Richard Bergeron

Condo plan or proposed condo plan, bylaws, annual general meeting minutes, last 12 months of board minutes, monthly unaudited financial statements, reserve fund study, plan and amount in the fund, management agreement, insurance certificate, percentage of owner occupied units, lease agreements pertaining to parking stalls. These documents and perhaps more depending on the condominium building form the package that all potential condo owners should review and be satisfied with prior to finalizing a conditional offer on a condominium unit. If the list seems a bit daunting (and it should) there is good reason. In addition to purchasing the unit you are also purchasing part ownership in the condominium corporation, a corporation that can have a great impact on your quality of life (ie bylaw restrictions) and your pocket book (potential cash calls).

Any sound, professionally prepared offer to purchase should contain a buyer’s condition that the buyer is given all condominium corporation documentation and upon receipt of all documents have the opportunity to review and be satisfied with them. Where most offers fall short is that the time frame to review these documents is time specific and not tied to when the final document is provided to the buyer.

It’s more often the case than not that sellers do not have on hand all the required documentation to provide to a buyer when an offer is accepted. The scramble begins to locate or order from the management company the required information. If the condition date is a specific calendar date this puts the buyer at a disadvantage in terms of having enough time to review the documents. In the case of new condominiums this situation is resolved by the Alberta Condominium Property Act which states any prospective buyer has 10 days, upon receipt of all documents to review them and be satisfied with them.

As condominium ownership has become a greater segment of the real estate market the awareness of the importance of the condominium corporation documents has increased. This is evident in the number of companies a buyer can hire to review these documents on their behalf. Only seven years ago there were a handful of companies in the city that offered this service. If a buyer thought to have anything reviewed more often that not they consulted with their lawyer. Although lawyers play an integral role in the buying and selling of real estate, their expertise is not in deciphering condo documents. Today buyers have a choice of more than a dozen reputable companies capable of the task.

Given the scope of the financial commitment a buyer is making with condo purchase and that a buyer has to abide by the corporation’s bylaws (can you have a pet, are there age restrictions) the old adage “Assume Nothing” is most appropriate to adhere to. The cost of having documents professionally reviewed will pay dividends in the future!

Recently I worked with a client looking to purchase a condo in the Beltline area. My client, a lawyer from Ontario, has had significant experience in condo living, serving on the condo board in the building where he lives in Toronto. After viewing many properties, the decision came down to one of two units in two different buildings.

Both buildings were nearly identical in age, number of units, style and size of units and parking (part indoors and part outside). The first building was located in a very desirable area with many amenities such as shops and restaurants steps from the door and offered a strong reserve fund, but had outdated common areas. The second building was in an emerging neighbourhood, with substantial construction of upscale condos and amenities in the works, but currently not as good a location as the first building and it did not have as strong a reserve fund. The suite in the first building was a penthouse and the suite in the second building was not.

While in different buildings, each condo met the client’s needs in terms of size, layout and number of bedrooms and price point. Which one to choose? After much research on my part it may surprise you that the client chose the unit in the second building with the less superior location and smaller reserve fund! Here’s why.

The sale statistics for the building he chose showed a trend of buyers repeatedly paying more for units in this building than in the first building which offered the better location and large reserve fund. It was obvious from first entering the chosen building that the owners and management had invested a lot of time, money and effort into their building. The elevator had been replaced, the lobby updated with new, longer lasting materials in contemporary colours, new window coverings were in the lobby, hallway lighting had been improved, silver hardware replaced the older brass style, there were updated fire exit signs, new parkade lighting installed and the parkade had been painted. In addition, after reviewing the condominium documents it was revealed more improvements where scheduled. It was evident the owners were proud to call this building home by wisely spending money to update and maintain the structure and common areas of their building.

