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Join former CBC radio host Mark Connolly as he sits down with real estate insiders to bring you behind-the-scenes perspectives that answer your questions about home ownership.
With topics that matter whether you’re buying, selling, or staying put, this is the place to get the latest market updates for the Edmonton housing market, hear conversations about housing affordability, learn about mortgage options, and so much more.
Join us twice a month for episodes that cover local trends with context you won’t find in the national news, and get actionable insights that give you confidence for your next move.
The RAEdio podcast is presented by the REALTORS® Association of Edmonton.
Welcome to the RAEdio Podcast brought to you by RAE, the Realtors Association of Edmonton. So that's the RAEdio Podcast. We deliver easy to understand market insights, some homeowner tips, perspectives from industry experts so that you can feel informed and empowered wherever you are in your homeownership journey because better decisions start with better information. Welcome back to this episode of the radio podcast. We're talking condos once again.
Mark:This is episode two on this subject. Our guest is Michael Gibson, partner at Miller Thompson LLP in Edmonton. Michael, welcome back.
Michael:Hi, Mark. Thanks for having me back.
Mark:Now Michael, as well as being a practicing lawyer, teaches at the U of A on condo law, and he co wrote the book that the students use in that course. Michael, obviously you wrote this a few years ago, but there's been some recent changes to Alberta condominium legislation that condo owners and boards should be aware of. So what are some of those and their impacts on condo ownership that have been fairly recent?
Michael:Oh, yeah. There's been quite a number of changes, and I probably need to update the book now.
Mark:There you go. Second edition.
Michael:So the big ones that come to mind, of course, there's the new tribunal that everybody's very excited about. So this has been something that's been talked about in the industry and in various groups have actually been lobbying for it. It's a dispute resolution tribunal specific to condos. As you can imagine, as we talked about in the last episode, this is a shared ownership structure with a democratic board that governs, this collective property. And so there's opportunity for disputes and disagreements.
Michael:And so the legislation was recently changed, and the government will be introducing a new tribunal to hopefully help resolve some of those disputes that come up in condos.
Mark:And would those be disputes between owners and boards, or owners and owners, or boards and contractors, or is it everybody involved?
Michael:Well, conceivably, it could be everybody involved for the most part. Yeah. Typically, what we see is owners, boards, which are running the condos, so it might be an owner and condo corp dispute, developers. Those are gonna be the parties that that the tribunal is focused on.
Mark:Have there been some voting changes as well, and how does that impact ownership?
Michael:There have been some voting changes. So in my opinion, it's probably not going to impact owners that much because what the changes to the voting provisions in the legislation have done has really come in line with how most condos had been drafting their bylaws. And so at a general meeting, you know, we mentioned in the previous episode that your vote is weighted on the basis of your unit factor, your share in the collective property. But typically, you know, for for most things that are dealt with at a at a board meeting or or a general meeting, we're not gonna go and count everybody's shares. So it used to be done by show of hands.
Mark:Right.
Michael:Know, all in favor, yay, nay, and anybody who's been to one of those meetings will probably have seen that. So what the legislation has introduced is is they formalized that. There's now what's called an owner vote, which is is that show of hands. One owner, one vote. But at at the fundamentally, your share in through the unit factors is still the basis for for your votes.
Michael:You can demand now what's called a unit factor vote. So that's the weighted vote. So legislation has formalized that.
Mark:Yeah. I guess if you had a very close call, a very close vote, and you wanted to call for that, that that would maybe, you know, you could call for that, and it might go in your favor instead. Now what about what about regulations for developers? And we're gonna get into some actual instances of things that have happened in condos in in Edmonton and Alberta. But are there any differences in what developers are now, you know, regulated in any way?
Michael:Well, yeah. So there's been a lot of changes over the last few years to the developer provisions. You know, we used to say that there's no such thing as the Condo Police, but there is now some regulatory control. There are bodies that would be and officers of the Alberta government who will enforce some of those developer provisions and those requirements on developers because ultimately that is consumer protection legislation. So if I'm buying from a developer, I have certain rights and entitlements.
Michael:If the developer breaches those requirements, there's now some provision for me to seek to have that investigated by the province and possibly some fines even. Primarily, the developer's obligations are in terms of disclosure. What is it you are developing? What are the terms? What are the proposed bylaws?
Michael:And, will this place actually you know, you're selling me typically an idea because when you're buying from a developer, it may may just be a concept. You might be signing a purchase agreement for something that'll still take a couple of years to build. So holding developers to some of the promises that they've made to people in that regard is is critical. You know, we talked a lot about in the last episode making sure that you do your condo doc review, you have a sense of what the fees are gonna be and the financial health of the building is gonna be. So for example, if a developer is selling a building and saying, here's a proposed budget for this building, what historically we've seen in in a number of cases is it's if the budget itself that might come from the developer is a sales pitch.
Mark:Right.
