Condominium properties, although still real property, involve a whole different level of requirements due to the corporate ownership aspect of being a unit owner within a condominium corporation. This corporate ownership is governed by the Condominium Properties Act and its Regulations which legislate the operation and behavior of the condominium board as well as the corporation itself for the benefit of all unit owners. One of the key interactions between buyer and seller relating to condominiums is the provision of the condominium documents, so let’s consider the intention and use of the condominium documents condition found in the AREA Residential Resale Condominium Purchase Contract.
In the standard AREA contract, there exists a list of condominium documents that are considered "included" for the purpose of the condition. This list of documents was not simply created out of thin air but rather is a list of the documents the Condominium Property Regulation prescribes in Sec. 20.52(1), which has been slightly modified to provide applicable time frames for the consideration of a typical buyer and other practical considerations of the transaction. This list, as the regulation intends, is the list of documents that condominium corporations must maintain, but the buyer and seller may additionally add other items that are important to the buyer. Oftentimes the condominium board will hire a licensed Condominium Manager to manage the daily operations of the condominium corporation, including the maintenance and distribution of the prescribed documents to owners and prospective purchasers upon request. The buyer, in buying a unit in a condominium corporation, must have all the available information to make an informed choice about the health of that corporation before becoming an owner.
The standard AREA Exclusive Seller Representation Agreement with the Condominium Property Schedule attached requires that the seller provide the documents to the brokerage within 10 days of signing the agreement, and the list of documents is also included so the seller knows what documents should make up a complete package. As the individual most in touch with the corporation and its management, the seller is the most able to provide the complete package of updated documents immediately at the time of listing, and simply provide any updated documents they subsequently receive to the brokerage during the listing period so that at any time the brokerage will be able to provide a complete and updated package of documents to prospective buyers without delay or issue during the listing period. Although this is the best practice, unfortunately, many sellers opt to wait until they get an offer accepted on the property and then start thinking about the documents at that time. This increases the probability of rush fees for the provision of the documents, as well as the possibility that the seller cannot or will not get the documents in the time frame they agree to in the contract.
Most contract conditions have only one condition date which is the date by which the buyer must decide if they are satisfied with their due diligence and either waive or non-waive the condition. In the case of the Condominium Documents condition, however, there are actually 3 dates that need to be decided at the time of writing the offer. These three dates are critical to the protection of the buyer’s ability to ensure, more importantly than the unit itself, that the corporation is one they are comfortable being an owner in by a thorough review of necessary current documents.
The first date that must be decided is the Condition Day, which is the date upon which the buyer must be fully satisfied with their review of the full document set, and then waive their condition to prevent the collapse of the transaction completely.
The second date is the Document Delivery Day stated as a deadline for the seller to provide the buyer, at the seller’s cost, true copies of all the documents in the list that are currently available from the corporation. This second date must normally be earlier than the actual condition day to provide the buyer with ample time to review the complete documents package before having to make their decision about waiving or not waiving their condition. It is always advisable to recommend that a buyer get a professional condominium document review company to review their documents for them, and that can require a good 10-14 days once the documents are provided to get the review summary back.
Finally, the third date is a pre-determined contingency plan to manage a situation, although rare, that can arise with condominium documents. This date is a pre-determined condition day extension in the event that a seller cannot or will not provide the documents to the buyer on or before the Document Delivery Day. In such situations, using this date the buyer and seller have pre-agreed that if that happens the buyer may give notice in writing to the seller of their intentions to get the documents package or missing documents, themselves and the condition will be automatically extended to the date chosen here. Incidentally, that notice would go on the AREA General Notice form so it is in writing, and must be done between the Document Delivery Date (Date 2) and the Condition Day (Date 1) to be valid. Additionally, the seller agrees that they will reimburse the buyer for the reasonable costs associated with getting the missing documents themselves, and in case anyone questions whether or not the buyer has the authority to obtain the documents themselves as a non-owner, Sec. 44(1) of the Condominium Properties Act requires the corporation to provide the documents to a purchaser within 10 days of a written request, so this also should help inform the necessary date to use for this extended condition.
Let’s say you are asked to invest in a beautiful, newly renovated, and busy pizza restaurant in a great neighborhood. On the surface, it seems like a great opportunity so you ask to review some documents to make sure your investment is well founded. This is similar to the thought process behind a condominium document condition, in that although the condominium unit may be beautiful and in a great location including all the amenities you have been looking for, it is prudent to remember that you are investing in a corporation, and to see all the documents to ensure your investment is well founded. If the pizza restaurant is not charging enough for their food, and they are in debt because of the renovation it may change your value calculation on that investment, and so it is also with the condominium corporation whose fees are too low to cover expenses, or has an insufficient reserve fund. This condominium document condition, when deployed properly ensures the buyer has every opportunity to verify that what they see, is actually what they will get!
Provincial Practice Advisor
Bryan has many years of experience in the real estate industry including over 10 years as a former broker in the Edmonton Region.
Email: firstname.lastname@example.orgPhone: 403-209-3619