I did all of my homework before buying a condominium, and I think I bought a good one. Now I’m here and I want to make sure it remains a positive experience. What can I do?
You’re right to want to keep the condominium you’re in a positive experience; not only is that better for you as an owner, but it will also help your resale value.
When you bought the condominium, you likely received a number of documents to review—this should have included the corporation’s bylaws, a budget, a reserve fund study, and a reserve fund plan.
You may have originally hired someone to review the documents for you, but as an owner now, you want to make sure you understand what these documents are and what they mean. These are four of the most important condominium documents:
- bylaws – every condominium corporation has bylaws. The bylaws outline the rules by which the Board of Directors, and individual owners, have to abide. If you don’t abide by the bylaws, the Board of Directors may have the authority to fine you. Make sure you know and understand the bylaws for your condominium.
- budget – each condominium corporation has an annual budget that outlines revenue (from condominium fees) and expenses (capital and operational) for the coming year. The corporation budget shows you how the Board of Directors is spending the corporation’s money.
- reserve fund study – this important document analyses the state of the common property of a condominium corporation. It assists a condominium corporation in planning future capital expenses, and ensuring the corporation will have enough money in its reserve fund. It should contain:
- an inventory of all common property that may need repair/replacement within 25 years
- information about the current condition of common property and an estimate of when each component may need repair/replacement
- estimated costs of repairing/replacing each component of the common property
- the life expectancy of each repaired/replaced component of the common property
- current amount in the reserve fund
- the recommended amount of money that should be added to the reserve fund to ensure necessary repairs/replacements occur
- reserve fund plan – this is a document the Board of Directors can develop based on the results of the reserve fund study. It sets out how the Board of Directors will address the revenue and expenses required to meet the long-term capital needs of the condominium. The Reserve Fund Plan should:
- identify the capital expenses to be incurred by the condominium corporation
- outline the timetable over which these expenses will be incurred
- indicate the method of funding and the amount needed for maintaining the reserve fund
The other thing I want to emphasize is the importance of getting involved in your condominium corporation. Remember that a condominium isn’t just a place to live. When you buy a condominium, you’re buying into a corporation, which means joint ownership of the corporation’s assets. Getting involved as a member of the Board of Directors provides you with the opportunity to affect how the corporation is run because you will be part of the decision-making process. You’ll also have better access to information about the financial health of the corporation.
“Ask Charles” is a question and answer column by Charles Stevenson, Registrar of 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 email@example.com.