Condo Terminology for Novice Canadian Real Estate Investors

March 30, 2011 - PRLog -- | www.preigCanada.com | www.WorldWealthBuilders.com | Toronto |

Condominium living is a popular option for many Canadian as it can be a relatively carefree housing and real estate investment option. Currently, in major cities in Canada, one out of three new homes built is a condominium. Interest in condominiums tends to grow with a shortage of rental accommodation, relatively low mortgage interest rates, and urban core renewal. “New Real Estate investors intend to buy condos to start investing, since there is very little care required” say Navtaj Chandhoke, founder of Professional Real Estate Investors Group (PREIG) Canada. Most major newspapers, Real Estate websites now include a condominium section which recognizes the increasing number of people who already live in—or aspire to live in—a condominium.

Residential condominiums can be high-rise or low-rise (under four storey’s), town or row houses, duplexes (one unit over another), triplexes (stack of three units), single-detached houses, stacked townhouses or freehold plots. There are even mixed-use condominiums that are partly residential and partly commercial buildings. They come in various sizes with diverse features and they can be found in almost every price range.

“A condominium is a form of home ownership in which individual units of a larger complex are sold, not rented. These units may be renovated apartments, townhouses or even commercial warehouses” says Navtaj Chandhoke. Contrary to popular belief, the word 'condominium' does not apply to the type of unit itself, but the legal ownership arrangement. Any multi-unit structure can 'go condominium', meaning occupants must either vacate the premises or purchase their apartments outright.

Those who purchase units in a condominium technically own everything from their walls inward. All of the individual homeowners have shared rights to most common areas, such as the elevators, hallways, pools and club houses. Maintenance of these areas becomes the responsibility of a condominium association. Every owner owns a share of interest in the condominium association, plus an obligation to pay monthly dues or special assessment fees for larger maintenance problems.


Board of directors: Every condominium must have an elected executive, the Board, which is responsible for proper administration of the condominium and bylaw enforcement. The Condominium Property Act’s initial Appendix 1 bylaws, although replaceable, stipulate a board of no fewer than three (except where there are not more than two owners) and not more than seven individuals.

Caveat: A unit-owner’s obligation to pay regular condominium fees or special assessments is fundamental to the condominium’s financial security. If a delinquency develops, the corporation has the right to file a caveat (notice or warning) against the title. The charge may be enforced in the same manner as a mortgage.

Condominium Corporation: When a plan is deposited with a land titles office, an administrative body is automatically created. Membership in the condominium corporation is made up of the owners of the individual units. Its purpose is the management of the affairs of the condominium in the best interests of all owners.

Condominium plan: Every condominium community has a plan, registered at a land titles office that provides unambiguous definition of the perimeter of the master lot, the location of buildings (if any), unit boundaries, and the unit-factor distribution. The document replaces the original single title with unit titles.

Common property: Every part of a condominium plan that is not a unit is common property. The condominium common property supports and services the individual units, and its ownership is proportionately distributed among the unit owners in accordance with their unit factors.

Condominium Property Act: The name of the Alberta statute that supports, directs, and regulates condominium ownership. Since provinces have jurisdiction over land titles, each has its own condominium legislation. Fundamental concepts are essentially similar. However, from one province to another, legislative scope and administrative technicalities may vary significantly. The Act, which must be passed into law by the provincial legislature, articulates legislative concepts and cornerstone provisions.

Contributions (condo fees): Condominium owners contribute to a fund for payment of common property costs (whether normal operating, reserve, or special) via assessments levied against their units. “Contributions” is the proper term, but “condo fee” has acquired colloquial, although incorrect, currency.


Estoppel Certificate: In the context of condominium, it’s a certificate issued by a condominium corporation stating the status of a particular unit’s contribution account. If the corporation certifies that there are no arrears, referred to as a “clear certificate”, it cannot subsequently claim otherwise against a new owner.


Insurance — corporation: Every condominium corporation must place and maintain a “master policy” (for a broad set of perils specified in the Regulation)over the common property and the units (other than improvements made by the owners) and against corporation, board and officer liability for action or omission with respect to carrying out their functions.

Insurance — unit owner: To protect against property loss, personal liability and disaster expenses, every condominium owner should purchase unit-owner insurance. Such coverage usually offers all-risks protection against an owner’s personal property loss from fire, theft and vandalism, and improvement and betterment coverage for damage to upgrades made by the owner.

Mortgages — unit: Buying and financing a new or used condominium residence is not much different from that of a non-condominium home. Like any home purchase, ownership of a condominium unit plus its proportionate share in the common property is an estate in land. Land Titles will issue a title and register mortgage documents and other instruments associated with standard real estate investments.

Municipal taxes: Like traditional-house buyers, condominium purchasers are land owners. So, they must pay their fair share of municipal taxes. For assessment purposes, each unit and its share in the common property constitutes a separate parcel of land and improvements.


Officers: From its members, the Board elects an executive — usually a president, a vice-president, a secretary and a treasurer. The president chairs meetings and often has a casting vote. The vice-president performs the president’s duties in his or her absence. The secretary ensures minutes of proceedings are kept; and the treasurer, that proper financial records are maintained.


Reserve fund: A fund of money set aside to provide for the repair and replacement of major parts of the common property. Officially termed the Capital Replacement Reserve Fund, it is usually held in secure, fairly liquid investments, and is not intended to be used to cover regular or annually recurring maintenance.


Tenancy in common: Condominium unit-owners collectively co-own the common property as tenants in common. The arrangement is a long established, business-like system for administering undivided interests in real property. In the absence of a written co-ownership agreement, common law provides for the accounting, allocation, and collection of operating expenses, and for the reimbursement of expenditures that result in capital enhancement. With condominium, the plan and the bylaws constitute a contract between the individual unit owners and the condominium corporation.

Unit: Home sweet home. The unit is the area that you actually own and hold title to. Repair
And upkeep of the unit is generally your responsibility.

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Navtaj Chandhoke is a Canadian-based real estate investor, speaker, author, educator and the founder of World Wealth Builders, leading Canadian Real Estate investors education,mentoring serving Canadians since 1993.
www.WorldWealthBuilders.com | www.preigCanada.com |