Condominiums can be a great housing option, and with some due diligence, you can find one that is well suited to your needs, and a financially sound purchase.
Condominium refers to a type of ownership that includes the individual ownership of a unit and shared ownership of common property with other unit owners. Condominiums can be apartment-style, townhouses, attached, or detached.
Condominium owners typically pay monthly condominium fees to cover their share of expenses for the common property, and some of this payment goes into the condominium corporation’s reserve fund.
The reserve fund is used to pay for major capital repairs and replacements. All condominium corporations must have a reserve fund. As a buyer, you want a condominium corporation that has a healthy reserve fund because it reduces the likelihood of a special assessment. Special assessments occur when a condominium corporation has major work to do and there isn’t enough money in the reserve fund. The corporation assesses an amount owing to the owner of each unit.
So how can you find out if the corporation you’re thinking of buying into is a healthy one? A good place to start is a condominium document review.
Condominium documents relate to the operation of the condominium corporation, which you want to ensure is financially stable and well managed. Condominium documents include but are not limited to:
When buying a condominium, you can hire a professional to review your condominium documents. They can provide you with a summary of the documents, and identify areas about which you might have concerns. Reviewing condominium documents can uncover financial difficulties, bylaws you find unacceptable (for example, restrictions as to size, number, or type of pet), upcoming necessary maintenance, or even discussion in Board meeting minutes about water issues.
Even a healthy reserve fund and a review of condominium documents can’t guarantee you won’t have a special assessment or that your fees won’t go up. In fact, you should expect your fees to go up a small amount each year, from factors such as inflation or rising utility costs. However, reviewing the condominium documents will give you a good idea of the health of your condominium, and if it’s the right one for you.
“Ask Charles” is a question and answer column by Charles Stevenson, Director of Professional Standards with the Real Estate Council of Alberta (RECA), www.reca.ca. RECA is the independent, non-government agency responsible for the regulation of Alberta’s real estate industry. We license, govern, and set the standards of practice for all real estate, mortgage brokerage, and real estate appraisal professionals in Alberta. To submit a question, email firstname.lastname@example.org.