A real estate lawyer has a vital role to play in a condo purchase. Although buying a condominium unit is similar to buying a single family home - inasmuch as it includes signing an Agreement of Purchase and Sale - there are several additional legal aspects to condominium ownership. For example, in addition to owning the unit in which you live, you will also own a share in the common elements, such as hallways, lobbies, elevators, common rooms, outdoor walkways, and any other amenities. "Exclusive use" common property elements may also be present, such as balconies, parking spaces and storage lockers, which amenities are outside the unit's boundaries but are for your exclusive use. This article briefly discusses a number of items that your real estate lawyer will review with you if and when you decide to purchase a condominium unit.
The Status Certificate
After signing the Agreement of Purchase and Sale, and during the conditional period, you may be entitled to obtain a copy of a status certificate (and attachments) from the owner or property manager of the unit. If so, this documentation should be reviewed by your real estate lawyer, as a precondition to the transaction going firm, in order to ensure that the condominium corporation is in good health. Specifically, the status certificate will outline the amount of common expenses due and payable monthly, whether there are any anticipated special assessments or common expense increases, the status of the reserve fund, and if the corporation is involved in any litigation. The status certificate is part of a package that generally contains financial statements, budgets, reserve fund audits/balance, a copy of the condominium declaration, the rules and regulations applicable to the unit, the condominium bylaws, a copy of the condominium's master insurance policy, a legal description of the unit, and a copy of the property management contract (if applicable).
In some cases, common expenses stated in the Agreement of Purchase and Sale are less than the amount disclosed on the status certificate. This situation often occurs when the listing period overlaps the building's year end, and the expenses are increased but the listing details are not updated. If this occurs, your real estate lawyer will alert you and will advise you how to move forward.
The Reserve Fund Balance
A reserve fund consisting of at least ten percent of the corporation's total operating expenses is typical in the case of most condominiums. The reserve fund exists to cover the cost of major repairs or replacements to the condominium's common elements over the life of the building, such as the roof, roads, sewers, sidewalks, elevators, plumbing and other building systems.
If the reserve fund is inadequate, current and future owners can face large "special assessments" or the condo will have to carry the cost of borrowing significant amounts of money over a long time period. In order to protect condo buyers, the Condominium Act requires that a reserve fund study be completed periodically. These studies are usually completed three years. This study evaluates the condition of the condominium's common elements, estimates their expected lifespans, and estimates any repair or replacement costs.
Your real estate lawyer will review and analyze the condominium's bylaws, rules and regulations, and will explain the effect of these rules with you. For example, your real estate lawyer will draw your attention to any liabilities that might be imposed on you, such as what you can and cannot do in the common areas, when you may use those common areas, and what happens if you or your guest breaks something.
Your lawyer will confirm with you that these rules and regulations will not impact your lifestyle if and when you occupy the condominium. For example, there may be limits to how many people can occupy your unit, what home improvements you can make to your unit, restrictions on running a small business from your unit, and/or a limit as to what you may store in your unit or use on a balcony. There may be noise restrictions and/or limits on whether pets are allowed to occupy your unit. There could also be limits on when certain amenities, such as an exercise area, may be used. Furthermore, you could be required to attend condominium meetings and may be expected to serve on an activity board.
Each of these issues will be discussed with you, directly, after your real estate lawyer has had an opportunity to review and report on the condominium's rules and regulations in effect.
Verify the Unit Boundary
Your real estate lawyer will review the condominium unit boundaries with you, usually with the benefit of a copy of the Condominium Plan, to ensure that the unit you believe you are purchasing is included on the Transfer/Deed to be registered at closing.
Contact Merovitz Potechin LLP Before Confirming Your Condo Purchase
If you are buying a condominium unit, our real estate lawyers in Ottawa can help. We have significant experience with residential and commercial condominium unit purchases and sales. We will help you to understand the condominium documents provided to you, and we will work to alleviate any legal concerns that you may have about condominium ownership. Contact an Ottawa real estate lawyer today at 613-563-7544.