Buying a Condo
If you are considering buying a condo, you should read this page. You will find important information about the process of buying a condo including strata fees, type of ownership, bylaws and rules, title, etc.
A
condo is a strata lot in a strata development that subdivides a building
(or sometimes land) into separate parts (called strata lots) for individual
ownership. Depending on the development, a strata lot may be an apartment, a
townhouse, a retail store, a medical office, and so on. In a high-rise strata
building, each apartment is a separate strata lot. In this example, the strata
scheme allows people to own their apartment. The words strata and
condominium mean the same thing. British Columbia is the only place in North
America that uses the word “strata” instead of “condominium”. It’s not the
size or shape of a development that makes it a condominium project. Instead,
it’s the legal nature of it. If the development is legally created by a strata
plan, it’s a condo project, whether it’s a 300-unit high-rise apartment, a
50-lot bare land strata recreational development, or a 2-unit duplex.
What should you consider before making an
offer and buying a condo?
Monthly strata fees
All
strata lot owners must pay strata fees for their strata lot. The Schedule of
Unit Entitlement sets each strata lot’s payment. The strata fees are based on
the strata corporation’s annual budget, so check the current budget. Is a large
part of it for recreational facilities (for example, a fitness centre and
swimming pool)? If so, how much you will use them. Your monthly strata fees
will pay your share of the upkeep for the recreational facilities, even if you
never use them.
The physical condition of the project
In a
strata development, the general rule is that every owner must contribute to
common expenses, such as repairs, unless an exception to the rule applies. If
the development is in poor repair, you will have to pay your share of the cost
to fix it, even if the repairs do not involve your strata lot or the part of
the project where your unit is located. You may have to pay for special levies
that have been previously approved, but not yet implemented. Review the minutes
of meetings to see if any major repairs have recently been made or are planned.
Check the minutes of general meetings of the strata corporation and meetings of
the strata council. If the strata lot is part of something called a section,
you also need to check the minutes of general meetings of the section as well
as minutes of the meetings of the section’s executive. In each case, ask for
complete copies of the relevant minutes for the past two years.
The type of ownership: “freehold” or “leasehold”
Our legal system distinguishes between ownership and possession. In a lease, the landlord owns the property, but gives possession to the tenant for the term of the lease. In most condominium developments, people own their strata lots. These are called freehold developments – each owner holds “fee simple title”. The Strata Property Act permits a government body, for example, the City of Vancouver, to be the landlord of a leasehold strata development. In a leasehold development, the landlord owns the property, but grants a long-term lease to a developer (say, for 99 years) to build a strata development there. The developer is a long-term tenant who, with the landlord’s permission, creates a strata development on the landlord’s property.
In this example, suppose the developer, as the long-term tenant, builds a high-rise apartment building on the City’s land. After the developer files the strata plan (called a leasehold strata plan), the high-rise apartment building is divided into strata lots and common property. The government owns each apartment and is the long-term landlord. The developer is the long-term tenant, entitled to possession of the apartment for the rest of the 99-year lease. The developer does not own the apartment, so it cannot sell it. But the developer can sell its leasehold interest in each apartment under the long-term lease. In other words, the developer may sell to a buyer who can then occupy the apartment for the rest of the long-term lease. But most buyers don’t stay in one place that long. Instead, that buyer will probably sell their leasehold interest (as long-term tenant under the lease) to the next leasehold buyer, and so on. A long-term lease in a strata development may last for many years, as this example shows.
If a person is registered on title as the long-term tenant under a long-term lease in a leasehold strata development, the Strata Property Act treats that person as an owner. The long-term tenant must pay the monthly strata fees and any other contributions, such as a special levy. Depending on the project, the developer may prepay all the rent due under the long-term lease. Or, rent may be payable every year under the lease. In that case, the lease usually requires payment of annual rent, but permits payment in 12 equal monthly instalments, usually on the first of each month.
