by Garry Shapiro and Evan Shapiro, Shapiro Real Estate & Business Lawyers

 

Toronto is growing up. Literally. Our skyline is filled with condominiums and with cranes in the process of building even more. Demand for condominiums has been abundant due to increased housing needs within urban areas, affordability constraints, and investment pursuits. They are frequently the option of choice for first-time homebuyers and desired by individuals looking to downsize, live in the heart of the city, or enjoy the amenities of condominium ownership. With so much demand, prospective buyers should become familiar with the unique characteristics of condominium ownership, including:

What is a condominium?
The term “Condominium” refers to a form of legal ownership rather any particular style of building. Any type of building is capable of being a condominium, whether residential, commercial or industrial. For residential condominiums, they can be high-rise, low-rise, townhouses, or even detached houses. When you purchase a condominium, you are acquiring title or ownership to an individual unit, while the common elements of the condominium (i.e. hallways, elevators, lobby, swimming pool, etc.) are owned by all unit owners through the Condominium Corporation.

What is a Condominium Corporation? How are they managed?
The Condominium Act, which governs the ownership of condominiums in Ontario, requires that a Condominium Corporation be established for each and every condominium. The purpose of a Condominium Corporation is to manage the affairs and property of the condominium. The Condominium Corporation’s affairs are regulated by the Condominium Act as well as internal documents known as the Declaration, Description, By-Laws and Rules. The Board of Directors of the Condominium Corporation, who are elected by the unit owners, are responsible for making decisions on behalf of the Condominium Corporation. Ordinarily, the Board of Directors may hire a property manager to attend to the day-to-day management of the condominium.

What are Common Expenses? What is a reserve fund?
Each unit owner is responsible for paying a share of the expenses of the Condominium Corporation, as allocated by the developer in the Declaration. This percentage is normally in relation to the size of each unit. What constitutes a “Common Expense” should also be defined in the Declaration. Common Expenses include the cost of security and concierge, utilities, and services such as gardening and snow removal. It is important to remember that Common Expenses will increase over time due to increased costs to operate the condominium, such as utilities and labour.
A portion of your common expense payments will be deposited into a separate account known as a Reserve Fund. The purpose of the Reserve Fund is to account and budget for major capital expenditures that will be payable over time, such as repairs and replacements of common property, or other unexpected expenses.

Are there any restrictions on the use of a condominium unit?
When you purchase a condominium, you are agreeing to abide by the Declaration, By-Laws and Rules governing the Condominium Corporation, which may include restrictions on the use of your unit. For example, you may be restricted from having a barbeque, having pets within your unit, renovating your unit, or even changing the colour of your blinds. Prospective purchasers should review the Status Certificate to understand what restrictions exist on the use of their unit.

What is a Status Certificate?
A Status Certificate, together with all supporting documents such as the Declaration, By-Laws, and Rules, provides information as to the Condominium Corporation’s operations and financial health. When entering into an Agreement of Purchase and Sale for a condominium unit, make sure that the agreement is conditional upon lawyer review of the Status Certificate. The Status Certificate will provide you and your lawyer with the information needed to make an informed decision to purchase the property.

“Buyer Beware”
As with all Agreements of Purchase and Sale, caveat emptor, or “buyer beware”, applies. For pre-construction condominiums, be wary of statements made by sales representatives. For re-sale condominiums, you need to ensure that the unit complies with the Declaration, By-Laws and Rules of the Condominium Corporation. Any non-compliance will ultimately become the liability of the purchaser.

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This article is only meant to be a brief overview of the nature of condominium ownership. There is much more to consider for each of the above topics as well as many other topics that were not raised, such as purchasing pre-construction condominium units, occupancy fees, and special assessments. Our knowledgeable lawyers and staff would be pleased to discuss your questions or concerns with purchasing a condominium unit. 416-224-0808 / eshapiro@garryshapirolaw.com