Real Estate: You buy into a business when you buy a condominium
(NC) -- Condominium units represent an affordable, versatile and popular option in the housing market, especially for first-time buyers and empty nesters. Approximately half of all new housing stock in Canada is made up of multi-unit dwellings (which includes condominiums), according to Statistics Canada's most recent census data (2011).
“Many people don't realize that when they purchase a condo, they aren't just buying a home – they're also buying into part of a business,” says Ray Leclair, the vice president of public affairs at LAWPRO. “You become part of the business of running the condominium corporation.”
With this in mind, Leclair offers the following tips and considerations for prospective condo buyers:
1. Be prepared for close community living and restrictions.
Condos may pose lifestyle restrictions you would not encounter in a detached home. Issues can range from noise from neighbouring apartments, to restrictions on pets, limitations on the use of your balcony and even restrictions on window treatments (acceptable curtains or blinds). Condo bylaws, rules and regulations outline your rights, and reviewing them with a real estate lawyer can provide greater clarity and insight.
2. Play an active role in the management of your condo corporation.
There are different ways you can get involved with the management of your condo corporation, including attending annual owners' meetings, voting on the board of directors, or even joining the board or various committees. The board of directors in a condo is responsible for managing the assets (e.g. reserve fund) and business of the corporation.
3. You are responsible for the condo's assets – and its liabilities.
Similar to the shareholders of a for-profit corporation, owning a condo unit means you own a “share” of the assets and liabilities of the condo corporation. While the monthly common expense/maintenance fees you pay to the condo corporation and insurance will often cover liabilities that arise, this may not always be the case. A special assessment could be imposed on you by the board of directors which may represent a nominal or substantial amount (e.g. repaving the underground parking garage or repairing the pool).
Prospective condo buyers are encouraged to discuss these issues with their real estate lawyer before signing an agreement of purchase and sale, to ensure they understand their rights and responsibilities when it comes to condo ownership.