In
addition to paying monthly strata fees, long-term tenants must pay their
proportionate share of the monthly rent under the long-term lease. When the
long-term lease ends, the Strata Property Act allows several options. Normally,
the long-term tenant must vacate the strata lot, unless other arrangements are
made. At this point, possession of the strata lot goes back to the landlord.
But the landlord must pay an amount to the departing long-term tenant. The
compensation is calculated using a formula in the long-term lease or by
government regulation. This is why the fair market value of a leasehold strata
lot is usually much less than the value of a comparable freehold strata lot. If
you plan to buy the interest of a long-term tenant in a leasehold strata lot,
you should make any offer subject to first reviewing the long-term lease and
all related documents with your lawyer.
The bylaws and rules
Read them carefully before you buy. Bylaws set out owners’ rights and responsibilities and control what the place will be like to live in. Bylaws control the use of strata lots and common property. Bylaws set out the duties of owners, tenants, occupants, visitors, the corporation and the strata council, as well as the procedures at council and general meetings. Bylaws also allow the strata corporation to penalize owners who violate the bylaws.
Every strata corporation begins with a set of default bylaws, called the standard bylaws. The standard bylaws can be changed with a custom bylaw, technically called an amended bylaw. To be enforceable, an amended bylaw must first be filed with the strata plan at the Land Title Office. A bylaw may restrict an owner’s ability to rent a residential strata lot to a tenant. This is important: if you plan to live in your unit, you may want the other owners to live in their units too. You may want rental restrictions. On the other hand, you if you’re buying the unit as an investment for rental, you will not want any rental restrictions.
Bylaws may also restrict pets or certain age groups, such as children. Similarly, the bylaws will likely require you to get permission before making significant changes to your strata lot, such as altering walls or making plumbing or electrical changes.
A strata corporation may also have rules. Rules apply only to the use and enjoyment of common property and common assets. For example, a rule may limit the size of vehicles that may park in a common-property parkade, or restrict the hours when a common-property fitness centre is open.
If
you ask, a seller can obtain strata documents from the strata corporation for
you to review, including a set of up-to-date, consolidated bylaws, as well as a
complete copy of the rules. But even if you understand the bylaws and rules
before you buy, they can be changed at any time.
The Information Certificate (Known as Form B)
You
can ask the strata corporation for an Information Certificate (also known as
Form B). It has important information on several things, including the
corporation’s finances, the money the strata lot owes for strata fees, and
other obligations, such as a special levy. The Information Certificate also
shows if the strata corporation has adopted any new bylaws not yet filed at the
Land Title Office, and whether the strata corporation is involved in any
lawsuits or arbitration. You should always review a current Information Certificate
before making an offer to buy a strata lot. Or you should make your offer
subject to reviewing a current Information Certificate.
The financial statements of the strata corporation
These
show how much your monthly strata fees will be and where all the money goes.
They show any special levies to cover major expenses such as repairs. They also
show how much is in the contingency reserve fund. If any major renovations are
planned, you will have to help pay for them, so this is important information.
The Schedule of Unit Entitlement (also called a Form V)
Each strata lot must contribute proportionately to common expenses, such as strata fees and special levies. Strata lot owners are personally liable for the debt of their strata lot. The Schedule of Unit Entitlement is a table that shows the portion of costs that you, as a strata lot owner, are responsible for. Compare your share of the costs to those of owners of other strata lots in the strata plan.
The
strata plan and resolutions affecting common property – the strata plan,
including any amendments, and resolutions affecting common property, are filed
at the Land Title Office. Get copies of these documents and review them. Check
the location and area of your strata lot and see if any limited common property
features are attached to your strata lot.
The title to the strata lot
This
may limit the use of the strata lot or affect its value. For, example, a bare
land strata development may limit the height of any house you want to build on
it. With your lawyer, review the results of a current title search for the
strata lot.
The Disclosure Statement
If you’re buying a new condominium in a development with 5 or more strata lots, the developer must supply a Disclosure Statement under the Real Estate Development Marketing Act. Read the Disclosure Statement and any amendments – they have a lot of important information about the project.