When purchasing a condo many people contact a real estate agent to help them find a condominium and review the documentation. When the offer to purchase is signed it is often conditional on obtaining financing. When financing is approved, the offer to purchase becomes binding. Should you also make the offer subject to the review of your lawyer? If you do, what would a lawyer review?
The questions a lawyer will ask may have already been discussed with the real estate agent but a lawyers critical opinion will assure you that your purchase is safe.
If you make your offer to purchase subject to “review by your lawyer to your satisfaction,” your lawyer should ask the following questions:
- Have you read the bylaws?
- Some condominiums have restrictions that may concern you. For example, a condominium might not allow the unit to be rented or might not allow pets?
- Have you looked at the recent financial statements of the condominium corporation?
- A condominium needs to maintain a reserve fund to pay for the future upkeep of the property. A well managed condominium will have a sufficient reserve fund that is spent as budgeted.
- Is there a deficit or surplus? Have special levies been assessed? These things will indicate whether or not the condominium corporation is well managed.
- Unusually high professional fees may indicate past legal disputes.
- Has a reserve fund study been completed within the last 5 years?
- A reserve fund study estimates the cost of maintaining the condominium building in the future. You should compare the reserve fund study to the financial statements.
- Have you read the board of directors’ minutes from the last two years?
- These minutes will disclose the concerns the board has had with unit owners, legal concerns with the management company, or insurance claims.
- Has the condominium corporation been sued.
- When you purchase a condominium unit, you become the part-owner of the condominium corporation and you will be liable for a portion of any judgment awarded against the corporation.
- Do you know when the vendor purchased the property, how much they paid, whether they have a mortgage, or are they in arrears for any condominium fees assessments or taxes?
- This information is available through a title search and will assist you in making your decision and when negotiating the purchase.
Your lawyer may ask further questions depending on a review of the information and further details of your potential purchase. For further information about purchasing a condominium see Service Alberta’s Consumer Tip Sheet – Buying and Owning a Condominium.