Do your ‘due diligence’ before buying
Asking questions is essential when purchasing a condo
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.
IS A PARTNER WITH
Our expert says condo owners need to be able to co-operate with others.