Condo Living 2

My thanks to those who commented on an earlier posting. Here I focus on a few issues about condo ownership and management. More detailed information is found at http://condoinformation.ca/
Many of the owners to whom I have spoken are unaware of the contractual obligations when they purchase a condo, and what they agree to when they are elected a board member. Board members act as caretakers for their own property and that of fellow condo owners, property which may account for a large share a person’s total assets.

As I see it, a main problem is that many of the contracts involve the provision of services where the supplier or seller has more information than the buyer and where it is difficult or costly for the buyer to acquire the necessary information. Condo purchasers only become aware of what they have purchased and their rights and responsibilities after they have parted with their money. Board members only become aware of their responsibilities and liability after they have agreed to serve on the board.

For example, services are provided by real estate agents, developers, lawyers for buyers, condo management firms, and condo board members. As is the case with all services, some providers are more knowledgeable than others, some are more forthright than others, and in almost all cases they know more than the buyers. In addition, most buyers do not do the necessary research or spend the time to learn the details of their purchases. Economists call these transaction costs which can be high where it is necessary to collect and evaluate information about a contract. Many buyers do not do a thorough job of searching for and evaluating the necessary information. We rely on so-called experts whose interest is completing the transaction, although they have some concern for maintaining a reputation for honesty and reliability.

A starting point is to become familiar with the available documentation, much of which is legally required for a transaction and for condo management by a board of directors. The wording of these documents is often opaque, at least to the layperson, and that sometimes (often?) includes those providing services to the buyer.

Documentation

There is a series of documents which describe what a person owns and the rules and procedures which affect their ownership and living conditions in their condo unit.

1. The Ontario Condominium Act stipulates in general how a condominium corporation in the province has to be organized and governed. There is no one responsible for overseeing compliance with this act like an ombudsman, unlike the case of rental properties.
2. The Condo Declaration is the constitution for each particular corporation with details subject to the provincial act. It is often drawn up by the developer of the condo building and outlines what each person owns and what are common areas and expenses. At the time a unit is sold, a Status Certificate is issued in conjunction with the Declaration outlining the financial and other conditions of the building at that time.
3. By-laws are drafted and passed by the condo board of directors dealing with matters such as the standard unit and insurance. They become additions to what is required by the Declaration.
4. Rules may also be passed by the board to determine the conditions for living in a condo. Rules exist to promote the safety, security or welfare of owners and their property as well as the corporation’s assets. Rules also exist for the purpose of preventing unreasonable interference with residents’ use and enjoyment of their units and common elements.
5. For information purposes a corporation may provide owners with helpful suggestions for living in their units and making use of common areas. This information has no legal standing, but may be used to welcome new owners to a building.
A buyer needs to have copies of these documents and to understand the implications of the wording of each document. This is not an easy task for the typical buyer but vital to their understanding of what is being purchased. The real estate agent and buyer’s lawyer should do this but may not. I am aware of a situation where a number of units were sold in a building when the declaration was not in conformity with the amended provincial legislation and there was no standard unit bylaw in existence. I suspect there are other such cases. Agents and lawyers are interested in completing sales and collecting commissions rather than spending their time explaining the meaning of legal documents. Buyers are often content to remain unfamiliar with their purchases.

Board membership

Many of us agree to serve on a condo board of directors with limited understanding of the commitment being made and the personal liability involved. Some of the liability may be covered by insurance paid for out of condo fees. Residual liability is the responsibility of the individual. On joining a board, a person should learn about their responsibilities and ask to see the documentation listed above, even though they may already be owners and think they are familiar with these materials.
As owner of a single family home, a person has responsibilities and obligations. Some of these may be the same for condo board members (non-owners may be board members), but some will differ as you are dealing with single ownership of a condo unit but joint ownership of a building. Information can be obtained from existing board members and from board members of other condo corporations. You are pretty much on your own in learning about the responsibilities for the unit whose board you are joining.

Some may view these caveats as a deterrent to condo ownership. This is not the case and not suggested by the data. In 2006, 913,000 households or 10% of total households in Canada were condominiums, up from 4% in 1981. For Vancouver the 2006 figure was over 30%. I expect the 2011 census will report more recent figures.

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