Friday, August 12, 2005

Opting out of the Condominium Property Act

Dear Betty

We are a fairly upscale duplex-style 16 unit bare land condominium development in Edmonton built between 2001 and 2004. There is a committee in place to discuss the pros and cons of opting out of the Condominium Act and registering under the Societies Act, primarily to avoid the cost of a reserve fund study. It appears that we would still have a reserve fund. Can you comment on the advisability of such a decision?



Dear S.H.

When looking to dissolve a condominium corporation there are many things to consider. You need 100% of the owners to agree, you need to have the properties re-surveyed, and you will incur legal costs to dissolve and register the Societies Act Articles and any required Restrictive Covenants to be registered on each title. In our experience the cost of preparing a Reserve Fund Study is usually a lot less than the cost to dissolve the Corporation. In addition to this you still have buildings that are and will continue to age and require repairs. A Reserve Fund Study simply provides the owners with a financial guideline to prepare for these costs, today and for a future 25 year period, which will occur whether planned for or not.

In addition to this the Societies Act does not give the Board of Directors the power to control, manage, maintain or repair the common area's which means that the Board has no control over if a repair is completed or not. Should a neighboring owner choose to allow the building or landscaping to deteriorate, the loss of value impacts the neighboring properties as well as itself. This is one of the key benefits to the condominium structure. Property values are protected as the Board has the responsibility and power to ensure that maintenance of the property is completed timely and properly.

As part of your research, take the time to drive by projects that are not condominiumized, and are not regulated by the Condominium Property Act. You will often see clutter, different colors of trim, roof shingles, styles of screen doors, fences, different landscaping ideas, and more. The curb appeal can be severely impacted as the majority of buyers in Alberta prefer uniformity and clean, well manicured and maintained properties. I believe that the cost to dissolve added to the potential loss in property value far outweighs the cost of having a Reserve Study Prepared once every five years. Be sure to do the math.

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At February 2, 2012 at 12:33 AM, Blogger Jeffrey21 said...

The reserve fund is needed in case of emergency repairs. Just like getting an insurance, it will not be a good idea to opt out of this expense.

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