About Condominiums
About Condominiums
If you are looking at buying a condominium in Oakville, or anywhere within Ontario, location isn’t the only thing you want to be concerned about. As a Buyer, you should be aware of the building or complex’s amenities and the maintenance of the common areas. As the Buyer, you should also have an understanding of the fees and the rules and regulations that come with living in a condominium, as well as the condominium corporation’s financial health. This is a lot of information, so, let’s start at the basics, what is a Condominium? What is a Condominium Corporation and what do they do? What are the fees involved in owning a condominium? And, what is a Status Certificate?
Condominium Fees
There are two types of fees; monthly maintenance fees and special assessments
Monthly maintenance fees are a monthly fee that is collected and used to cover the costs of keeping the common areas and other elements in good repair. They are also used to cover the operating costs of amenities such as fitness room, party room, swimming pool and staff – security guard, concierge or cleaning staff. Utilities may or may not be included in the monthly condominium fee. When it comes to the condominium fees as a Buyer, you should be aware of what services are and are not included in the monthly fee.
Each condominium has will have a declaration. This declaration shows how much each unit must pay in monthly condominium fees by way of a percentage. This percentage is usually calculated by the square footage of the unit. Increases in fees can happen at any time and for any number of reasons. It is important to note that when owners of new build condominiums can see a significant rise in the condominiums fees first few years of ownership, this is because fees to cover the cost of certain amenities might not take effect until the 2nd or 3rd year.
Special Assessment
Special Assessments can be charged by the condominium corporation in addition to the regular monthly condominium fee. The cause for the special assessment could be due to an unexpected repair or a shortfall in funds revealed in the reserve fund study (explained later). Like the condominium fee paid monthly, the declaration sets out how much each unit owner will pay when there is a special assessment. The condominium board sets the special assessment and does not require approval from all owners. An owner has the right to request copies of financial record providing the request is in writing.
Status Certificate
When a Buyer is purchasing a resale condominium, they want to be sure that they receive and understand the status certificate. Your offer should be conditional on the certificate being reviewed not only by yourself and other purchasing parties, but it should also be reviewed by a lawyer.
A status certificate should include:
- A statement on the status of the present owners fee payments. You want to be sure that the owner is up-to-date in paying their fees. If they are not, it is possible that you will find yourself having to cover the cost upon closing.
- The condominium corporation’s financial status. In order to understand this fully, you will have to review the following:
• The corporations current budget
• The most recent audited financial statement
• The reserve fund study
• You will want to know if there are any special assessments
• Also, if the corporations knows of any increase in the condominium fees is planned.
• It is important to also note if any major repairs are planned, as this could result in a fee increase or special assessment.
• Also, check that the reserve fund study is healthy, part of the value of the condominium unit you are purchasing is in the financial health of the reserve fund. - The condominium declaration. This declaration defines the legality of the units and common areas. It shows the percentage of ownership each unit has and how much each unit owner must pay in condominium fees.
- Condominium by-laws, Rules and Regulations. The condominium board of directors passes rules and by-laws that govern the condominium corporation. As a new owner, you must accept these rules, and do not, these rules cannot conflict with the Condominium Act set out by the Federal Government???. The board may also make rules to govern day-to-day living, like how to use the elevators, if owners can have pets and even what type of window coverings you can have.
Reserve Fund
On top of the utility and operating costs that you will pay in the monthly condominium fee, some of that money will go towards building up what is called the reserve fund. A condominium corporation must set up and maintain a reserve fund for the major repair and replacement of common areas or assets. The corporation must hire a qualified professional to conduct a reserve fund study. This study recommends how much money is needed for the reserve fund, it includes estimates of how long the common areas will last and what it will cost to repair or replace certain parts of each. It is designed to help keep the condominium property in good repair and reduces the risk that owners will need to pay a special assessment fee to make sudden major repairs. The study helps ensure that the cost of future repairs is not passed on only to future owners and it MUST be presented to the board for approval.
New condominium corporations have to complete a reserve fund study within one year of registration. The fund must be properly funded by the end of the following fiscal year. Each condominium corporation must complete a new study every three years.
It is important to note that the current value of a unit can depend on the financial health of the reserve fund.