Interested in purchasing a Condo? Be aware of these legal pitfalls.

What lawyers look for when reviewing condo documents.

Though the general rule of “buyer beware”, applies to most property acquisition, it’s particularly important when considering real-estate purchases given the scale in their value. This is further complicated with buying a condo, as you’re actually buying into a condo corporation (essentially becoming a shareholder in a company), rather than acquiring physical land.

The overall well-being of a condo can’t be entirely determined by conventional means, such as doing a walk-through to gauge the overall condition of the building or the unit for sale – you have to dig deeper. The condominium documents allow you to look into the financial state of the condo corporation as well as the effectiveness of the condo board. These documents are usually numerous and can be difficult to interpret, so it’s vital that you get them reviewed professionally by a real-estate lawyer, so that you can make an informed choice in your purchasing decision. The following are a few examples of what real-estate lawyers are trained to look for when reviewing the documents of a condo corporation:

Board meeting minutes content and continuity

Real-estate lawyers carefully review all the records of the condo board meetings, not only analyzing their content, but also looking for gaps in the minutes. The minutes should be complete, with no gaps. If gaps are present, then there may be vital information missing relevant to your choice to buy or not.

Reserve fund health

A condo corporation is required by law to have an properly maintain a reserve fund to cover the costs of anticipated maintenance, repairs or replacement of the property of the corporation. As such, gauging the health of the reserve fund requires looking beyond the actual amount in the the bank and looking at the reserve fund study, which is required to be completed every 5 years. Your lawyer will be able to weigh the cost of current and projected upcoming expenses with the amounts currently in and expected to be in the reserve fund from monthly condo fees. If there is a discrepancy in these values, your lawyer will be able to advise you on the likelihood, timing and magnitude of a future special assessment.

Lawsuits

No one would think of buying into being the target of a lawsuit, but failure to properly review condo documents can result in just that! If you buy into a condo corporation that is being sued, you become, in part, a target of that lawsuit as a legal shareholder. Your real-estate lawyer will be able to inform you of any legal actions currently in process or being proposed against the condo corporation, as well as an estimate of the legal costs and outcomes of these actions. Legal costs come out of the reserve fund, as do any damages ordered to be paid by the condo corporation. A successful lawsuit against the condo corporation can mean costly special assessments for shareholders.

Learn more about condo law in Edmonton.

If you fail to properly review condo documents before making a purchase, you may be left with no course of action against the seller. That’s why it’s vital to have them professionally reviewed by a real-estate lawyer.

*If you’re interested in buying a condo, click here to read about a recent change in the Condominium Property Act.

*If you’re looking for a real-estate lawyer in Edmonton, click here.

 

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