Although the reserve fund was not as strong as the first building, it was clearly demonstrated that the owners in this building were actively involved in maintaining and increasing the collective value of each owner’s investment. The proof of higher value in the second building was demonstrated through sales of $20,000-$40,000 more for the same type of condo as compared to the first building. Through research and analysis my client bought a condo in a superior building which will protect and increase his investment in the future.

When condo buildings were constructed in the 1970’s and 80’s it was very popular for a building to have amenity areas for the owners. These may have included group/party rooms, saunas, hot tubs, exercise areas and change rooms. Over the years many of these have fallen into disuse or disrepair. On average, a small percentage of owners utilize these amenities. The emphasis placed on keeping them maintained and updated is diminished.

There is a financially rewarding option many condominium corporations are currently exploring. More and more are looking to sell these areas, either renovated or not, as individual residential units. There are several factors driving this trend in condo buildings.

The first is obviously the great increase in condominium property value Calgary has experienced over the past several years. Condo boards are eyeing the large sums of money that the corporation could realize from selling the unused or under-utilized common areas in the building as individual units. This money could be used to re-furbish other common areas such as the halls and lobbies or be put to major capital expenditures such as replacing old elevators or roofs, thus alleviating the need for special assessments or higher condo fees. Remaining funds could be allocated to the reserve fund for future use. Updating and upgrading the building would increase the overall property values of units in the building, thereby benefiting all owners.

The second reason for this trend is that these underutilized areas are usually a drain on the collective expenses of the building. They still need to be heated, cleaned and maintained. Boards are looking to turn this expense into an asset.

A third reason is that with another unit in the building paying condo fees, each owners monthly fees may actually decrease.

The process to convert common area to individual ownership is a lengthy one and involves the services of a qualified condominium lawyer as well as the guidance of the management company. A special resolution needs to be passed by 75 % of the ownership (not always an easy number to achieve). The condo plan needs to be resurveyed with new unit factors assigned to each unit. A title needs to be created for the new unit and each title in the building needs to be amended with their new unit factor. This whole process can take over a year and in some cases several years! Given the Calgary real estate market, the financial rewards for the corporation can be great and outweigh the time, effort and expense required.

Currently there are several buildings in the Beltline in various stages of this process. Over time buyers will see more of these situations as they look to purchase resale units, or even one of the former common area suites.

Recently I was showing suites in an upscale, newly constructed condo building in Eau Claire. When I stepped out of the elevator it was like walking into a bright sunny day; the amount of hallway lighting was the most I had ever seen in a condo building. Every 4 feet a wall sconce was on either side of the hall as well as 4 overhead pot lights. You could almost feel the heat coming off the light fixtures. Later I was informed that the condo fee for the suite my clients were interested in had just jumped 30%, due mostly in part to electricity costs! With the amount of lighting in the common areas I saw and the type of light bulbs used this was no surprise.

Here is a classic example of how choosing a greener approach to our lives can actually pay dividends, rather than costing consumers more. The budgeted amount for electricity for this building prior to the condo fee increase was $110,000 for the year. Image if the condo association board for this building chose to change all the common area lighting to compact fluorescent (CF) bulbs. True, there would be an initial cost outlay to purchase new bulbs, at approximately $2 per bulb. However, the CF bulbs have a lifespan of 6,000 hours compared to 750 hours for incandescent bulbs and the energy usage is roughly 25% of incandescent bulbs.

Under this new scenario, the board would be able to reduce condo fees rather than have to increase them! When was the last time that happened? By thinking “green”, the owners of the building could actually save money. The board could go a step further and put in place a building policy that individual unit owners use a minimum number of CF bulbs in their suites as well. In the case of this building, the electricity for the suites is not individually metered and the condo association pays for everyone’s electricity. This small change would be a cost savings for the owners year after year.

The promise of saving a few bucks a year by using 1 CF bulb may not send you rushing out to replace your bulbs. But consider the wider impact when this is applied on a broad scale, as in a condo building. The green benefits suddenly become very tangible, especially to your pocketbook!