When you are shopping for a home in Nova Scotia, you may consider purchasing a condominium unit.  This Lawletter is intended to give you an overview of some of the unique issues which arise when you buy such a unit.

What do you get when you buy a condominium?

A condominium complex is a system of separate ownership of individual units in a multiple unit building, and in Nova Scotia, its creation is authorized by statute.  The ownership of a unit differs from the ownership of a house in certain ways.

The condominium you are purchasing is a self-contained unit.  In a high-rise development, your unit will be that area horizontally and vertically between the walls, from the bare floor under your flooring or carpet to the ceiling.  Any walls within the unit that support the entire complex are not included in your unit.

You are also purchasing a percentage share in the common elements of the complex.  Common elements are generally described as being all the property in the complex except the individual units.  With your condominium, you will also receive the right to the exclusive use of certain common elements.  For example, if you have a balcony, you do not own it because it does not fall within the area of your unit; rather, you are granted the exclusive right to use that balcony.  You may also be provided a specific area for storage or parking.

Finally, by purchasing a condominium unit, you are also acquiring part ownership in the Condominium Corporation.  The Condominium Corporation is an incorporated company whose object is to maintain the property of the complex. The Condominium Corporation is in charge of the day-to-day maintenance of the entire condominium complex.  A unit owner is in a position very similar to a shareholder of a corporation.  Each unit owner has a vote in the running of the corporation.  All the unit owners’ votes may not be equal; rather, they may vary according to the unit size or certain other factors.

Restrictions on Ownership of the Unit

The use to which you may put your condominium unit is restricted by the terms set out in the following  documents:
The Declaration – this is a lengthy document which, among other things, sets out many of the rights and privileges which a unit owner enjoys.  Similarly, it contains many restrictions which may affect your use of the unit.  For example, the Declaration may state that the unit cannot be used for the purpose of running a business, or that no interior alterations may be made without consent, or it may restrict your right to lease your unit, or prohibit the ownership of pets.

The Bylaws – this document authorizes the Condominium Corporation to make rules from time to time.  These rules are much like the occupancy rules enforced in apartment buildings.  They are known as the Common Element Rules, and they dictate how the unit owners in the complex must act in relation to the common areas and common elements.  The Condominium Act requires that Bylaws be registered with the Registrar of Condominiums in order to be enforceable.  Common Element Rules, however, need not be registered in this manner.

These documents form contractual arrangements which are very difficult to change.  In most circumstances, it takes an eighty percent (80%) vote of all unit holders of the property to amend the Declaration.  It takes a vote of the owners of at least 60% of the common elements to amend and/or pass a Bylaw.  It takes a vote of a majority of unit owners present at a meeting to pass Common Element Rules.

The Declaration, Bylaws and Common Element Rules will govern the use of your new home.  Please read them carefully and contact your lawyer immediately should you have any questions or concerns.  The standard form of Agreement of Purchase and Sale for condominium real estate transactions allows a purchaser a specified number of days within which to review the Deed, Declaration, Bylaws and Common Element Rules and Regulations of the Condominium Corporation.  You must carefully review these documents and raise any objections which you have within the time allowed.

Day to Day Management

As is mentioned above, the Condominium Corporation is charged with the day-to-day management of the complex.  Each unit owner has the right to run for office as well as to review the financial statements of the Corporation.  All meetings must be held in accordance with the Bylaws.

The real day-to-day management of the corporation is usually carried out by a separate management company.  That management company is charged with the responsibility of maintaining the building, collecting the monthly assessments, and paying for utilities.  If you as a unit owner are not satisfied with the management company, you can suggest that the contract not be renewed when it comes up for review.

Monthly Fees

The monthly condominium fees paid by you as a unit owner to the Condominium Corporation will be used to maintain the building(s) and to pay day-to-day expenses.  A portion of the fee goes into a reserve fund to be used at some future date for large unexpected expenses such as roof replacement, paving or furnace repairs.  These condominium fees are much the same as taxes and may increase in the future.

Reserve Fund

The Condominium Act provides strict guidelines for the maintenance of a Reserve Fund by each Condominium Corporation.  The Reserve Fund, as previously mentioned, is created to provide funds for major repairs or improvements to the Corporation property.  Inquiries should be made to determine if the Corporation in which you plan to purchase has completed a Reserve Fund Study (which will be required for most Corporations), and if the recommendations of that Study have been followed.  If not, you may be subject to Special Assessments by the Corporation to increase the balance of the Reserve Fund to the required amounts.

Parking Spaces

Each Condominium Corporation differs with respect to the allocation of parking spaces.  In some cases, parking spaces are treated as exclusive-use common elements and assigned to the particular units under the terms of the Declaration.  In that case, you automatically receive the right to use the parking spot assigned to your unit when you purchase that unit.  In other cases, the parking space may be separately deeded to an owner; then you must ensure that you receive a deed to both your unit and to the relevant parking space.  In yet other cases, the Condominium Corporation will enter into leases whereby individuals may lease parking spaces. This, of course, will be subject to the availability of parking spaces, and it may be necessary for you to put your name on a waiting list.

The availability of parking will have an impact on the purchase price and the resale value of your condominium.  It is, therefore, very important that you make inquiries with respect to the allocation of parking spaces and that you include a provision relating to this issue in your Offer to Purchase.

Real Property Taxes

You should bear in mind that your condominium unit will be taxed by the municipality as if it were a single family dwelling.  With new developments, the property may still be assessed to the owner of the development; however, ultimately, each unit will be assigned a tax account number and will be assessed individually. Your bank may ask you to pay a percentage of your yearly taxes with your regular mortgage payments in order to ensure that the taxes will be paid.
Insurance

While the Condominium Corporation is required to maintain insurance on the complex as a whole, it is your responsibility to ensure that you should make arrangements with your insurance agent to ensure that adequate insurance is in place on the day of closing to provide coverage for liability, your personal belongings and any upgrades of the unit.

Newly Constructed Condominiums

Agreements to purchase a newly constructed condominium usually contain a lot of detail which you should review carefully with your lawyer. These agreements contain provisions which require you to make contributions to a reserve or contingency fund at the time of your purchase.  There may also be provisions by which the seller can ask you to take possession of a completed unit and pay a use and occupancy fee, before the actual transfer of title is completed.  It is essential that you fully understand these provisions.

Recent Amendments to the Condominium Act

Traditionally, purchasing a newly constructed Condominium came with significant risks; however amendments have been made to the Condominium Act to provide protection to the buyer. Changes have been made to implement stricter requirements on the developer including new conditions regarding the Reserve Fund, limitations on the Occupancy Fee that may be collected from you, and more information must be provided to the buyer at the time the Agreement of Purchase and Sales is signed.

Conclusion

Purchasing a condominium is an exciting experience. While you will face many decisions, you should not be intimidated by any of them. Your lawyer is there to help you through the process.

This information has been provided for general reference only. For advice on an actual matter, you should consult a lawyer. To contact a member of our team call us at 902-469-9500 or 1-866-339-3400 or contact us online to make an appointment.