Important condominium documents
Do your homework before you buy
Condominium documents can provide essential information that can aid purchasers in making informed decisions with respect to purchasing the right condominium.
If you are considering the purchase of a condominium, you may wish to review the following documents:
• By-laws
• Current Audited Financial Report (if applicable)
• Current Financial Statements
• Current Insurance Certificate
• Current Budget
• Reserve Fund Study
• Reserve Fund Plan
• Board of Directors Meeting Minutes and AGM Minutes
• Management Agreement
• Owner Occupancy Ratio Statement
• By-laws
• Current Audited Financial Report (if applicable)
• Current Financial Statements
• Current Insurance Certificate
• Current Budget
• Reserve Fund Study
• Reserve Fund Plan
• Board of Directors Meeting Minutes and AGM Minutes
• Management Agreement
• Owner Occupancy Ratio Statement
A read through the by-laws can help the potential buyer understand the laws that govern that particular corporation. The by-laws establish the duties, obligations, and responsibilities of both the owners and the condominium corporation. One section in particular, the “Duties of the Owners” speaks to the things that the unit owner is responsible for. Another section which should also be perused and closely scrutinized is the section that speaks to the “Restrictions in Use and Occupancy.” This section outlines the restrictions placed on residents and visitors and is critical, because it speaks to issues such as:
• Pet Ownership
• Use of BBQs
• Storage of RV’s
• Age Occupancy Restrictions
• Pet Ownership
• Use of BBQs
• Storage of RV’s
• Age Occupancy Restrictions
It would behoove the potential purchaser to pay special attention to this section to confirm that their life style and the rules that govern a particular condominium are “in sync”.
The most recent audited financial statements and the current financial statements will address and outline a corporation’s financial status and should provide a clear picture of its operating and reserve accounts as well as it’s expenditures.
The Insurance Certificate outlines a condominium’s insurance coverage and it’s deductibles. If you have questions regarding the coverage you could contact the insurer or ask to be provided a copy of the insurance policy.
The current Budget will indicate a corporation’s projected operating expenses and show how much of the owners’ contributions are to be allocated to the reserve fund for that fiscal period. If properly prepared, they should also include a breakdown of the condominium contributions for each unit. The budget can also give a potential purchaser an idea of what percentage of the budget has been allotted to pay for utilities, repairs and maintenance, insurance, management, etc…
The Reserve Fund Study should identify the repair and /or replacement of a corporation’s capital items. These capital items are usually large ticket items that are not repaired or replaced on an annually reoccurring basis.
The study indicates their present age, their estimated life expectancy or the remaining life, and the estimated replacement or repair costs. The study helps to create a better understanding of what the corporation’s future needs and sets guidelines, so that the corporation may set aside the necessary funds to replace capital items, such as boilers, roofs, elevators, common area carpets, and the like.
The Reserve Fund Plan is a projection of the income and expenses for the
Reserve Fund for the next five years. The plan should show the capital items, which are projected for repair and/or replacement for that period of time, the costs of those expenditures, and the amount of money that will be added to the Reserve Fund, including the interest received by the corporation on the Reserve Fund. This plan is can be reviewed and updated annually when the Budget is prepared and established using the Reserve Fund
Study and the property’s current physical state as a quide.
The Board of Directors Meeting Minutes and AGM Meeting Minutes can give an owner or prospective purchaser a “snap shot” of a corporation’s decision-making process. The minutes will show the decisions and policies made by the Board of Directors as well as points that are being considered. They can also provide an indication of where the corporation is being stewarded.
The Management Agreement will indicate who the professional condominium management company is and what their duties are.
The Owner-Occupancy Ratio indicates the percentage of units that are owner –occupied and the percentage of units that are rental properties. These facts may be important to a potential unit owner, to lenders and to CMHC.
These documents are just as crucial if you are a unit owner that is selling your unit. It is advisable to ensure that the aforementioned information is available at the time that you list your unit. Waiting to gather this information after an offer has been made on the unit can result in additional costs and could put undue stress on the parties involved.
Don’t be afraid to familiarize yourself with these documents and improve your chances of selecting the right condominium community for you and yours. CL
Marc Bateman, BA, ACCI, CPM, is the President and Broker of Acclaim Condominium Managers.
Ana Bateman, BSc, MEd, is an Agent and the Managing Director with Acclaim Condominium Managers.
Marc Bateman, BA, ACCI, CPM, is the President and Broker of Acclaim Condominium Managers.
Ana Bateman, BSc, MEd, is an Agent and the Managing Director with Acclaim Condominium Managers.
