‘Condominium’ is a legal term applied to a specific and certain type of real-estate and ownership. The following types of real estate may fall within the ambit of the legal term;
- Apartment buildings (high-rise or low-rise);
- Certain lofts;
- Certain Townhouses; and/or
- Certain semi-detached or detached houses
An owner of a condominium unit has proprietary rights of ownership to their individual condominium unit as well as a collective shared ownership as well as financial obligation to maintain the facilities or “common elements” of the building. These common elements may include;
- Parking areas;
- Gardens; etc.
Declaration, description, and the condominium corporation
At the outset it would be helpful to understand that upon the development of a condominium building the ‘declaration’ and ‘description’ must be registered; once this is done the development becomes a Condominium Corporation. The owners of the individual condominium units are considered to be owners of the Condominium Corporation and exercise a right to vote on specified matters of concern. The owners also elect the directors of the Condominium Corporation in order to handle the daily business of the condominium Corporation.
A Condominium Corporation is legally created upon the registration of two important documents; i) the ‘declaration’ as well as the ii) the description. In the declaration such things as the definition of units, common elements, the division of ownership of each owner, and the amount of monthly condominium fees are set out. In essence the declaration serves in ways as the constitution of the condominium building. The description on the other hand contains a building or floor plan as well as the property survey of the condominium unit.
Other than the Declaration and Description it is important to note for potential Condominium owners that the use of condominiums are also governed by by-laws and rules. The rules govern the day to day rights and obligations of residents and owners of condominium units such as for instance the policy on pets, and the requirements of renting out the condominium units etc. The by-laws determine the powers and duties of the Condominium Board of Directors such as for instance the procedure for conducting meetings as well as the collection of common expenses etc.
Common elements and monthly condominium fees
Condominium Corporations generally require that each owner be responsible for the repair and maintenance of their own unit whereas the corporation is responsible for the upkeep, repair and maintenance of the common elements.
In order to fulfill this duty of upkeep, repair and maintenance of the common elements the Condominium Corporation collects funds known as the common expenses from the owners of the Condominium Units. The amount of money a condominium owner is required to pay per condo is dependant upon the size, services and facilities of the condominium unit(s) they own as well as those offered by the common elements. For instance, a condominium building where the common elements include facilities such as gyms, swimming pools or services such as entertainment centers or libraries will generally have a higher amount of monthly common expenses than those without. The common expense can represent a significant financial cost and burden, therefore potential purchasers should consider whether they will be able to afford the expense before buying a Condominium Unit.
The Status Certificate, formally known as the ‘estoppel certificate’ contains the following essential information concerning the financial status and circumstances of a particular Condominium Corporation:
- The Condominium Declaration;
- The By-laws;
- The budget;
- The reserve fund;
- The management contract;
- The Minutes of the latter most General Meeting of the Condominium Corporation;
- A record of any lawsuits concerning the Condominium Corporation; and
- A record of Insurance.
When purchasing a resale condominium unit, the purchaser should make sure to thoroughly investigate the financial status of the Condominium Corporation they are planning to purchase a condo in. An experienced real estate lawyer can help the purchaser asses the financial condition of the condominium corporation. This is generally done by examination of the ‘status certificate’ at times referred to by its formal term ‘estoppel certificate’. This helps the lawyer asses the financial statements and budget of the Condominium Unit.
The purchaser should pay special attention the status of the reserve fund held by the Condominium Corporation in order to determine whether a sufficient amount of money is held in the fund in order to maintain the upkeep and/or repair of the Condominium Corporations Capital Assets. Generally an agreement of purchase and sale of a condominium unit contains provisions which require the purchase to be conditional upon the receipt of a Status or Estoppel Certificate, with all the relevant contents and a minimum of 5 days to review it and determine whether the relevant financial status of the condominium corporation is satisfactory.
The assess the large number of documents involved in the purchase of a Condominium unit can be a daunting task. For a purchaser it is generally an important purchase for either residential or investment purposes. It is recommended that the services of a reputable and experienced real-estate lawyer are acquired in order to assist the purchaser and help secure his/her/their best interests.
For more information please contact one of our experienced Real Estate Lawyers at MEHDI AU LLP.
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