*Please note that School of Scheff is not legal advice and should not be taken as such. School of Scheff provides legal information which is specific to the Province of Alberta. Should you reside outside the Province of Alberta, please contact a lawyer in your jurisdiction with any legal queries as the laws across the Canadian provinces vary widely.*
Condominium Disclosure 101
In theory, purchasing a condominium shouldn’t be all that different than purchasing a detached residential home. In actuality, while similar, there is an additional layer to consider – the fact that you become part of a collective governed by a board of directors. In order to help inform you about whether you want to live in this particular condominium complex, there is extensive document disclosure you have a right to review before deciding whether you want to move forward with your purchase. Under the Condominium Property Act and Condominium Property Regulation you are entitled to extensive disclosure.
The review of this disclosure is usually one of the conditions under your purchase contract and you have a few weeks to review this disclosure. You may review it yourself or have your lawyer review it. The condominium corporation has 10 days to provide this to you after its requested and therefore, by the time you receive it, you may require more time to review the documents. As such, you may want to consider either a) having a longer than usual condition period or b) asking for an extension of your condition date once you receive the documents to ensure that you aren’t rushed in your review.
This list comes from section 20.52 of the Regulations, with my contextual comments in italics:
1. an information statement that includes:
a. the particulars of
- any lawsuit started against the condominium corporation that they have been served with, including the monetary value of the claim;
- any outstanding judgments or orders.
- any written demands made to the condominium corporation for amounts greater than $5000 that if the condominium corporation fails to pay, would result in a lawsuit being started against the corporation;
- This can be important information because if the condominium corporation has a judgment against it, the owners can be called on through special assessment to pay a portion of the judgment.
b. a statement setting out the amount of the condominium fees payable and the basis on which that amount was determined;
- You will be responsible to pay condominium fees each month and will want to know how much you are expected to pay and how that amount was determined.
c. a statement setting out any structural deficiencies that the condominium corporation has knowledge of at the time of the request in any of the buildings that are included on the condominium plan;
- These are items which may or may not be captured in the capital replacement fund study. If they were unexpected they may not have been in the study but could be equally as costly.
d. loan disclosure statements for current loans, including documents showing the starting balance, current balance, interest rate, monthly payment, purpose of the loan, amortization period and default information, if applicable;
- If the corporation has had to take out loans for any reason, these are things which the owners would be paying for indirectly through their condominium fees. If the interest rates rise, or the condominium corporation takes out more loans than it’s able to repay, the owners could end up responsible for these loans through special assessments.
2. the particulars or a copy of any subsisting or prior management agreement;
- If the condominium corporation has contracted a management company to perform corporation duties, this agreement will contain all of the particulars respecting what duties they have been contracted to perform and how much the corporation is paying for those services.
3. the particulars or a copy of any subsisting recreational agreement;
4. the particulars respecting any post tensioned cables that are located anywhere on or within the property that is included in the condominium plan;
- Use of these cables were common in the 1970s and 1980s and were most often used in high-rise, concrete construction condos. They are steel cables placed inside of plastic tubing pulled to a high-tension inside the concrete slab to allow for more strength over larger distances.
- If installed correctly, they don’t pose a safety risk, but if they begin to corrode they can become a safety risk and as such, condos which have these cables often have higher condominium fees due to the monitoring of these cables that is required to ensure they remain safe.
- You may also have difficulty obtaining financing for a condo with post tensioned cables and this can affect your saleability in the future.
5. a copy of the budget of the corporation and a copy of the annual financial statements of the corporation;
- This will tell you whether the condominium corporation has been managing their money well and whether you as an owner may end up having your condominium fees increased due to poor money management.
6. a copy of the bylaws of the corporation
- The bylaws contain vital information for the rules that govern the condominium corporation and rules that are imposed on you as owners. This can affect whether you can or cannot have pets in your unit; what changes you may be able to make to the exterior of your unit; how much you pay in monthly condominium fees; parking; exterior maintenance and interior maintenance of the common areas; and other aspects of your day to day living. If you desire complete control over what you can and cannot do in your home, living in a condominium may not be for you.
