Buying a condominium is a lot like buying a house. But there are also important differences. Learn the key things to consider before making an offer to buy a condo.
Understand the legal framework
The term condominium means a building or complex of buildings containing a number of individually owned units or houses. In British Columbia, the term is used informally. The legal term for a condominium in BC is strata. In strata housing, the owners own their individual strata lots and together own the common property as a strata corporation.
More than high-rise condos
Strata housing is more than just high-rise condos. Strata housing can also include duplexes, townhouses, fractional vacation properties — even single-family homes in bare land strata corporations (called “strata subdivisions”).
It’s not the size or shape of a development that makes it a strata. Instead, it’s the legal structure used. If a development is legally created by a strata plan, it’s a strata — whether it’s a 300-unit high-rise apartment or a two-unit strata duplex.
The law that applies
In BC, the Strata Property Act is the main law governing stratas. Under this law, a strata corporation is created when a strata plan is registered in the Land Title Office. A strata plan is a series of drawings and notations, and shows the boundaries of each strata lot and the common property.
Owners of the individual strata lots are members of the strata corporation. Together, they own the common property, pay for the common expenses of the strata corporation, and vote on matters of common interest.
Some condominium complexes in BC are not set up as strata corporations. Some apartments, townhouses and duplexes operate under various other legal structures, such as housing co-operatives or privately-owned rental buildings. This also occurs on First Nations reserve lands, where provincial property laws don’t apply the way they do elsewhere.
Strata developments can be either freehold or leasehold. In a freehold development, people hold “fee simple title” to their strata lots. That means they own their strata lots.
In a leasehold development, the landlord owns the property, and people hold a “leasehold interest” in their strata lots, for a specific term. These long-term tenants are registered on title, and are treated as owners under strata property law. They must pay the monthly strata fees and any other contributions, and can sell their leasehold interest in the strata lot to the next leasehold buyer.
Most strata developments are freehold, where people own their strata lots.
Key things to consider
Our information on buying a home (no. 406) covers key factors to consider when buying any type of home, whether it’s a strata, a house, or some other type of legal structure. It covers topics such as what to include in an offer to purchase, “subject to” clauses, counteroffers, financing, fraud risks, the taxes payable, the statement of adjustments, and more.
Here, we explain considerations specific to buying a unit in a strata complex.
A prospective buyer of a strata lot should review documents that will help them make an informed decision about whether to buy the strata.
Under the law in BC, a buyer can request the strata corporation provide an information certificate (in Form B). This certificate sets out facts about the current status of the strata corporation and the strata lot being sold. The form should include the financial obligations for that strata lot, any parking and storage facilities assigned to the strata lot, the monthly strata fee and any special levy payments outstanding, and other useful facts. The form should attach documents such as the current budget, rules, any rental disclosures statement, and any depreciation report for the strata corporation.
The information certificate also shows if the strata corporation has adopted any new bylaws which will take effect but haven’t yet been filed at the Land Title Office, and whether the strata corporation is involved in any lawsuits or arbitration.
It is also important to review the legal documents for the strata. The title to the strata lot lists any covenants, easements and other encumbrances on title. This can reveal limitations on the use of the strata lot or charges that may affect its value.
The strata plan shows the boundaries of the strata lot you are thinking of buying. It shows the “unit entitlement” of the lot, which determines the strata lot’s proportionate share of contributions, and the schedule of voting rights for the strata corporation. Compare your obligations to those of other strata lots to ensure they are proportionate.
Bylaws, rules and minutes
Strata lot owners must comply with the bylaws and rules of the strata corporation. Read them carefully before you buy.
The bylaws of the strata corporation set out owners’ specific rights and obligations and give you a good sense of how rigidly the strata corporation controls owners. Look carefully for any pet, age, or rental restrictions and whether they will be a problem for you.
A strata corporation’s rules set out how common property and common assets can be used. Look for whether they restrict activities that might be important to you. For example, a rule may limit what size of vehicle can park in a common-property parkade, or restrict the hours when a common-property fitness centre is open.
Past minutes of meetings of the strata council, and general meetings of the owners, can give you a sense of how active the strata council is, and recent issues the strata corporation has been dealing with, such as water leaks or expensive repairs coming up. Ask for at least two years of minutes (ideally, more than that), and review them carefully.
For new strata developments
For new developments, the owner-developer must give prospective first buyers a copy of an up-to-date disclosure statement. This document discloses the intentions of the owner-developer, and has marketing representations, as well as disclosure of legal encumbrances and other important information.
Make sure you can afford to be an owner in the strata you’re considering. Review the financial statements and budget of the strata corporation to assess its financial situation, where money is being spent, and the balance of the contingency reserve fund (a fund to pay for infrequent or unexpected common expenses). Review what special levies and other funds have been assessed and spent on major expenses such as repairs.
Monthly strata fees
All strata lot owners must pay a proportional part of the common expenses of the strata corporation by paying strata fees for their strata lot. The strata fees are typically based on the strata corporation’s annual budget, divided by the unit entitlement which sets out the share for each strata lot. Check the current budget and the information certificate for the current strata fees. Compare the strata fees to other similar developments.
If the strata fees seem high, check if there are expensive recreational facilities or other features, or budgeted items which you will have to help pay for — whether they benefit you or not.
If the strata fees seem low, consider whether the budget is adequate, and be realistic about likely strata fee increases and large special levies that may be needed for expensive repairs.
Strata lot owners may need to pay other expenses, including:
- Special levies. A strata lot owner also needs to pay their share of any special levy for extraordinary expenditures assessed against all strata lot owners.
- User fees. There may be user fees to use parking or other facilities.
- Insurance deductibles. Many strata corporations will charge an owner for insurance deductibles or other charges arising from sources of damage within a strata lot.
The general rule is that every owner in a strata corporation must contribute to common expenses, such as repairs, unless an exception to the rule applies. If the development is in poor repair, you will have to pay your share of the cost to fix it, even if the repairs do not involve your strata lot or the part of the project where your unit is located. You may have to pay for special levies that have been previously approved, with future installments. Future installments should be disclosed in the Form B information certificate.
Review the minutes of strata meetings to see if any major repairs have recently been made or are planned. Ask for copies of minutes for at least the past two years.
Ask to see the strata corporation’s depreciation report, and review it for any expensive replacements, repairs or upgrades which have been recommended.
Review the minutes of strata meetings carefully for issues which might concern you. If you are on a fixed income, or borrowing heavily to buy a strata lot, watch for discussions that might indicate expenses, such as ongoing or threatened litigation, water leaks, building envelope problems, or structural repair concerns.
A careful review of the minutes can tell a lot about the strata. You might see noise complaints relating to an adjacent strata lot, or very strict enforcement of the bylaws, recurring disputes, the existence of factions or similar trends which may concern you. Is there a licensed strata manager involved in meetings? Do they appear to have difficulty electing a full strata council? Does the council meet monthly or infrequently?
Before making an offer to buy a condominium, consider having a lawyer review the critical documents, including the contract of purchase and sale, legal title to the strata lot, the strata plan, the information certificate, strata meeting minutes, and the bylaws and rules.
If you can’t see a lawyer before you make an offer, consider adding a sentence to your offer saying it is subject to a lawyer’s review of the strata documents to confirm that no features reduce the use or value of the strata lot. Then take the offer to your lawyer before you remove any of the “subject to” clauses or the deadline for doing so expires. Buying a strata lot involves risks and pitfalls that a lawyer can help you avoid.
This information applies to British Columbia, Canada
Reviewed in July 2018
Time to read: 9 minutes