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January 01, 2014

ACOA owners’ corner – Your condo, your investment

What every condo owner should know (First of two parts)

Bernice M. Winter

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When you purchase a condominium you are buying more than a home. You are also buying a share in a corporation. The small ones cans be worth over a million dollars and the larger can be multi-million dollar corporations. The important question is, how can you enjoy living in your condominium home, while protecting your investment?

Let’s start with the basics: A condominium is created by registration of a condominium plan at the land titles office. The condominium plan contains detail such as the Unit Factor, the legal size of the home (unit), the location of the boundary of the unit and it identifies the components that are common property.

The Unit Factor determines the “undivided interest share” each owner has in the common property. Common property is owned in common by all unit owners in proportion to their Unit Factor.

Every owner is impacted personally and financially by the style of management, the financial strength and the overall viability of the corporation. When it is time to sell the unit, the salesperson, the prospective buyers, lenders, and mortgage insurance companies evaluate the viability of the corporation. There are condominiums in Alberta that are not able to get risk insurance, that mortgage insurance companies will not insure and that lenders will not finance. This means that owners in these properties are not able to sell for fair value until the causes of these problems are corrected.

The great news is that protecting your condo investment is not rocket science. You do not need a degree in corporate management or financial management. All you need is an understanding of the roles and responsibilities of the elected board of directors and the owners. The areas that will assist you in protecting your condo investment that I am highlighting in this article are based on my 38 years of condo experience. As each condominium project is unique to itself governed by its own management style, condo plan and customized bylaws, the following comments are of a generic nature as a guide for living in a condominium and protecting their investment.

Election of the Board of Directors

Every condominium is required to have a Board of Directors. This board is comprised of owners elected by owners at the annual general meeting (AGM). In Alberta the condominium legislation and bylaws give the board the power and the responsibility to make many decisions without the vote of the owners. These responsibilities include budgeting, spending, borrowing money, hiring contractors and proving information to owners (shareholders). The Board does require the vote of the owners to change the use of common property, to borrow money in excess of the limits in the bylaws, to select the annual auditor, to spend reserve funds on capital improvements and to amend or change the bylaws.

As the Board of Directors hold a lot of power and responsibility. It is important that the owners attend the annual meeting and elect the owners they believe will have the best success in running the business of the Corporation. Too often owners are elected to the board only because no other owner is interested or willing to step up.

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