Condo Document Review in Calgary: What Buyers Need to Know
When you buy a condo in Calgary, you are purchasing more than the unit itself. You are also becoming part of a condominium corporation and taking on a share of its financial responsibilities.
A condo may look beautiful during a showing. The common areas may appear clean, the landscaping may be well maintained and the monthly condo fees may seem reasonable. However, none of that tells you whether the corporation is running a deficit, facing legal action, planning a major repair or considering a special assessment.
That information is found in the condo documents.
After more than two decades of helping Calgary buyers, my advice is straightforward: never waive the condo-document review condition until the documents have been received and properly reviewed.
What Is a Condo Document Review?
A condo document review examines the legal, financial and operational records of the condominium corporation. The objective is to help a buyer understand the health of the corporation before becoming one of its owners.
As a Calgary REALTOR®, I help my buyers look through the important documents and understand issues that could affect their purchase. However, I do not replace a professional condo-document review company.
A professional reviewer examines the complete package and prepares a plain-language summary of the corporation’s financial position, major concerns and potential risks. If the reviewer identifies something unusual, I want the company to explain how serious it is.
Is it a routine issue that happens within many condo corporations, or is it an unusual problem that could expose the buyer to significant costs?
That distinction matters because not every concern means a buyer should automatically walk away.
Never Waive the Condo-Document Review Condition
I would never recommend that a buyer waive the condo-document review condition before the documents have been properly reviewed.
Like a financing condition, the condo-document review condition is an essential protection. It gives the buyer an opportunity to understand exactly what is happening within the corporation before making the purchase firm.
Removing this condition simply to make an offer appear more attractive could expose the buyer to serious financial and personal stress. There could be an unpaid special assessment, ongoing legal action, an operating deficit or a major repair under discussion.
The unit may be impressive, but buyers also need to be comfortable with the corporation they are joining.
Who Pays for the Condo Documents?
In the Calgary condo purchase contracts I prepare, the seller is responsible for purchasing the required condo documents and delivering them to the buyer and the buyer’s REALTOR®.
The cost of obtaining those documents is paid entirely by the seller, and I write that responsibility into the purchase contract.
The buyer normally pays separately for the professional company that reviews the documents on the buyer’s behalf.
The seller should order a complete and current document package as early as possible. Waiting until the last minute can result in missing documents, rush charges and unnecessary pressure as the buyer’s condition deadline approaches.
The Most Important Condo Documents I Want to See
A professional reviewer should examine the entire package, but several documents immediately receive my attention.
Legal Actions, Claims and Judgments
One of the first things I look for is any legal action or claim involving the condominium corporation, the board or contractors working for the development.
I also want to know whether there are any unsatisfied judgments or orders against the corporation.
A lawsuit is a major warning sign that requires a detailed explanation. Legal disputes can become extremely expensive. Since the owners collectively fund the corporation, those costs could eventually affect condo fees, reserve funds or additional contributions from owners.
A legal action does not automatically mean the buyer must walk away. However, the nature of the dispute, its potential cost and the corporation’s insurance coverage must be understood before the condo-document condition is removed.
Written Demands of $5,000 or More
I also look for details of any written demand of $5,000 or more made against the corporation.
That demand may involve a contractor, supplier or another party claiming that the corporation owes money. Buyers need to know what caused the demand, whether it has been resolved and whether it could develop into legal action.
The underlying dispute may be more important than the initial dollar amount.
The Current Budget and Financial Statements
The corporation’s budget and financial statements show how money is being collected and spent.
I want to see the cost of maintenance, insurance, utilities, property management and other services and expenses associated with operating the development.
I pay particularly close attention to repeated operating deficits.
Most condo corporations are run efficiently, but a corporation cannot continue spending more than it collects indefinitely. A deficit eventually has to be corrected, which will often mean higher condo fees.
It could also lead to reduced services, postponed maintenance or additional money being collected from owners.
One isolated deficit may have a reasonable explanation, but several consecutive deficits are a much more serious concern.
The Reserve Fund Study and Reserve Fund Balance
The reserve fund is intended to help pay for major repairs and replacements involving the corporation’s common property.
These expenses may include:
Roofing
Windows
Elevators
Boilers and mechanical systems
Exterior building components
Underground parking structures
Roads within bare-land condominium developments
Other shared systems and property
Alberta condominium corporations are required to complete a reserve fund study and report at least every five years. The study examines anticipated repairs and replacements and helps the corporation establish a funding plan.
