcoming shortages.
Also, a condominium review specialist knows exactly which condo documents a seller needs to provide, according to the purchase contract. If any documents are excluded, the buyer may miss crucial information.
Who pays for the special assessment?
The contract between seller and buyer states:
I want to buy a condo in foreclosure. How can I retrieve any condominium documents?
A buyer of a condo that is in foreclosure must purchase his/her own set of condominium documents. The seller of a foreclosure is a third party, such as a bank or mortgage insurance company. These institutions are not obligated to provide all the condominium documents in the way a private seller is. A buyer of a foreclosure who needs condominium documents can purchase all the necessary documents at the management company. In Alberta, these documents usually don’t come cheap.
I want to buy in a self-managed complex. How do I retrieve the condo docs?
Buying a unit in a self-managed complex is very well possible. However, it is important to use all possible diligence. Often, self-managed condominiums can only provide limited documents. By law, there is still a condo board, and usually the board can provide the necessary documents. If, for example, the minutes of meetings are not available, one can ask for all the email traffic regarding the complex. Door knocking on other units is a good extra step to use to learn more about the complex, as well. Even if units are tenant occupied, tenants are often most honest about their living experiences in the building.
What other things serve as due diligence when buying a condo?
Of most importance is to have a condominium document review specialist scrutinize all the documents. The condo document specialist will create an extensive report created from the bylaws, the minutes and the financials. As a potential buyer, also diligently read through all the condominium documents yourself. Board members are often a great resource, so track down members of the current condo board to ask questions. Besides the condo review specialist and the condo board, some old-fashioned door knocking is a great way to learn more about the building. Owners can provide you with good information, and tenants sometimes even provide you with more extensive information on living conditions. Also, a realtor can sift through the history of the particular unit and the entire complex, via the MLS. The MLS history can also give valuable past information about the complex.
Can I sue my condo board?
The short answer is yes, you can sue your condo board. All board members must act honestly and in good faith and must avoid any conflict of interest. A condo board must follow the CPA, the Condominium Property Act, as well as the Bylaws of the condo corporation. Obviously, board members must act fairly and keep the owner’s best interest in mind. If the condo board or a member is in breach, and damage is incurred, a unit owner can sue. There are several lawyers in Calgary who focus on condo law in particular.
Please note: The above is general information and not considered legal advice. We do our best to write informative articles about real estate in Calgary, Alberta. If you have any questions or concerns about our comments, please feel free to contact us or speak to your legal advisor.
We are Tanja van de Kamp and Ariette van Pelt, working as a team, both buying and selling homes in Calgary. Calgary has been our home since 2004, and real estate our full-time profession since 2009. Tanja was a lawyer in The Netherlands for 12 years, and learned how to negotiate strategically, and to work in the best interests of her clients. Thanks to our honest and transparent approach to real estate and towards our clients, we have built our business. It’s been a privilege to work with our clients, and, over the years, many clients reciprocated their appreciation of us, as shown through their many referrals.