Do your ‘due dili­gence’ be­fore buy­ing

Ask­ing ques­tions is es­sen­tial when pur­chas­ing a condo

Calgary Herald - Calgary Herald New Condos - - New Condos - ROBERT NOCE

Q: I am con­sid­er­ing pur­chas­ing a con­do­minium unit for the first time. How can I de­ter­mine if the re­serve fund is ad­e­quate? Who pro­vides this in­for­ma­tion? How can I find out how well the cor­po­ra­tion is be­ing man­aged? What other ques­tions should I ask, and who should I ask? How can I find out if there are any law­suits against the con­do­minium cor­po­ra­tion?

A: Good for you! These are the types of ques­tions that ev­ery po­ten­tial pur­chaser should be ask­ing as part of their “due dili­gence.” The onus is on a pur­chaser to re­view the re­serve fund study and plan, to de­ter­mine whether or not the cur­rent funds are suf­fi­cient to meet the needs of the con­do­minium cor­po­ra­tion. If the con­do­minium cor­po­ra­tion iden­ti­fies $300,000 in ex­pen­di­tures in 2015, and there is only $25,000 in the re­serve fund, then you re­al­ize there are in­suf­fi­cient funds to cover the re­pairs and main­te­nance work. There­fore, the con­do­minium cor­po­ra­tion will ei­ther have to in­crease condo fees or is­sue a spe­cial as­sess­ment.

In terms of how well the cor­po­ra­tion is man­aged, that is a dif­fi­cult ques­tion to an­swer. You could re­view the min­utes of the board and/ or the past an­nual gen­eral meet­ing. As well, if the con­do­minium cor­po­ra­tion has changed prop­erty man­agers in a short mat­ter of time on sev­eral oc­ca­sions, that could be a sign of prob­lems. If you can ask a cur­rent owner in the con­do­minium cor­po­ra­tion some of these ques­tions, you may get some help­ful an­swers.

To find out if there any law­suits against the con­do­minium cor­po­ra­tion, you could do a search at the court­house.

Other things to ask are whether or not the con­do­minium cor­po­ra­tion im­poses fines on own­ers, and how ef­fec­tive are they at en­forc­ing the by­laws. Has the cor­po­ra­tion bor­rowed any money? I have a long list of ques­tions that go be­yond the scope of this ar­ti­cle. As you can see, it is es­sen­tial to do your due dili­gence.

Help­ful hint: Some of the ques­tions you need to ask can be done by you as a po­ten­tial pur­chaser. How­ever, if you need some­one to give you a per­spec­tive or anal­y­sis of some of the con­do­minium doc­u­ments, you should hire a lawyer or some other ex­pert in the con­do­minium field, be­fore your pur­chase is com­plete.

Q: I live in a 105-unit town­house condo. Many own­ers are con­cerned about the num­ber of renters we have. Our prop­erty man­ager says that, ac­cord­ing to the Con­do­minium Prop­erty Act, we can­not re­strict renters. My friend lives in a 114-unit villa condo and their by­laws state that they may have only two renters. Is it pos­si­ble for our condo board to en­act such a re­stric­tion?

A: Your prop­erty man­ager is cor­rect. The Con­do­minium Prop­erty Act pre­vents cor­po­ra­tions from re­strict­ing the rights of an owner to lease his/her unit to a third party. I would sug­gest the by­law in your friend’s condo isn’t le­gal. As with any sin­gle fam­ily home, an owner is free to rent their unit out to a third party, and no by­law can re­strict that right.

Help­ful hint: From a pol­icy per­spec­tive, it makes sense to al­low a unit owner to de­ter­mine whether or not he or she wants to rent their unit to a third party. The owner is ul­ti­mately re­spon­si­ble for the unit and will be re­spon­si­ble for any pay­ment of fines in­curred and not paid by a renter for by­law in­frac­tions.

Q: Our condo has a by­law that states all pets must be car­ried by own­ers while on condo prop­erty. Our dog weighs 50 pounds and we have both had is­sues with our backs in the past. Can the condo board be held li­able if an ac­ci­dent should oc­cur while we are be­ing forced to carry our dog up and down five flights of stairs in the build­ing?

A: There is a ra­tio­nale for re­quir­ing own­ers to carry their pets across com­mon prop­erty and into their units; it’s an at­tempt to min­i­mize dam­age to com­mon prop­erty and to avoid li­a­bil­ity on the part of the con­do­minium cor­po­ra­tion, es­pe­cially if a pet at­tacks another person on condo prop­erty. You, how­ever, have a dif­fer­ent prob­lem in that your dog weighs a lot. I do not be­lieve the con­do­minium cor­po­ra­tion would be held li­able for re­quir­ing you to carry your pet should you suf­fer a back in­jury. You bought a condo unit know­ing these were the by­laws. The big­ger is­sue, as I see it, is why you would sub­ject such a large dog to liv­ing within the con­fines of a con­do­minium unit. Per­haps the dog should be hold­ing you li­able for keep­ing it in such small quar­ters.

Help­ful hint: If the own­ers are not sat­is­fied with this by­law, they can change it with the sup­port of 75 per cent of the own­ers and unit fac­tors. Do not buy into a con­do­minium prop­erty if you’re go­ing to try to find ways around the by­laws. By­laws are im­posed for a rea­son and they must be com­plied with by all own­ers.

Q: We have had prob­lems get­ting peo­ple to want to take a turn on the board. Many of us have been on the board for a long time and we want some­one else to do the work. What hap­pens if no one steps up to the plate and we do not get a board elected?

A: Ev­ery con­do­minium cor­po­ra­tion in Al­berta must have a board. If no one comes for­ward to sit on the board, then your prop­erty man­ager would have to hire a lawyer and make an ap­pli­ca­tion in court to ap­point an ad­min­is­tra­tor for the con­do­minium cor­po­ra­tion. This will mean an in­crease of costs to all of the own­ers and an em­bar­rass­ment to the con­do­minium cor­po­ra­tion. In fact, if I were a po­ten­tial pur­chaser of a unit in such a cor­po­ra­tion, I would run away as fast as I could. The ap­point­ment of an ad­min­is­tra­tor is a red flag for po­ten­tial pur­chasers and can have a neg­a­tive im­pact on the value of your units.

Help­ful hint: It’s in­cum­bent on all own­ers to par­tic­i­pate in some form within the con­do­minium cor­po­ra­tion. If you don’t like to co-op­er­ate with other peo­ple or be ac­tively en­gaged in some way, then don’t buy a condo. There are many rental prop­er­ties avail­able that will al­low you to live in a low-main­te­nance set­ting with­out the bur­den of par­tic­i­pa­tion and in­ter­ac­tion with other peo­ple.


For the Cal­gary Her­ald

Our ex­pert says condo own­ers need to be able to co-op­er­ate with oth­ers.

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