Buying a Condominium (Script 407)

From Clicklaw Wikibooks

This script provides general information about buying a condominium unit (or strata lot). This script assumes that you have already checked script 406 on “Buying a House”.

For information on owning a strata lot, check script 401, called “Owning a Condominium”.

What is a condominium?

The word condominium is used in other provinces. It means a building or complex of buildings with some individual owner apartments or houses. In BC, the word condominium is used informally.

Strata lot—in BC, a condominium unit is called a strata lot. It can be an apartment, townhouse, commercial space, a freestanding house, a duplex unit, a bare lot of land containing a home, or some other configuration, as long as the strata lot is shown as a strata lot on a properly registered strata plan.

Strata corporation—in BC, a condominium complex or development is called a strata corporation. A strata corporation allows for individual ownership of strata lots in a single parcel of land, and is created by a strata plan which is a series of drawings and notations registered in the Land Title Office. That strata plan is the document which shows the boundaries of each strata lot and the common property.

Owners of the strata lots are members of the strata corporation, and together own the common property, pay for the common expenses of the strata corporation, and vote on matters of common interest.

Bare land strata corporations are unique in that the strata plans show only a top down view of the property parcel, and each strata lot, which is a bare lot of land usually containing a home which belongs entirely to the strata lot owner.

Strata corporations and other types of condominiums

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 strata corporation—whether it’s a 300-unit high-rise apartment, a 50-lot bare land strata recreational development, or a 2-unit strata duplex.

Some condominium complexes in BC are not strata corporations and are not governed by the Strata Property Act. Some apartments, townhouses and duplexes operate under various legal frameworks such as housing societies, privately owned rental buildings or others. This also occurs on first nations reserve lands, where provincial property law doesn’t apply normally. You should get legal advice to ensure that you know what you are offering to buy.

For more details on condominiums, check script 401, called “Owning a Condominium”. It explains several topics including common property, limited common property, the strata plan, the strata corporation, the strata council and insurance.

What should you consider before making an offer to buy a condo?

Typically, a prospective buyer of a strata lot should request and receive documents that will let them make an informed decision about whether to buy the strata lot. At a minimum, a buyer should obtain and carefully review the following:

A. Form B Information Certificate—this sets out required facts about the current status of the strata corporation and the strata lot being sold. The Form should include the financial obligations for that strata lot, any parking and storage facilities assigned to the strata lot (the monthly strata fee and any special levy payments outstanding), and other useful facts. The Form B should have attached documents such as the current budget, rental disclosures statement (if any), rules and the depreciation report for the strata corporation (if there is one).
The Form B Information Certificate also shows if the strata corporation has adopted any new bylaws which will take effect but haven’t yet been 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 strata corporation may charge a fee plus the cost to copy the Form B Information Certificate.
B. Depreciation report—every strata corporation with 5 or more strata lots must obtain a depreciation report unless the owners have regularly voted by 75% vote resolution to defer the report. If a depreciation report has been prepared, a copy of it must be attached to the Form B Information Certificate. The depreciation report must have financial forecasting and an inventory and evaluation of the common property and common assets and any other property that the strata corporation has a duty to maintain. A depreciation report helps the owners anticipate and budget for future common expenses and special assessments.
If a depreciation report has not been obtained, be very careful in evaluating the condition of the property as a whole.
C. Title to the strata lot—this document lists any covenants, easements and other encumbrances on title. With your lawyer, review the documents registered against title, and confirm that there are no registered documents which reduce the value or usability of the strata lot.
D. The strata plan—it shows the boundaries of the strata lot you are thinking of buying. The strata plan, or associated schedules, show the unit entitlement which determines the strata lot’s proportionate share of contributions, and the schedule of voting rights for the strata corporation. Compare your obligations to those of other strata lots to ensure that they are proportionate.
E. The bylaws of the strata corporation—these set out owners’ specific rights and obligations and give you a good sense of how rigidly the strata corporation controls owners. Look carefully for any pet, age, and rental restrictions and whether they will be a problem for you.
F. Obtain and review the Land Title Office’s Strata Plan General Index for other documents registered in the Land Title Office, such as limited common property designations, or other important documents, such as a rare, unanimous section 100 resolution which changes the default division of expenses.
G. Several years of minutes of meetings of the strata council, and general meetings of the owners, including minutes of any section, can give you a sense of how active the strata council is, and recent issues the strata corporation has been dealing with such as water leaks, expensive repairs coming up, and discussions about winding up the strata corporation. Ask for at least 2 years of minutes (ideally, more than that), and review them carefully.
H. For new developments, the owner-developer must give prospective first buyers a copy of the up-to-date disclosure statement including any amendments as filed with the Superintendent of Real Estate. That document discloses the intentions of the Owner-Developer, and has marketing representations, as well as disclosure of legal encumbrances and other important information.
Although the disclosure statement itself doesn’t bind the strata corporation as a governing document, it includes schedules which are binding, and it can indicate the developer’s intentions for the development, and plans for future phases, which may be important to you.
For older developments, it may be possible to get a copy from the seller, or the strata council.

