When You Buy Into A Condominium You Are Buying Into A Whole New And Different Lifestyle

Let’s face it . . . condo life is not for everyone.  So before you buy into one you had better do some serious thinking.  If you’ve watched “Duck Dynasty” where the one son wanted to skin a deer on his front lawn in their Home Owners Association, you know what I’m talking about.

Condoland is full of minefields with trigger mechanisms that are unique to this envious lifestyle, (envious as long as you come into them with the proper attitude and don’t want to skin deer in the yard).

I can give you one tip on an issue that some, even some (misinformed) lawyers it seems.  Misinformed or uninformed lawyers and buyers have been shown recently to be turning to great lengths pursuing the flawed logic that suggests to them that they can simply dissolve the condo corporation, asking the municipal government to simply “cancel the condo designation and take over the condo corporation“.

Let me open today’s blog with some apparently “world shaking awarenesses“, the first of which is that you simply cannot wind down or dissolve a condo corporation because you don’t like the condo lifestyle.

Oh, there are statutes (“laws“) set out in The Condo Act, specifically Subsection 128, but an informed reader simply doesn’t jump in and start crowing about “dissolving the corporation“, but rather is astute enough to read the entire Act, if not the applicable entire section of the Act in which S.128 appears.

S.128 is designed to take the corporation into “Bankruptcy“!

I’ve actually seen “half-wit” lawyers advising uninformed condo buyers that this option is available to them, when in fact there has never been a residential condominium corporation pursue this option.

You’ve got to ask yourself “why has this never been done” (it actually was done once but that was with a “Timeshare” where buyers simply walked away for their timeshare purchases (I don’t blame them as I’m not a fan of timeshare).

Take it from someone who’s been directly involved in condos and the condo lifestyle for four decades (since they were introduced into law).

It has never been done, because residential condominium corporations are “net positive” entities, by which I mean they shouldn’t have creditors and outstanding debt.

Condos are structured in a way that “dissolving one” would constitute a dichotomy.

If expenses pop up unexpectedly that the corporation cannot meet (would be a sign of very poor governance and/or unlawful activity) the board, under the Condo Act has the indisputable right to introduce a Special Assessment (demand the money to cover the unexpected expense) from its shareholders (the unit owners).

But let’s go back to the beginning and get a grasp on the facts that could lead all condo owners to having to pay unexpected expenses (imagine the ceilings starting to fall in the five or six level parking garage under your building).  Or the roof and/or windows start to fail!

If the corporation has been ineptly managed (as many are) or even if it has but a couple years earlier the condo faced another multi-million dollar crisis resulting in a shortfall in the Reserve Fund (money accumulated by the corporation, usually 10% of common element fees).

Now, Boards of Directors (“Volunteers” frequently with no business or legal experience) do have a little flexibility.  They can, for example finance the costs over time and simply add these costs to the monthly common element fees, but you want to clearly understand going in, ultimately the buck stops with the unit owners and condo Boards of Directors are “Statute Bound” (obligated under law) to implement a Special Assessment in a matter along these lines.

Vexatious owners, can also deplete a corporation’s cash reserves for future expenses (“Reserve Fund“), especially in small condos.  Fabricating Board of Director wrongdoing, making unreasonable demands on the Board and/or Property Manager wastes time, energy and resources (collectively “money” as a proper functioning board retains the necessary legal counsel to handle all matters).  Unfortunately, harassment and adversarial interaction seems to have come into vogue in our “Post Trump era” and Director Harassment has become a major pastime from Owners with very little on their minds.

More frequently we have been seeing uniformed or misinformed consumers buying into condos, with absolutely no understanding of what they are getting themselves into.  It’s not only your right to know what is going on.  It is your obligation.

If you are someone that does not like, and cannot see yourself living by Rules, then I can assure you, right up front that condo life is simply not for you.  I respect that in key Condoland markets (high population areas) consumers have little choice as condos are their only choice unless they are well healed (detached houses in Toronto and most cities are way above the average buyers income bracket).  But know and always keep in mind, “if you don’t like living within rules and regulations, you should not buy or rent in a condominium as rules are the heart blood of Condoland“.

