20 Jun About That Condo You Are Moving Into
About That Condo You Are Moving Into
Inspecting condos is part of what I do. As such, I find that many who decide to purchase a condo do so without full knowledge as to how a condominium operates and how you are affected by its governance. So, here is some information I would like to share with you so that you enter your new digs with eyes wide open.
A condominium or condo is a type of real estate ownership which consists of both commonly owned and privately owned areas. The Co-Owners Association is the collective body formed by the constituent owners of a condominium. Apart from the Condominium’s Governing Documents, each Condominium Association has a set of Bylaws that comprise a set of additional regulations and procedures that govern the internal operation of the condominium organization.
The Association’s Board of Directors is a group of elected co-owners charged with the responsibility of operating and insuring the overall welfare of the condominium complex and, the Director who is a condominium owner, is elected by the association in order to contribute to the actions of the Board. The Board may then create a Committee and recruit a person or group of persons appointed to study, investigate and form a recommendation on specific issues. The Association may decide to hire a Management Company under contract in order to aid in the operation of the condominium complex.
The Association’s insurance policy, unlike the co-owners’ insurance policy which protects the individual owner’s property, provides protection for the common elements of the condominium complex and is paid for by an insurance premium which is a sum of money paid to maintain insurance coverage.
Every Association will have an Annual General Meeting which is a meeting of all co-owners in a condominium usually held at the end of the association’s fiscal year. The association’s Fiscal Year End is comprised of a twelve month period in which a complete accounting is done. Depending on the association and the complexity involved, an annual audit may be required. An audit provides an examination, by a designated Chartered Accountant, of the association’s financial records.
The meeting should use the Robert’s Rules of Order, at the very least as a guideline, which is an established procedure for conducting a meeting. For a matter of record, the Minutes of the meeting are taken; this is a written transcript or summary of a meeting. Should it be impossible for a co-owner to attend the Annual General Meeting, he or she can submit a Proxy in the form of a person or document that acts on behalf of the absentee co-owner. Once the President of the Board brings the meeting to order, a quorum must be determined. A Quorum is the number of members of a group that must be present in order to legally transact business.
The Board of Directors must have a Budget and / or a financial plan which projects the future expenses and income of the condominium. This projection helps avoid potential assessments which are a sum levied on a property, either based on an appraisal or a percentage of ownership in the condominium. All co-owners contribute to the maintenance of the common elements. The common area is defined as the materials and space that are jointly owned by all owners in a condominium project. You also have limited common area whereby material and space are owned by all co-owners in a condominium but are restricted in access and use. A balcony would be considered limited common area. That is, it is common area but used solely by the individual co-owner.
The condominium Fee is an assessment, a sum of money, which is charged to an individual unit or property in order to pay for the expenses as described in the association’s budget. Routine maintenance is required for the upkeep necessary to fulfill the expected useful life of an item or area. A Special Assessment is a special sum levied on a property for a specific purpose. So, for example, if the roof has to be replaced and there are insufficient funds in the reserve account, a special assessment is levied to make up for the balance required to replace the roof.
Should it be necessary for the Board to make an extraordinary decision such as hiring an engineering company to solve the issue of water infiltration, a Special co-owners’ meeting may be called. This is a meeting of all co-owners in a condominium for the purpose of discussing and resolving special issues which concern the whole condominium.
To avoid what can be unpleasant news from a special co-owners’ meeting, it is highly recommended that every association have on file a Reserve Report, also known as Reserve Analysis. This would provide an analysis of the condominium’s common property which projects the necessary funds to make repairs or effect replacements. This report acts as a compass for the association and helps determine the necessary capital reserve. This capital reserve, also known as Reserve or Contingency Fund, is a fund set aside for the repair and replacement of the common elements of a condominium. Therefore, the budget should include the condominium fee to cover the month to month operating expenses and a separate sum that is set aside every month towards the reserve fund.
I have to stress the following as many condo owners feel that they can go ahead and make any type of renovation change to their unit and this is not the case. Always consult with your Board of Directors before starting any changes to your unit. Some things are allowed and others are not. Remember that you own the space from the paint inwards only. Even so, changing walls and moving mechanical components may not be allowed. There are plenty of cases where a co-owner has made renovation changes only to find out that they are now legally bound to change it back to its original state and at the co-owners expense which may include the association’s legal expense.
So now you have a little more knowledge in your pocket. Enjoy your new digs!
Geoffrey Darwent CPI
Condominium Management & Residential Home Inspector, CPI
Gestion de condominium & Inspecteur des immeubles résidentiels, IPC
Assuré / Insured