What is a Condominium?
Condominium refers to a form of ownership. A condo can be any kind of housing:
•high-rise or low-rise apartment
•townhouse or stacked townhouse
•detached or semi-detached house.
Condominium developments are self-governing communities with rules and bylaws to guide their operation and business affairs.
With a condo, you own your individual unit and share in the ownership and expenses of maintaining the common elements. Common elements can include things like hallways, elevators, fitness facilities and grounds.
How is a Condominium Run?
A condominium is run collectively by the condo unit owners, all of whom are members of the condo corporation. The condominium corporation manages the condo property, finances, official records, reserve fund study agreements, and all related matters.
Owners elect a board of directors to oversee operations. The board may hire a property manager to take care of day-to-day repairs and maintenance.
Rights and Responsibilities
As a condo owner, your rights and responsibilities differ from other homeowners.
For example, you are entitled to vote at meetings of the condominium corporation and you are required to follow the condo’s declaration, bylaws and rules.
What are the Declaration and Description?
The declaration and description are among the most important documents you will review when you are buying a condo. Among other things, they provide a legal description of the condominium’s units and common elements. The declaration also determines your share of the common expense fees.
Living in a condominium means you must be aware of three key expenses:
•monthly common expense fees
Monthly Common Expense Fees
Monthly fees cover the costs of keeping common elements in good repair. They also cover the operating costs of things like fitness facilities, party rooms and swimming pools.
If the condominium has staff, such as security and concierge, these costs will be covered by monthly condo fees.
Monthly fees may cover all, some or none of the costs of your utilities. Before you buy, make sure you know:
•what services are included in your monthly common expense fees
•if you need to pay certain costs in advance
•what your monthly operating costs will be.
You are directly responsible for your share of the operating expenses of the condo. You and other owners will have to increase your monthly common expense payments, if necessary, to keep up with rising costs.
A portion of your monthly common expense fees goes to build up a reserve fund. A condo corporation must set up a reserve fund for the major repair and replacement of common elements. These can include the roof, exterior of the building, roads, sidewalks, sewers, heating, electrical, plumbing, elevators, laundry and recreational facilities.
The corporation must hire a qualified professional such as an architect or engineer to conduct a reserve fund study. This study:
•recommends how much money is needed for the reserve fund
•includes a site inspection that estimates how long the major components of the condominium, together with replacement costs of each component, will last
•is designed to help keep the condo property in good repair
•reduces the risk that owners will need to pay a special assessment to make sudden major repairs
•must be presented to the board for approval.
New condominium corporations must complete a reserve fund study within one year of registration. The fund must be fully funded by the end of the following fiscal year. On a continuing basis, the corporation must conduct reserve fund studies every three years.
A Caution for Buyers of Newly Built Condo Units
New condo owners are sometimes unpleasantly surprised to find their budgets strained by significant increases in monthly expenses. Such increases are common during the second or third year of ownership.
Builders estimate monthly expenses, but it isn’t until the board of directors takes over – and conducts the first reserve fund study – that you begin to know the true costs of maintaining the building.
A special assessment is a fee over and above monthly common expense fees. Special assessments may be charged to help pay for unexpected major repairs or shortfalls in the reserve fund.
The same percentage that determines an owner’s share of monthly common expenses is used to determine your share of any special assessment. The percentage for each unit is set out in the declaration.
A special assessment must be approved by the condo board.
How Condominiums Are Run
In some ways, a condominium development is like a small town. The owners of each unit are members of the condo corporation and have the right to vote at meetings (one vote per unit).
An elected board of directors, like a town council, makes decisions on behalf of the owners, and often hires staff to carry out the work. Just as towns have a town manager; condos often have a property manager.
The condo corporation is responsible for managing the condo property, finances, official records, reserve fund study, and all related matters. As an owner, you have a right to review these corporate records, as long as you make your request in writing and give reasonable notice.
Board of Directors
Owners elect a board of directors to manage the condo corporation’s affairs.
The board typically meets once a month to conduct business. Among other things, it must:
•ensure the building and property are properly maintained and that repairs are carried out as needed
•renew the reserve fund study every three years and ensure adequate funds are invested in the reserve fund to cover major repairs
•appoint an auditor and oversee financial accountability
•organize an annual meeting of the condominium unit owners, and any other owner meetings that may be required
•pass bylaws dealing with the responsibilities and powers of the board, how meetings will be run, and the collection of common expense fees
•pass rules to promote the safety, security and welfare of the owners.
The board must have at least three directors. Each director must:
•act honestly, in good faith and exercise due diligence in conducting board business
•exercise reasonable care and skill in fulfilling his/her duties
•disclose conflicts of interest in writing
•be at least 18 years of age, of sound mind, and not in a state of bankruptcy.
Directors are elected for a term of up to three years and may run for re-election. It’s a good idea for boards to elect directors to terms that overlap so that there will always be a board member with operational history.
Directors may be removed from office by a majority vote. (See Other Owners Meetings) Owners may then elect a replacement.
Boards of directors may hire a property manager (or a property management business) to oversee the day-to-day operations. A property manager may:
•collect common expense fees
•keep operating records
•respond to owner complaints
•maintain common elements
•hire and monitor service companies.
The property manager is accountable to the board of directors.
Annual General Meetings
The board of directors holds annual general meetings (AGMs) where owners vote on major decisions. An AGM must be held within six months of the end of the corporation’s fiscal year so that owners can review the financial statements in a timely manner.
In advance of the AGM, the auditor must issue a report on the corporation’s financial statements. The financial statements and auditor’s report must be attached to the notice of the AGM.
Voting is based on the number of units, not the number of owners. Each unit is entitled to one vote whether it has a single owner, two owners, or more.
Other Owners Meetings
The board of directors may call a meeting of owners at any time. The notice of meeting must explain the purpose for which the meeting is being called.
Owners may request a meeting of owners on any topic of concern, from something found in a specific rule to the performance of a director.
•If owners of 15 per cent of the units sign a written request for a special meeting, the board must call it within 35 days.
•The request must include what business will be discussed. For example, some owners may wish to change the hours of access to the pool. A rule can be changed by owners of a majority of units.
•If the reason for the meeting includes removing a director, the director’s name and reason for removal must be specified.
•If the board fails to call the special meeting, the person(s) requesting the meeting may call and hold the meeting within 45 days.
Voting by Proxy
If you are unable to attend an AGM or owners meeting but still want to have a role in the decision making process, you may wish to submit a proxy form. This gives another person who plans to attend the meeting the power to vote on your behalf.
•proxy for voting on general
•proxy for voting on the election of directors
•proxy for voting on the removal of directors
Only directors have a right to attend board meetings. Directors may issue invitations on occasion for owners or others to attend and address a matter with the board.
Boards of directors must keep minutes of their meetings and these minutes must be available for review by any owner. The corporation may not make a charge for allowing an owner to examine its minutes, but it may make a reasonable charge for any copies which the owner requests.
Information provided courtesy of the Ministry of Consumer Services.