Even detached housing developers and Municipalities these days have turned to the condo lifestyle.  POTLs (“Parcel of Tied Land“) are the way detached communities are built these days.

Initially, Municipal Governments front-ended residential development costs (streets, sewage, infrastructure, etc.) and recouped their major investment through property taxes, permit fees, etc.   But the condo concept materially changed all that thinking, when Governments realized that builders could be required to do all that on their (“developer’s”) dollars delivering net positive development revenue streams for the Municipal Government.

Developments become POTLs with “private assets” such as the roadway, lights, snow plowing in winter, insurances, etc. and constitute a new positive cash stream from day one.  Municipalities pick up garbage, but everything else is the condo corporation’s responsibility.  POTLs are after all, “Private Property“, each with their own governance.

Municipalities pass all of these huge costs off to developers and receive Permit Fees, hook-up fees, educational levies, and a list of other cash streams plus property taxes forever!  This is really how our society has and should have evolved.

It is tragic that our governments, collectively didn’t realize that the resulting corporations, many of which (especially in the high-rise industry manage major cashflow, budgets, challenges and demands requiring sound acumen to keep the corporation lawful and capitalized) to “Volunteer Owners” with only basic skill and/or experience levels (18 years old, not undischarged bankrupt, and mentally stable – that’s it!).

I’ve been working on a book and documentary about just how dysfunctional Condoland is from the ground up, but I’ve been facing lawyers falsely alleging outrageous conduct by me that anyone that knows me would know to be false, for a year now and that has dominated my time in my first year of retirement.  Honestly, I have never had to work as hard as I have since retiring!

My situation reflects a consistent vibe in the industry that I’ve observed for decades.

I got involved in condos shortly after condos were introduced in law and Canada’s most prolific developers (“Reichmann’s” of Olympia York Developments).

Freefall

I’ve never tried to hide my lack of formal education in my prominent blogs that have been popular for decades.  I get it . . . I’m a salesman, but I’m not your run-of-the-mill “salesman” like Herb Tarlic on “WKRP in Cincinnati“!  I’m dating myself here but suffice to say that all salesman have been lumped into this nest of liars usually referred to as “used car salespeople” but implied across the board.

Condominiums and the Condo Lifestyle are wholly based on “Rules” and undertaking by Owners when purchasing into them, that they will abide by these Rules and Regulations.

This is where much of the trouble evolves from in Condoland  . . . .  Buyers not understanding what they are getting into and even worse buyers thinking they can simply “as Municipal Governments to change the legal designation of a condo and take over the street” in the case of a POTL.

POTLs are NOT the street (for example).  POTLs are simply corporation’s who’s assets are limited to what the Disclosure Statements, Declaration, Rules, By-Laws and Budgets (collectively “Bundle of Documents“) that any and every buyer, (in perpetuity) is required to sign acknowledgement of having read and agreed to.

The problem is that many Buyers and even their lawyers are ignorant of this foundational difference with the condo lifestyle.

So buyers become frustrated and choose to take their frustrations out on the volunteer board of directors and/or property manager introducing a truly “toxic environment” that is contradictory to the very heart of the concept.

The Internet is full of nightmare stories of property management companies stealing from these major cash-flow corporation (run by uneducated and uninformed consumer volunteers).

Well intentioned volunteer Owners quickly become overwhelmed and turned off!  Many many condos can’t even get enough interest from within their ownership base (unit owners) to form a Quorum to legally even hold the corporation’s Annual General Meeting (“AGM“)!

Let’s face it  .  . . . . .  Condoland is in Crisis (title of my upcoming book and documentary) on multiple fronts and on multiple levels, all of which detrimental to its owners!

So, if I can convey one thought today that triggers some conscious time reflecting on what it is you have bought into, or considering buying into, it is to start with a little self-reflection including but not limited to :  “am I comfortable living with rules“.

I’ve recently observed that many consumers in Ontario are comfortable forfeiting their garage parking (in high-rise condos parking spaces are still consider jewels and critically important for resident owners even if they don’t have cars as they can rent them out and when they ultimately sell the unit the buyers will see it as such also).

