Condominium properties represent a large number of sales in all Alberta markets every year [about 30%], and the issues that surround the purchase and sale of condominium properties are specific and intrinsically linked to the condominium documents. It is widely understood that condominium ownership provides a carefree lifestyle option, but confusion over condominiums can be expensive. Let's take a few minutes to think through some of the high points.
As you would expect, the Real Estate Act of Alberta as well as the Real Estate Act Rules, govern the transaction of condominium properties, because condominium is a form of owning real property. As an additional complexity, condominiums are also governed by the Condominium Properties Act of Alberta which relates to the running of the condominium corporation itself, as well as specifics about how condominiums are bought and sold.
One of the biggest misconceptions about condominiums is what exactly a condominium is. Many consumers believe a condominium is an apartment-style property in a complex which offers amenities for its owners. Although this may be accurate, it is not the whole story, as a condominium can be almost anything from an apartment or townhouse to the lot under a single-family home or a 20-acre parcel of rural land. The reason for this is that a Condominium is a type of corporate ownership of a project, rather than simply owning a piece of individual real estate. One of the benefits of condominium ownership includes the right to dispose of your interest in that corporation which is why in the real estate space it feels a lot like non-condominium property.
Condominium Docs importance
When a prospective buyer considers buying a condominium property, it's important to frame thoughts around that purchase so the buyer clearly understands what condominium ownership means. If the buyer were going to spend $300,000 to invest in a popular hamburger franchise restaurant, they would likely want to know a few crucial details about that company. Financial health, assets, liabilities, renovation funds, debts, and restrictions, are only a few of the things a restaurant buyer would like to know about before investing their hard-earned money into that corporation to ensure investment success. This is the same as buying a condominium property, where the buyer needs the same information when deciding to invest their money into a condominium corporation. The big difference is that as a benefit of owning shares (unit factors) of that condominium corporation, the purchaser gets to own a specific piece of the physical property. The condominium documents serve the purpose of satisfying the informational needs of the purchaser to evaluate that investment profile.
What documents are required?
Thankfully consumers are not left alone to figure out what documents are critical when considering a Condominium purchase, as the Condominium Properties Act specifies which documents should be prepared by all condominium corporations in Alberta, and the Alberta Real Estate Association has undertaken to include this list and other important documents in the standard purchase contract for resale condominiums used by REALTORS®. By ensuring consumers make their purchase conditional to the review of condominium documents, REALTORS® help buyers gain the transparency they need when making the purchasing decision.
Who should review the documents?
The REALTOR® responsibilities end with helping the prospective buyer understand their need for these documents and where to get them. A REALTOR® is typically not qualified to review condo documents or provide advice on their contents. A REALTOR® may help a buyer check the list of documents provided by the condo board or management company against the list in the purchase contract, however, it is the buyer's responsibility to review the content themselves. If a buyer does not feel confident in reviewing the documents themselves, there are several condominium document review services available at an additional fee which can help a buyer identify points of concern in the documents and give advice on the contents of the documents themselves. A few law firms may offer this service, too, but typically contract it out to a condominium document review service.
Condominium ownership is different from traditional non-condominium ownership in that your ownership is a share of the whole project. This means that if the project requires upgrades it is the responsibility of all owners to pay for those upgrades. If the financial management of the corporation has not been diligent in planning for upgrades or maintenance, the result is usually a special assessment, or “cash call”, which is a bill due and payable by the individual owners. Special assessments can be a few hundred dollars or run in the tens of thousands of dollars per unit and can not be avoided as an owner, but can often be avoided through competent examination of the condominium documents before the purchase. Other things that can be caught at the time of purchasing through the document review are pet restrictions, parking issues, age restrictions, restrictions on commercial activities (like short-term rentals like AirBnB) and financial health of the corporation all of which may be concerns the purchaser should know about before they own the property.
Condo Fee confusion
Condo fees in their most pure form are simply the amount of money required to run the corporation, maintain the total project in good repair, and save a portion for future repairs and replacements. Oftentimes, buyers look for the property with the lowest fee, however, if that low fee is not covering the expenses and required savings for future repair and replacement, then a special assessment is inevitable. Good financial stewardship is vitally important to the health of a condominium corporation, and the condo documents can help determine if the condo has been well run and the condo fees are representative of the current and future needs of the complex for the benefit of all owners, present, and future.
[Used courtesy of the Real Estate Association of Alberta, retrieved 2021-11-29]