Checking those documents, a smart buyer or their lawyer can get a reasonable and current sense of the strata corporation and the strata lot, and any other documents to review.

Pay attention to issues important to you, and to the following:

  1. Financial obligations—make sure that you can afford to be an owner in the strata you're considering.
    a. Monthly strata fees—all strata lot owners must pay a proportional part of the common expenses of the strata corporation by paying strata fees for their strata lot. The strata fees are normally based on the strata corporation’s annual budget divided by the unit entitlement which sets out the share for each strata lot. Check the current budget and the Form B Information Certificate for the current strata fees. Compare the strata fees to other similar developments.
    i. If the strata fees seem high, check if there are expensive recreational facilities or other features, or budgeted items which you will have to help pay for—whether they benefit you or not.
    ii. If the strata fees seem low, consider whether the budget is adequate and be realistic about likely strata fee increases and large special levies that may be needed for expensive repairs.
    b. Other assessments—strata lot owners may need to pay other expenses, including:
    i. Special levies—a strata lot owner also needs to pay their share of any special levy for extraordinary expenditures which is assessed against all strata lot owners
    ii. User fees—there may be user fees to use parking or other facilities.
    iii. Fines and reasonable costs of bylaw enforcement—these can be charged back to an owner who contravenes the bylaws or rules.
    iv. Insurance deductibles—many strata corporations will charge an owner for insurance deductibles or other charges arising from sources of damage within a strata lot.
    Review the financial statements and budget of the strata corporation to assess its financial situation, where money is being spent, and the balance of the contingency reserve fund and other accounts. Review what special levies and other funds have been assessed and spent on major expenses such as repairs.
  2. The physical condition of the project—the general rule is that every owner in a strata corporation 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, with future installments. Future installments should be disclosed in the From B information certificate.
    Review the minutes of meetings to see if any major repairs have recently been made or are planned. If the strata lot is part of something called a section, you also need to check the minutes of general meetings of the section, plus minutes of the meetings of the section’s executive. In each case, ask for complete copies of the relevant minutes for at least the past 2 years.
    Ask to see the strata corporation’s depreciation report, and carefully review it for expensive replacements, repairs or upgrades which have been recommended, particularly those which are likely to be costly, required soon and for which no contingency reserve funds have been set aside.
  3. Is the community right for you—review the minutes carefully for issues which might concern you. If you are on a fixed income, or borrowing heavily to buy a strata lot, then watch for discussions which might indicate expenses, such as ongoing or threatened litigation, water leaks, building envelope problems, and structural or major repair concerns.
    A careful review of the minutes can tell a lot about the strata corporation. You might see noise complaints relating to an adjacent strata lot, or very strict enforcement of the bylaws, recurring disputes, the existence of factions or similar trends which may concern you. Are the minutes a well-organized and well-written record of decisions, or do they resemble a gossip column? Is there a licensed strata manager involved in meetings? Do they appear to have difficulty electing a full strata council? Does the Council meet monthly or infrequently?
  4. The type of ownership: freehold or leasehold—our legal system distinguishes between freehold ownership and leasehold possession. In a leasehold development, 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”.
    Leasehold developments—in these, a landlord owns the entire property parcel, but grants a long-term lease to a developer (often, 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, and then the developer sells leasehold interests in each strata lot to buyers, for a specific term.
    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 special levies, and can sell their leasehold interest in their strata lot to the next leasehold buyer.
    Depending on the project, the developer may prepay all the rent due under the long-term lease, or ongoing head lease payments may form a part of the leasehold strata corporation’s budget payable as part of the strata fees.
    Be cautious with leasehold developments—be sure you understand the remaining term of the head-lease, the term of your own leasehold, and what happens when the terms expire. Normally, the long-term tenant must vacate, or leave, the strata lot, unless other arrangements are made. The landlord may have to pay an amount to the departing long-term tenant using a formula in the long-term lease or in government regulation. It is important to carefully read and fully understand the lease contracts and related documents. 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. Make sure that you understand what you are buying and that the leasehold is being valued correctly. The fair market value of a leasehold strata lot is usually much less than the value of a comparable freehold strata lot.
  5. Bylaws and rules
    As an owner of a strata lot, you must comply with the bylaws and rules of the strata corporation. The law assumes you know them. Read them carefully before you buy.
    Together, bylaws and rules set out rights and responsibilities of owners, tenants, occupants and visitors. They also set out special restrictions on the use of each strata lot, common property and common facilities.
