Basics of the Condominium Concept
BASICS OF THE CONDOMINIUM CONCEPT
Developers and Sales Agents should never hide or misrepresent facts to make a quick sale.
There are many Unhappy Condominium Owners. The concept of a condominium is an ancient device to separate ownership of individual parts and share ownership of common parts. It has reached prominence in North America in the last ﬁve decades, resulting in legislation dealing speciﬁcally with condominium ownership.
Subsequently this concept spread in to countries like Australia, New Zealand, Singapore, Malaysia and some European countries. This concept has proven to be a viable, alternative home ownership style for many. It can be a method of combining some of the advantages of ownership with some of the freedoms and economies associated with rental.
Brieﬂy stated, condominium enables a person to share in the ownership and operation of a housing development while having negotiable title to his own unit.
Condominium is strictly a creature of statute (A written law passed by the Parliament). At common law, it was not possible to register ownership of a legal interest in a unit on the sixteenth ﬂoor of a high-rise building. The only interest capable of registration was the ownership of land. Even under the Condominium Act, it is still land that is the subject of registration. However, the legislature has managed to turn “space” into “land” with a few simple words. For the purpose of this Act, the ownership of land includes the ownership of space.
This permits the “unit”, which is strictly space, to be deﬁned as “land”. The division of property into units to be individually owned, with common elements to be owned in common by the owners of the units and an administrative framework to enable the owners to manage the property.
THE CONDOMINIUM CORPORATION
Upon registration of the Declaration and Description, a corporation is created by statute. It does not have share capital and does not provide limited liability. The members are the owners of the units and they elect a Board of Directors to represent them.
The objects and duties of the corporation are to manage the property and administer the common elements and corporate assets. The corporation requires the unit owners to comply with the Act, the Declaration, the by-laws and the rules. The Board of Directors passes reasonable bylaws affecting the property and the affairs of the corporation, but these bylaws must be approved by not less than ﬁfty-one per cent of the unit owners.
When an agreement of purchase has been entered into, the purchaser of a unit in an unregistered condominium corporation is not obliged to pay a monthly rental fee that is greater than the total of the following: mortgage interest charges on the unit; the unit’s share of municipal taxes; the unit’s projected monthly common expense contribution.
SOME SUGGESTIONS FOR A CONDOMINIUM CORPORATION
• A quorum for the transaction of business at a meeting of owners has to be around to 33 13%/ of the owners in person or represented by proxy.
• All voting by owners is on the basis of one vote per unit. An owner is not entitled to vote at a meeting if his or her contribution to the common expenses is in arrears for more than 30 days prior to the meeting.
• A meeting requisitioned by at least 15% of the unit owners must be held within 30 days. A reserve fund for major repair and replacement of common elements and assets of the corporation has been made mandatory.
• This reserve fund has been set at a minimum of 5% of the common expense fees, rising to a minimum of 10% three years. ( All these rules can be changed after a revised Condominium Act comes into force)
• The appointment of auditors has been made mandatory for all residential condominium corporations comprising 25 units or more. Provisions have been made for the appointment and the removal of auditors.
• A condominium corporation is now empowered to sue on its own behalf or on behalf of individual owners. • Similarly, the corporation may also be sued as a representative of the owners of the units on any matter relating to the common elements or the assets of the corporation.
• Various agreements or contracts entered into while the majority of the directors were elected when the development ﬁrm owned the majority of units are now deemed to expire in twelve months unless ratiﬁed by the directors at a time when the majority of the directors were elected after the development ﬁrm ceased to be owner of the majority of units. This provision eliminates the problem of long-term “sweetheart” contracts. When the purchasers of new condominium units take possession under an interim occupancy agreement they, in effect, have tenant status until the condominium is registered.
RENTING THE UNIT
A tenant of a condominium unit is subjected to the same duties and obligations as is an owner. When an owner leases a unit, he or she must notify the corporation that the unit is leased, and must provide the corporation with the lessee’s name and contact phone number and address.
A condominium owner may of course rent the unit if desired. However, if the unit is rented, owners are still responsible for the payment of the common expense fees. If an owner defaults in payment of the common expenses, the board of directors has the power to require the tenant to pay the common expense fee to the condominium corporation. In turn, the tenant is legally entitled to deduct this sum from rental payments.
MYTHS OF CONDO LIVING
Here are some common myths about owning a condo.
Condo fees are ﬁxed Monthly condo fees can increase at any time and for a number of reasons, like an unexpected major repair, legal proceedings involving the condo corporation, or just to keep up with rising costs. Most increases happen annually.
Owning a condo means affordable and carefree living
Condominiums are communities. Your ﬁnancial responsibilities are similar to home ownership, but you also share common expenses with the other unit owners. You also have to follow your condominium’s declaration, by-laws and rules and work with the other owners to make sure that the condominium property is well run.
You will use all the amenities
Many people don’t use all the amenities in their condominium, like the gym or the pool. However, a condo owner has to pay for amenities through monthly condo fees even if he or she does not use them. Consider if the amenities of a particular condominium are right for you.
The condominium corporation is responsible for all repairs and insurance, including for your unit
There are legally deﬁned boundaries between your unit and the common elements. In most cases, you will be responsible for and required to maintain and repair your own unit. The corporation covers everything else through the condo fees. Only parts of a condo unit may be covered by the condo corporation’s insurance. The rest, including the furniture and other contents of the unit, would have to be insured by the unit owners if they wish.
A tenant of a condominium unit is subjected to the same duties and obligations as is an owner. When an owner leases a unit, he or she must notify the corporation that the unit is leased, and must provide the corporation with the lessee’s name and contact phone number and address. A condominium owner may of course rent the unit if desired. However, if the unit is rented, owners are still responsible for the payment of the common expense fees. If an owner defaults in payment of the common expenses, the board of directors has the power to require the tenant to pay the common expense fee to the condominium corporation. In turn, the tenant is legally entitled to deduct this sum from rental payments.
if there is ever damage to your unit, to other units or to the common elements. For example, if there is a ﬂood in your unit and it damages the unit below you, you may be responsible for costs associated with the repair of that damage. Every condominium property is a little different. Be sure to check a condominium’s declaration and by-laws for information on who is responsible for repair, maintenance and insurance.
(The writer is a graduate of the University of Ceylon, Peradeniya. Award winning Realtor, with wide experience in all aspects of Real Estate including specialized knowledge of the Condominium concept. Held Membership in Canadian real Estate Association, Ontario Real Estate Association, London-St. Thomas Real Estate Board, Ontario, and was a member of the Realtor Political Action Committee)
BASICS OF THE CONDOMINIUM CONCEPT By Kirthi Hewamanne
Re Published By – Cornerstone Real Estate Services