7. in respect of a particular fiscal year (most often the most recent, but you can request previous years, two years is usually sufficient as this is the time period for most legal claims to be brought – two years from the day someone knew or ought to have known they had a claim), a copy of:
a. all approved minutes of all general meetings of the corporation, if available, draft minutes of general meetings, if approved minutes are not available, for meetings that occurred at least 30 days before the date of the request, and approved minutes of board meetings;
- Meeting minutes can tell you many important things about living in that particular condominium complex. Any issues that have arisen will be present in the board minutes as well as the annual general meeting minutes. This should include maintenance related concerns; problematic units or owners; parking concerns; or management concerns.
b. a statement setting out the unit factors and the criteria used to determine unit factor allocation.
- Unit factors are important because if a special assessment is issued, your portion is determined by the size of your unit and the unit factors you have. The more unit factors, the greater your proportion of the special assessment and the more you have to pay.
c. a copy of any lease agreement or other exclusive possession agreement with respect to the possession of a portion of the common property or real property of the corporation, including a parking stall or storage unit.
- This could be office space that the condominium corporation rents out or parking stalls that the condominium corporation rents out.
d. a consolidation of all the rules made by the corporation;
e. the text of written ordinary and special resolutions voted on by the corporation and the results of the voting on those resolutions, other than the results of a vote conducted by a show of hands;
f. copies of reports prepared for the corporation by professionals, including professional engineers but excluding reports requested and obtained by the corporation’s legal counsel in relation to actual or contemplated litigation;
g. copies of insurance certificates held by the corporation; copies of insurance policies held by the corporation; the current standard insurable unit description for the residential units or classes of residential units;
- Ensuring that the condominium corporation is carrying adequate insurance is vital. The condominium corporation’s insurance protects the common property and the units against loss resulting from destruction or damage (think of it as “studs out” coverage) and it can also protect board members and the condominium corporation from liabilities incurred when carrying out their duties. Some condo policies will cover “studs out” and “studs in” but not improvements or personal property. You’ll want to review your condominium corporation’s policy to confirm.
- You will also want to carry your own insurance to protect the items “studs in”, your personal property, and improvements that you make to your unit. In a total loss situation, the condominium’s insurance generally only has to reconstruct the unit to original specifications. If you had done renovations and improvements (such as finishing of a basement), you would have to have insurance to cover those improvements – the condominium corporation’s insurance generally doesn’t cover that. You can also obtain insurance against special assessments so that you only have to pay a deductible vs. thousands of dollars for your portion of the special assessment.
8. a statement setting out the amount of the capital replacement reserve fund;
9. copies of reserve fund plans, reserve fund reports and annual reports.
- This is a vital document that takes a birds eye view of health of the condominium property and determines a schedules for when capital replacements or improvements may need to be done. This includes replacing or repairing: flooring, roofing, siding, HVAC, boilers, elevators etc. It also sets out an estimate for the costs and a suggestion for the amount of the capital replacement fund each year to ensure there are enough funds to pay for the repairs and replacements as they come due.
- If when you review this study there are several major repairs due to be completed, these are repairs that should come out of the capital replacement fund – however, if the corporation hasn’t been collecting enough condominium fees to keep up with the fund demands you may end up with a special assessment and paying for a portion of these repairs out of pocket.
Some condominium corporations do not provide all of this information to you with their standard disclosure package. You are entitled to it and may request any of the above documents that may have been left out of the package you received.
Living in a condominium can be a great way to transition to a less onerous lifestyle but it can also have its pitfalls. If you’re contemplating moving into a condominium, make sure that you are informed as to the particulars of that condominium corporation – it may end up saving you a lot of time, headache, and money in the long run if it turns out that the condominium disclosure reveals red flags.