In the money?

November 9, 2012 -

There are many things to consider when you're buying a home under condominium tenure, including its location, price, size and layout.


In the money

But one of the most important considerations is the financial well-being of the condominium corporation.

Buying into a condominium corporation insufficiently funded to operate and maintain common elements can leave you with higher costs down the road. Low condominium fees may make a particular condominium more appealing than others, but it may be a sign that you should be extra diligent in determining if the condominium corporation is fully prepared to fund major repairs and renewal projects.

If the condo corporation is not “financially fit” to afford the maintenance required, the condition of the property could deteriorate or you may be faced with substantial charges to cover repair costs as they occur.

Fortunately there are ways to determine the financial status of the condominium based on the documentation that the condominium corporation is obliged to keep, including the annual operating budgets and end-of-year financial statements. You can request to examine this documentation.

For resale condominiums, check the estoppel or status certificate. The estoppel or status certificate is a package of legal documents that may include the declaration, bylaws, rules and information about the corporation’s insurance, reserve fund, property management contract and any outstanding judgments. For new condominiums review the disclosure statement that also supplies important financial information.

The condominium reserve fund

An important part of the operating budget is the reserve or contingency fund. The purpose of a reserve fund is to provide financing for major repairs and renewal projects over the life of the building or buildings that form the condominium corporation.
The fund essentially ensures that the condominium common elements will be maintained in good shape for the life of the project.
The amount required to be in the reserve fund depends upon the condition and life expectancy of all of the common property elements and the estimated cost to replace them over the life of the project. This information is obtained by carrying out reserve fund studies conducted by engineers or other professionals who assess the condition of the common elements of the building, estimating their remaining lifespan and their related repair and/or replacement costs.

After receiving the reserve fund study, the board of directors can propose a plan for the sustainability of the fund, including a determination of what would have to be set aside on a monthly basis to cover the long-term costs. These monthly contributions become part of the condominium fees that owners have to pay. In some provinces this planning is mandatory, while in others it is optional. Reserve fund studies are updated from time to time, depending on provincial regulations or at the discretion of the condominium corporation.

You do not want to move into your new home only to discover that the reserve fund is underfunded and major repairs are required. This could mean a significant increase in condominium fees or the levying of charges, commonly known as special assessments, to the owners by the condominium corporation to pay for the needed repairs. Special assessment charges can be high depending on the type of work required. Ensure you obtain and review the estoppel or status certificate, or the disclosure statement for new construction, to determine the current state of the reserve fund.

Before you buy, it’s important to carefully check out the financial condition of the condo corporation. To learn more about condo ownership, consult Canada Mortgage and Housing Corp.’s (CMHC) publication called Condominium Buyers’ Guide. Download your free copy here at or call 1-800-668-2642.

Mark Salerno is the Corporate Representative for the Greater Toronto Area at Canada Mortgage and Housing Corporation. You can reach him at 416-218-3479 or e-mail him at

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