When reviewing the reserve fund information, I want to know:
How much money is currently in the reserve fund?
Is the corporation following its approved reserve fund plan?
What major projects are expected?
When are those projects anticipated?
Does the study recommend increasing owner contributions?
Is the available balance sufficient for the work that is approaching?
A large reserve fund balance does not automatically mean the corporation is financially healthy. The balance must be compared with the size, age and future needs of the development.
A corporation may have a substantial amount saved but still be underfunded if several expensive projects are approaching.
AGM and Board-Meeting Minutes
Meeting minutes can tell buyers things that financial statements alone cannot.
The annual general meeting and board-meeting minutes may reveal discussions involving:
Recurring repairs
Water or drainage problems
Building-envelope concerns
Security issues
Noise complaints
Problem units or tenants
Disagreements among owners
Repairs that have been repeatedly postponed
Concerns about property management
Possible future special assessments
I believe buyers sometimes overlook these minutes, but they can provide an honest picture of what people living in the development are concerned about.
They may also help a buyer understand the neighbours, management and general atmosphere of the condo corporation they could be joining.
What Is a Special Assessment?
A special assessment is an additional amount charged to condo owners when the corporation needs money beyond its regular operating revenue or available reserve funds.
This often happens when a costly repair cannot be fully covered by the reserve fund.
Depending on the project and the number of owners sharing the cost, an individual owner’s portion could be thousands or even tens of thousands of dollars.
Buyers need to know whether a special assessment has been:
Discussed
Proposed
Approved
Partially paid
Fully paid
Left outstanding
The purchase contract must clearly establish how an existing special assessment will be handled.
Special assessments deserve their own detailed article, but they are one of the main reasons a professional condo-document review is so important.
Other Condo Documents That Should Be Reviewed
The complete package can also contain:
Condominium bylaws and rules
The estoppel certificate
The corporation’s insurance certificate
Management and recreational agreements
Parking and storage agreements
Information about known structural deficiencies
Monthly condo contribution information
Post-tension cable information, when applicable
Notices and correspondence recently sent to owners
Bylaws are particularly important because they affect how an owner can use the property.
Buyers should understand any rules involving pets, renovations, parking, age restrictions, smoking, short-term rentals and other lifestyle considerations before purchasing.
What Happens When the Review Identifies a Problem?
A red flag should be investigated—not ignored or immediately dismissed.
When a professional condo-document review company identifies a concern, I ask the reviewer to explain the issue in detail. I want my buyer to understand:
How serious is the issue?
Is it common or unusual?
Has the corporation already addressed it?
What is the potential financial exposure?
Could it affect financing, insurance or resale value?
Could it result in increased condo fees?
Is more information needed from the board, property manager, lawyer or another professional?
The answer may be reassuring. It may lead to additional questions or further negotiations. In other cases, it may give the buyer a valid reason not to proceed with the purchase.
The purpose of the review is not to scare buyers away from condos. It is to help them make an informed decision with their eyes open.
Is a Professional Condo Document Review Worth Approximately $500?
Yes.
A professional condo document review costing approximately $500 is a small investment compared with the purchase price of the property and the potential cost of an undisclosed problem.
The review provides peace of mind that the buyer understands the corporation’s financial condition, planned projects and known concerns.
Spending approximately $500 today may help a buyer avoid purchasing into a corporation facing a special assessment worth tens of thousands of dollars.
No document package can guarantee that a corporation will never experience an unexpected expense. However, a professional review gives the buyer a much clearer understanding of the available information before making the purchase unconditional.
There are excellent condo-buying opportunities available throughout Calgary, especially for first-time buyers, downsizers and investors.
However, choosing the right condo involves much more than comparing kitchens, views, amenities and monthly condo fees. Buyers need to evaluate both the individual unit and the corporation behind it.
I help my buyers compare Calgary condos, understand the important questions and include the proper protections in their offers. I also encourage them to use an experienced professional condo-document review company before removing the condition.
If you are considering buying a condo in Calgary, contact me before beginning your search. I can help you look beyond the listing photographs and determine whether the property, location, condo fees and condominium corporation make sense for your plans.
Terry Edwardson – Calgary REALTOR®
The Real Estate Company
403-830-6920
calgarydreamhomes.ca