I’m always amazed to observe how many detached houses that I drive by, despite having garages, seem to “prefer” to park in their driveway.  As an owner of an expensive “high end” automobile I can confess to never leaving my car exposed to the elements and/or vandals, period.  I can’t get my head around people having parking spaces but not using them, seemingly preferring to use their garages as storage lockers (isn’t that what basements are for?).

Although, to me, this is a clear example of distinctly flawed logic. I really don’t care what others do, (I’ve alway lived by the code that “I don’t care if you want to eat razor blades, as long as you don’t expect me to“) until it comes to condo life.

But when it comes to Condoland (any type of condo and believe me there is a broad range) owners are expected and required to live by the rules and regulations set out in their package of documents.  I’ve observed lawyers recently supporting disgruntled owners (for pay) who insist on challenging their documents “AFTER” they’ve bought into a condo.

Simply stated “these lawyers are committing ‘malfeasance’” and should be punished, although I’ve recently been convinced that there simply is no consumer protection despite there being representation that there is by institutions that I’ve historically believed to have oversight and who’s web sites promote that they do.

I attended an AGM recently where a couple disgruntled owners attended with their lawyers to complain about “how malicious the board was being by insisting that they not live by the rules about parking“.

Now, it’s one thing for Owners to be misinformed but when their lawyers are sitting right there, you can deduce that they have professional legal representation.

But if they did, they surely would know that “Rules are Rules and must be lived by“.  That doesn’t seem confusing to me, but apparently to these lawyers being paid to attend a meeting and purportedly knowledgeable on and of the Condo Act, the simple fact of the corporation’s documents clearly stating that the freehold homes within their POTL “each come with four (4) parking spaces” and that “POTL Owners must park on the POTLs and not the common elements“, you would think that they could share the leal reality with their clients (POTL Owners) that despite having three (3) automobiles and designating two (2) of their POTLs four (4) parking spaces as “storage lockers” for junk, will materially affect their ability to reside within the Rules of the condominium.  That’s simple math!

When these lawyers fail to adequately inform their clients, it leads them to believe that their flawed strategy (3 cars 2 spots is the calculation) the lawyers are failing in their duties to their clients and introducing a basis for disunity within the community and the breakdown of the social fibre of the community.

As a condo investor for decades I’ve owned lots of condos many with what might be perceived as radical rules and I respected and welcomed each and every burdensome rule happily.

For example, commercial vehicles.  A condo (HOA actually but virtually the same thing) that we owned in Florida where we spent our winters for years) had a rule that you couldn’t even park a commercial vehicle on your driveway.  There was a designated commercial vehicle temporary parking for contractors working on homes but absolutely no commercial vehicles owned by owner allowed on the premises.

POTLs are freehold homes with common elements usually consisting of the roadway thus owners with commercial vehicles are legally entitled to park them on their own POTL (as one of their designated four spots).  I can only imagine if they bought into the Florida community that we owned in.

So, if I can get one key point across in today’s blog, it is to learn what buying into a condominium means BEFORE you buy into a condominium.   You can’t and should not try to “change or break the rules“.  You must respect and live by the Rules or you should move.   All the fighting, name calling, fabricating or whatever tamper tantrums you conventionally use to support your dysfunctional opposition to the condo corporation’s documents will end up falling on deaf ears.

After all, the law is the law and most people that buy into condos actually like and look for condos with reasonable rules to insure everyone’s enjoyment of their home.  Your lawyer should have and must educate you to the Rules your are buying into before you buy in.  If you are buying into a “pre-construction” condo or POTL you receive the “Package of Documents” and sign acceptance to the content and are given 10 Days to cancel your Agreement of Purchase and Sale (“Rescission Period“) and during that time, you and/or your lawyers (I always read my completely myself, and I have the best real estate lawyer in Toronto in Myles Waxman) should insure that you know what you are getting into.

Specifically read the Rules (but other undertaking are also set out in the Declaration and the Disclosure Statement) and don’t get frustrated offended or opposed to them after the fact and don’t take any frustration out on your board of directors.

It is best that you get directly involved in the management of any condo that you are a shareholder in, although I’ve recently discovered a couple of nightmare realities buried within this logic that I will comment on shortly.

I’m Charles

 

 

Leave a Reply

RSS
Follow by Email
Facebook
Facebook
GOOGLE
LinkedIn