BEFORE YOU BUY OR RENT
Fees & Finances
Condo owners should understand the finances of their condo corporation and should be able to interpret expenses, reports, budget, etc. This means understanding what the annual budget, common expenses, special assessments, chargebacks, and liens are.
Financial Statements & Budgets
Owners should expect to receive board-approved financial statements before their corporation’s annual general meetings takes place. Corporations must create, have auditors review and have their board of directors approve financial statements every year. Many corporations choose to hire accountants to prepare statements. Smaller, self-managed condos may take on more of this process by themselves.
Corporations also create annual budgets that they must include as part of any status certificates.
Owners should review these and understand the financial status of their condo corporation.
Condo fees, also known as common expense fees or maintenance fees, are what owners pay to maintain their condo’s common elements such as the parking garage, hallways, lobby, recreation centre, elevators and more. Corporations also use these payments to shore up the reserve fund.
Each unit is allocated a percentage of the common expenses based on its size, parking space and locker. Payment proportions are initially determined by the builder through the declaration.
This is an additional payment or a levy a condo board collects from owners in case of an unexpected shortfall.
Special assessment fees are proportional to the per cent of common expenses of each unit. There have been situations in the past where units in certain corporations have been assessed for thousands or even tens of thousands of dollars. Buyers and owners should understand the financials of the condo corporation so they can properly assess the risk of any incoming assessments.
In addition to the Act, most condominium governing documents contain provisions that require the owners to pay back the condo for certain costs, damages, or losses. Units can be charged with these costs because of the behaviour of the owner or tenant. This charge ensures the expense doesn’t affect other owners who may not be at fault.
Condo corporations must obtain both property and liability insurance in case of damage to units or common elements. Common insurable property risks include water leaks, fire, smoke, vandalism and rain or anything else specified in the governing docs. Insurable liability risks include any harm that can come from use of land or machinery on the premises of the condo building. Corporations should also take out director and officer insurance so board directors acting in good faith can avoid personal liability when doing their board duties. Directors not acting in good faith are not covered by this insurance.
Unit owners should have their own separate insurance policy to cover damage to their personal possessions and unit upgrades or changes.
This insurance should include enough for liabilities in the event of an injury in the unit as well. A point to note: When taking an insurance policy, owners should research and understand their condo insurance and standard unit by-law to make sure their insurance covers what the condo policy does not cover.
Tenants should carry insurance for personal possessions and liabilities to complement the owners’ insurance.
A lien is a legal claim against a person’s property by a creditor. If not addressed, the creditor may be able to seize the property from the person that owes them. In a condo community a lien can happen due to:
- Arrears on monthly condo fees.
- When an owner fails, after due notice, to carry out necessary maintenance and repairs.
- Insurance deductibles because of damage to common elements or another unit may also fall in this category, depending on by-laws or declaration.
See our page on liens for more information.