If you are thinking about buying a condominium, or already own a condominium-residential or commercial, – Ontario’s new Condominium Act is important to you.
The new Condominium Act, 1998 became law on May 5, 2001 and it replaces the previous Act which came into effect in 1967. The new Act hopes to address the changing needs of consumers and the condominium industry. The new Act has introduced some major changes which owners of condominiums should be aware of. Overall the focus of the new Act is on greater disclosure of information so that consumers can make a more informed decision when it comes to deciding to purchase a condominium.
One of the most significant changes found in the new Act is the requirement of the board of directors of the Condominium Corporation to conduct periodic reserve funds studies. An inadequate reserve fund can adversely affect the value of your condominium and thus, your investment. All condominiums must maintain this special fund, called a reserve fund. The fund exists to pay for future repairs and replacement of the major components of the Condominium Corporation. The purpose of the reserve fund study is to ensure that the condominium has adequate monies to pay for the repairs and replacement of the common expenses owned by the condominium. This is a very important change which should be welcomed by condominium owners.
As the previous Act did not require reserve fund studies, many older condominium buildings were forced to ask owners to pay for many unexpected repairs such as underground garage maintenance, window replacements or fire code retrofit. As an owner of a condominium unit, you may be surprised to learn that you and other owners are collectively responsible for the operating costs of the entire condominium property. While you are the legal owner of the dwelling unit, parking and locker unit, you share ownership of what is called the common elements of the condominium which includes the hallways, lobby, recreation area, underground garage and other items.
When faced with large repair bills, many condominiums determined that the reserve fund was inadequate to pay for these repairs. In many cases this situation resulted because a proper reserve fund study was not done to anticipate these repairs. As a result, the condominium would have to declare a “special assessment” whereby the owner would be legally obligated to pay for a proportion of the repairs. If the owner failed to pay the special assessment, the condominium could register a lien on the unit, or in some rare cases, force a sale of the unit. The new Act should serve to avoid these surprises. Existing condominiums must conduct a reserve fund study within 3 years of the date of the new Act (May 5, 2001). Newly built condominiums must conduct a reserve fund study within 1 year of the condominium registering its declaration (the document that legally creates the condominium).
As with any large investment, when purchasing a cottage, it is important to conduct some preliminary investigations to avoid surprises. You can protect yourself by consulting an experienced real estate lawyer.
There are many other significant changes ushered in by the new Act. When purchasing a brand new condominium, the purchaser has a 10-day cooling off period during which it can cancel the deal without penalty. This period now begins from receipt of the signed agreement or receipt of the disclosure statement, whichever is later. Also, the purchaser now has the option of paying all cash on occupancy (the day you move into the unit) therefore avoiding paying the builder interest during the occupancy period. Finally, the new Act has provisions for mediation and arbitration for settling disputes between the owner and the Condominium Corporation.
These changes are important. Should you require more information on the new Act, you should consult a lawyer who specializes in real estate.