    Bylaws can very broadly restrict what people can do in the development, including restricting or prohibiting:
    • rental of a residential strata lot by the owner to a tenant.
    • pets as specified in the bylaw or generally
    • the permitted age of occupants
    • smoking
    • barbeques
    • the color of window coverings or other things visible in windows
    • the use of parking stalls or vehicle size
    • changes to the strata lots and common property
    • other uses which can be made of a strata lot, common property or common facilities.
    Reading the bylaws and rules, and comparing them to the standard bylaws, can give you some idea about how restrictive the strata corporation is. It also provides some assurance that the priorities of the strata corporation match yours. Consider how you might want to use your strata lot. Don’t make any assumptions without carefully reviewing the bylaws and rules and satisfying yourself that you will be able to use the strata lot as you intend, and that your vehicle, pet, child and possessions will be able to move in with you.
    Get a copy of any rules. Although rules apply only to the use and enjoyment of common property and common assets, they are not registered in the Land Title Office, and can specifically restrict activities which might be important to you. For example, a rule may limit the size of vehicles that can 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 the up-to-date, consolidated bylaws, and a complete copy of the rules.
    Bylaws and rules can be changed, and some changes may dramatically affect how you can use your property.
  6. Other restrictions—bylaws and rules are not the only documents which can restrict how you may use a strata lot. Covenants, easements and other documents registered against title may limit the use of the strata lot or affect its value. For example, in a bare land strata development, the title of your strata lot may be encumbered with a building scheme that restricts your use of the strata lot or limits the size or other details of any house you want to build on your strata lot.
    Municipal bylaws and zoning rules may further restrict use of a strata lot.
    With your lawyer, review the results of a current title search for the strata lot, and the other legal documents and circumstances.
  7. Confirm what you are buying—check the location, dimensions and area of your strata lot. Balconies, parking stalls, storage units and other non-residential areas you may expect to have access to are sometimes configured in odd ways legally. For example, parking spaces can be common property, limited common property, or part of your strata lot. Each of those configurations has different legal effects and can change your repair obligations and your rights to use them.
    If the parking stall or storage locker currently assigned to the strata lot is designated as common property, then the bylaws may allow the strata corporation to allocate or reallocate the use of a stall or locker, and you need to confirm whether you will keep that assignment. The strata corporation may also use a short-term exclusive use agreement or special privilege to give an individual owner or tenant the use of a stall or locker for up to one year. After that it must be renewed if they want the use to continue. Or the developer may have arranged for an affiliated corporation to hold a long-term lease over the common property parking or storage area. In that case, to use a particular stall or locker, the owner may need to negotiate an assignment of the right to use that stall or locker under the long-term lease.
    If the purchase of a strata lot includes the use of one or more parking stalls or storage units, you should confirm the nature of your right to use the parking stalls or storage units. Verify that any limited common property features like balconies, parking lots, and storage units are assigned to your strata lot in the manner, size and location which matches your expectations, are correctly noted on the registered documents and match the representations in the Form B Information Certificate, the real estate listing and any seller representations.
    Strata corporations must now disclose the designation of parking and storage lockers, and how they are allocated to a strata lot in the Form B Information Certificate.
    Put all your questions in writing and get written answers from the seller and, if possible, the strata council.

Use a lawyer

Before making an offer to buy a condominium, have a lawyer review the critical documents, including the contract of purchase and sale, legal title to the strata lot, the strata plan and any amendments, limited common property designations and other resolutions affecting common property, the Form B Information Certificate, legal issues identified in the minutes, and the bylaws and rules.

If you can’t see a lawyer before you make an offer, then add a sentence to your offer saying it is subject to your lawyer’s review of the strata documents to confirm that no features reduce the use or value of the strata lot. Then take the offer to your lawyer before you remove any of the “subject to” clauses or the deadline for doing so expires. Strata lots are expensive and buying one is complicated. Mistakes can be costly. It makes sense to use a lawyer.

Be very careful about rent-to-own, time share and other non-standard ways of buying a strata lot—do not sign any agreement without comprehensive legal advice.

More information

[updated July 2018]

The above was last reviewed for accuracy by Lisa Frey and Taeya Fitzpatrick, and edited by John Blois.

© Copyright 2018, Canadian Bar Association British Columbia Branch. Dial-A-Law is a registered trademark owned by Canadian Bar Association British Columbia Branch, a non-profit membership corporation.

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