What is a condominium?
Condominiums can come in many shapes, sizes and styles. There are apartment styles, town homes, duplexes, tri-plexes, single detached houses, recreational property, land only, commercial, etc. The difference between purchasing a home that is a “Condominium” versus a home that it not considered a “Condominium” simply means that you are purchasing your unit, plus buying into a part of the business. Hence why it is called a Corporation.
Condominiums consists of two parts. The first part is your unit. Your unit entails the boundaries around the area which is solely for your use and enjoyment. The second part includes a proportionate share of the “common areas”. These areas may include the roads, the hallways, swimming pools or fitness centers, courtyards/green spaces, any mechanical or any other equipment or areas that service more than one unit. Collectively the owners share the cost for the common areas operation, maintenance and ongoing replacement.
How are monthly Condominium fees calculated?
A group of owners, who make up the Board of Directors, make a budget to forecast the cost of paying for the repairs, maintenance, services, utilities and insurance for all the common areas. Some examples include paying for the electricity to light the hallways, shoveling the snow in the winter, cutting grass in the summer, repairing the elevator when it breaks down, patching the cracks in the pavement of your parking lot/roadways, etc. The total dollar figure of all these expenses gets divided up among all the units in the condominium complex and that amount becomes your monthly condominium fees for each unit. However, the fees are not necessarily divided equally among all units. The calculation is based on the amount of “Unit Factors” your unit holds in relation to the entire project.
What is a Unit Factor?
Unit Factors essentially represent the percentage of ownership that specific unit has in the complex. The builder/developer assigns the unit factors. These numbers are calculated primarily based on the size of the unit, but that is not necessary the only element to the calculation. The Unit Factor determines the owner’s portion of the operating budget or any special assessment owners are required to contribute, and possibly the owner’s voting rights, unless the bylaws state otherwise.
What are Bylaws?
Bylaws are the registered rules and regulations of the Condominium. They include regulations on how to conduct the business of the Corporation, rules for the Board of Directors, regulations pertaining to the proceedings of meetings, and rules for the owners and residents.
Does an owner need to carry insurance?
Yes. The unit owner may be responsible for insuring some or all of the following:
- Some condo properties are required to insure their structures;
- Personal property contents such as appliances, furniture and jewelry, and items stored in lockers;
- Improvements and betterments made to the unit (for example, upgrading flooring, finishing a basement, installing new cabinets, etc);
- Personal liability;
- Deductible coverage;
- Any other coverages required as per the Bylaws for that specific Condominium Corporation.
Since insurance can vary from one condo property to another, we outline the specific requirements in all our Document Reviews.