PURCHASING A CONDOMINIUM

When you are shopping for a home in Nova Scotia, you may be presented with the
opportunity of purchasing a condominium unit. This lawletter is intended to give you
an overview of some of the unique issues which arise when you buy such a unit.

What Is It That You Buy When Purchasing A Condominium?

A condominium complex is a system of separate ownership of individual units in a
multiple unit building, and in Nova Scotia, its creation is authorized by statute. The
ownership of a unit differs from the ownership of a house in certain ways.

The condominium you are purchasing is a self-contained unit. In a high-rise
development, your unit will be that area horizontally and vertically between the walls,
from the bare floor under your carpet to the ceiling. Any walls within the unit that
support the entire complex are not included in your unit.

You are also purchasing a percentage share in the common elements of the complex.
Common elements are generally described as being all the property in the complex
except the individual units. With your condominium, you will also receive the right to
the exclusive use of certain common elements. For example, if you have a balcony,
you do not own it because it does not fall within the area of your unit; rather, you are
granted the exclusive right to use that balcony, or you may be provided a specific area
for storage.

Finally, by purchasing a condominium unit, you are also acquiring part ownership in
the Condominium Corporation. The Condominium Corporation is an incorporated
company whose object is to maintain the property of the complex. A unit owner is in a
position that is very similar to a shareholder of a corporation. Each unit owner has a
vote in the running of the corporation. All the unit owners' votes may not be equal;
rather, they may vary according to the unit size or certain other factors. The
Condominium Corporation is in charge of the day to day maintenance of the entire
condominium complex.

Restrictions on Ownership of the Unit

The use to which you may put your condominium unit is restricted by the terms set
out in the following documents:

1.The Declaration - this is a lengthy document which, among other things, sets
out many of the rights and privileges which a unit owner enjoys. Similarly, it
contains many restrictions which may affect your use of the unit. For example,
the Declaration may state that the unit cannot be used for the purpose of
running a business, or that no interior alterations may be made without
consent, or it may restrict your right to lease your unit, or prohibit the
ownership of pets.
2.The Bylaws - this document authorizes the Condominium Corporation to
make rules from time to time. These rules are much like the occupancy rules
which are enforced in an apartment building. They are known as the Common
Element Rules, and they dictate how the unit owners in the complex must act
in relation to the common areas and common elements. The Condominium Act
requires that Bylaws be registered with the Registrar of Condominiums in order
to be enforceable. Common Element Rules, however, need not be registered in
this manner.

These documents form contractual arrangements which are very difficult to change. It
takes a one hundred per cent (100 %) vote of all unit holders and all encumbrancers
(e.g. mortgage holders) of the property to amend the Declaration. It takes a vote of the
owners of at least 60% of the common elements to amend and/or pass a Bylaw. It
takes a vote of a majority of unit owners present at a meeting to pass Common
Element Rules.

The Declaration, Bylaws and Common Element Rules will govern the use of your new
home. Please read them carefully and contact your lawyer immediately should you
have any questions or concerns. Clause 3 of the standard form of Agreement of
Purchase and Sale for condominium real estate transactions allows a purchaser a
specified number of days within which to review the Deed, Declaration, Bylaws and
Common Element Rules and Regulations of the Condominium Corporation. You must
carefully review these documents and raise any objections which you have within the
time allowed.

Day to Day Management

As is mentioned above, the Condominium Corporation is charged with the day to day
management of the complex. Each unit owner has the right to run for office as well as
to review the financial statements of the Corporation. All meetings must be held in
accordance with the Bylaws.

The real day to day management of the corporation is usually carried out by a
separate management company. That management company is charged with the
responsibility of maintaining the building, collecting the monthly assessments, and
paying the utilities. If you as a unit owner are not satisfied with the management
company, you can suggest that the contract not be renewed when it comes up for
review.

Monthly Fees

The monthly condominium fees paid by you as a unit owner to the Condominium
Corporation will be used to maintain the buildings and to pay day to day expenses. A
portion of the fee goes into a reserve fund to be used at some future date for large
unexpected expenses such as roof replacement, paving or furnace repair. These
condominium fees are much the same as taxes and may increase in the future.

Parking Spaces

Each Condominium Corporation differs with respect to the allocation of parking
spaces. In some cases, they are treated as exclusive use common elements and
assigned to the particular units under the terms of the Declaration. You automatically
receive the right to use the parking spot assigned to your unit when you purchase that
unit. In other cases, the parking space may be separately deeded to an owner; then
you must ensure that you receive a deed to both your unit and to the relevant parking
space. In yet other cases, the Condominium Corporation will enter into leases
whereby individuals may lease parking spaces. This, of course, will be subject to the
availability of parking spaces, and it may be necessary for you to put your name on a
waiting list.

The availability of parking will have an impact on the purchase price and the resale
value of your condominium. It is, therefore, very important that you make inquiries with
respect to the allocation of parking spaces and that you include a provision relating to
this issue in your Offer to Purchase.

Real Property Taxes

You should bear in mind that your condominium unit will be taxed by the municipality
as if it were a single family dwelling. With new developments, the property may still be
assessed to the owner of the development; however, ultimately, each unit will be
assigned a tax account number and will be assessed individually. Your bank may ask
you to pay 1/12 of your yearly taxes with your monthly mortgage payments in order to
ensure that the taxes will be paid.

Insurance

While the Condominium Corporation is required to maintain insurance on the complex
as a whole, it is your responsibility to ensure that you have an adequate condominium
owners insurance policy in place in respect of your particular unit. Confirmation that
such a policy exists will be required for your mortgage holder. You should make
arrangements with your insurance agent to ensure that adequate insurance is in place
on the day of closing.

Reserve Fund

The Condominium Act provides strict guidelines for the maintenance of a Reserve
Fund by each Condominium Corporation. The Reserve Fund, as previously mentioned,
is created to provide funds for major repairs or improvements to the Corporation
property. Inquiries should be made to determine if the Corporation in which you plan to
purchase has completed a Reserve Fund Study (which will be required for most
Corporations), and if the recommendations of that Study have been followed. If not,
you may be subject to Special Assessments by the Corporation to increase the
balance of the Reserve Fund to the required amounts.

Newly Constructed Condominiums

Agreements to purchase a newly constructed condominium usually contain
considerable detail which you should review carefully with your legal representative.
These agreements will contain provisions which require you to make contributions to a
reserve or contingency fund at the time of your purchase. There may also be
provisions by which the seller can require you to take possession of a completed unit
and pay a use and occupancy fee, before the actual transfer of title can be completed.

This Lawletter has been provided for quick reference only. For advice on an actual
case, you should consult a lawyer.

PREPARED BY: Christene H. Hirschfeld

PREFERRED AREAS OF PRACTICE: Real Estate, Corporate, Commercial

Another helpful guide is the CMHC Condominium Home Buyer's Guide. Click to read..(Need Adope Acrobat Reader to read)...

For a guide to condo prices in the Halifax area click here: Condo Prices