Condo ABCs

Act of co-ownership, association, condo fees, reserve fund, business registry, initial declaration, common areas, divided and undivided co-ownership… many terms seem so complex when purchasing a condominium.

Condominiums offer their owners numerous advantages: access to common spaces integrated services within the building, a price often more affordable than a home, great freedom, etc. But condo implies co-ownership and a communal project. What important information should you know in order to make a well-informed decision? Here’s a short overview with some definitions.
 

The Difference Between Divided and Undivided Co-ownership

In divided co-ownership, each owner owns an exclusive share of the building (his/her unit) with an independent mortgage. He or she is also the owner of a portion (quota) of the common areas of the building (parking, pool, elevator, gym, etc.). A homeowner’s association is formed to simplify the management of the building, and a declaration of co-ownership defines the rules in force and the regulations that apply.

Undivided co-ownership is when several people own a building in its entirety (allegedly equal shares, unless a contract of joint possession stipulates different shares). They jointly assume the mortgage, municipal and school taxes, etc. This is often the case for a couple who purchase a residence, or when several close relatives inherit a property.
 

Co-ownership = Common Interests

You are the owner of your condominium, and also responsible for the building in which it is located. Thus, you must share the building with your neighbours, but also abide by the regulations in force, assume your share of the common costs, and become involved in the management of the condominium. It’s not rocket science, since it is in your best interest that your investment is protected at its fair value.
 

What is a Condominium Corporation?

The condominium corporation oversees the management of the building as a whole (declaration of co-ownership, financial health, repairs, current expenses, regulations, important decisions, etc.). It consists of owner representatives. Meetings are held periodically and members vote for annual budgets and elect owners to the board of directors, in addition to voting for important decisions about the building and the land. Get involved if you want to make your voice heard, or come up with new ideas and solutions. It’s all to your advantage!

Note: In the case of a new building project, the builder manages the corporation until the ratio (quota) is 50% for purchasers. Then the management of the corporation is transferred to the co-owners.
 

Know Your Rights, Obligations and Limitations

The sky is not the limit when one is a co-owner because the common good comes before individual interests. Do you have a dog? Are you sure that animals are tolerated in the building where you want to move? Several regulations involving both the building and the units are registered in the act of co-ownership or even adopted at the annual meeting of the homeowners’ association. This may include prohibiting some renovations in your condo (redoing floors, moving walls, etc.) to having a BBQ, a spa, and other items. Of course, the purpose of all of this is to ensure the uniformity and security of the residential complex, as well as the resale value of your property.
 

Condo Fees and Reserve Funds

Common charges (condo fees) consist of current expenditures (insurance policy, snow removal, landscaping, maintenance and janitorial services, inspection of safety equipment, etc.) and the amounts allocated to the reserve fund for major long-term projects (replacement of the roof, doors and windows, repairs to common areas, parking, exterior siding, etc.).

Although section 1072 of the Civil Code requires a minimum of 5%, we recommend that you evaluate the cost associated with the replacement of each component, the estimated number of years before replacing it, and establish a realistic budget for the required contributions in order to avoid paying large or unexpected amounts of money in one fell swoop.

An adequate reserve fund is a sign of good management and financial health. It can save you big trouble, but also be a guarantee of excellent resale value when the time is right. Think long-term investment.

 

Documents and Important Information to Know

 

The Briefing Note

When you purchase a new condominium, the vendor will present you with a preliminary contract , (article 1785 of the Civil Code), which contains a briefing note (mandatory for a new building of 10 units or more). This is where you will find the estimated budget, which includes, among other things, the common expenses, or condo fees. This information will allow you to forecast costs related to the maintenance of the building and the amount to be set aside for the reserve fund.
 

The Declaration of Co-ownership

The The Declaration of Co-ownership is a notarized contract binding all the co-owners (published in the land registry) and which outlines (among other things) the regulations, and a description of the common, private areas and those used by some co-owners (garages, parking or storage spaces, etc.). Also included are management rules for the building.
 

Recent Financial Statements

The financial statements of the building can be an excellent indication as to its financial health and management. Check the paid and unpaid condo fees, the reserve fund, and the expenses and debts to get an idea of any additional contributions you may have to make.
 

The Minutes

The minutes can provide a good overview of the issues and decisions dealt with by the association of co-owners.
 

We hope that this information will help you make a well-informed choice when you purchase your future property. Take a look at our superb condominium projects located in Laval and surrounding areas.

Special collaboration: Jacques Gosselin, Controller at Construction Voyer

Have a great week!