Michael:Common fees are as low as a $100 a month. And then lo and behold, as soon as the the board takes over, they find, well, we have to take care of all these things now, and the budget goes up. And so that that $100 a month fee goes up pretty rapidly. So the idea is to keep developers, make more realistic budgets, be be more realistic in your disclosures so that as much as possible with the concept of something that might be built in a couple of years, the owner is clear on what it is they're actually buying into, and the product delivered reasonably matches that.
Mark:I've heard the term chargeback used in some areas. What what exactly is that? What does that what does that apply to?
Michael:So a chargeback isn't restricted necessarily to developers. That is something that condo boards can levy on on a particular owner. That was introduced into the legislation with some recent changes that came in just this February. And so what that would entail, so we've got our regular monthly fee that basically pays for all of those budgeted expenses and it keeps the lights on and keeps the whole property operating. We might have, and we talked a bit about it last time on special assessments, you know, those general normally some capital expense that just wasn't in the budget.
Michael:They don't have the money for it. So it's a cash call on all of the owners. And a chargeback is kind of like a mini special assessment. It's a cash call on a particular owner for a particular reason. So if an owner is negligent in the sense of leaving their bathtub to run and it overflows and it causes a lot of damage to, you know, the units below and the common property areas, the cost of that could be charged back to that unit owner.
Mark:Alright. So let's talk about we mentioned the bylaws. Obviously, they come into effect, and you have to examine what they are, and you have to abide by them if you're a condo owner and someone who lives in it. But when a bylaw infraction happens, and I know there's a lot of disputes between owners and tenants and that sort of thing, like any place where people are living together, what enforcement mechanism exists to keep, you know, errant owners accountable to everybody else?
Michael:So it it may be a funny way of thinking about it, but I don't think it's inaccurate conceptually. The condo is kind of like a mini municipality. It's a community with a shared property, and the owner's paying their fees to to pay maintain that property. So the condo provides services, but also, yes, there are rules, and sometimes owners break those rules. So what can the condo do?
Michael:The condo can actually fine owners. So much like a municipality, it does have the ability to levy fines on owners, and that has to be spelled out in the bylaws. So that will definitely be one thing owners should be looking for in their bylaws is okay if my dog digs a hole in in the carpet in the hallway. What, what can the condo do? Well, you know, maybe the condo can charge me back.
Michael:Maybe my dog's barking too much and it's a noise disturbance. Well, the condo can fine me for that, and I have to bring the dog into compliance and control it. I use the dog as an example, but there's all kinds of things. Parking people and pets are what we look to for enforcement in the bylaws. So fines is definitely one.
Michael:As well, the legislation allows condos to bring what's called an improper conduct claim against owners. And that's typically where, okay, we've tried the fines. We've tried making demands. At the end of the day, for whatever reason, this person's just not complying. Well, now we're seeking some court intervention that can require compliance.
Michael:And at the end of the day, what that court order might look like could be anything from some form of, you know, order from a judge saying, you know, you must do this or you'll be held in contempt of court. And I've even seen it be the case if it's severe enough, the court will kick an owner out of their own condominium.
Mark:Wow. Now is is the history of that sort of thing within a condo available when you're buying a condo? In other words, we talked about condo documents in our previous episode. So if I'm buying condo now, you know, number 201, and in 202, there's somebody living there who is constantly in breach of bylaws, has been having a dog that misbehaves, always getting noise complaints, can I find that out? Because that might affect my quality of life, and maybe my you know, I might have second thoughts about buying that condo, if that's the case.
Michael:Yeah. So that would be another thing you could look for in the documents, and I will caveat that with condos are subject to the privacy legislation. So what they can put in those documents is is somewhat restricted.
Mark:But Okay.
Michael:Part of what an owner can request in a document review is the minutes, as well as what's called an information statement. So I'll start with the minutes. If there are issues with with, say, the neighbor in 202, condos have to document condo boards have to document all the decisions they make in a set of minutes that our owners are entitled to and new buyers are entitled to. And so in those minutes, if there's been a lot of fines levied against that owner in 202, there's been a lot of complaints about their behavior, I would expect to see something reflected of that in the minutes. And so if someone were to come to me and say, hey.
Michael:Can you take a look at these minutes? And I say, well, for the last three months, I see that there's been 10 complaints about this person. Looks like they've started levying fines, and maybe you wanna buy the unit right next door to them if you considered that.
Mark:Yeah. Yeah. That could be a consideration.
Michael:Exactly. And then as well too, the information statement. So that's kind of a summary sheet that you get from the condo, and what they have to include in that is set out in the legislation. But part of that does include any major claims made against the condo, and major claims being over $5,000. So if there's a big multimillion dollar ongoing litigation that that you would expect that to come up in those documents.
Michael:And if they don't, well, we we've seen we've seen new buyers make those claims in court against the condos as
Mark:well. Yeah. Now one topic that sounds intimidating is condo termination. What is termination? What's involved in that process?
Michael:So let let's start with creating a condo, and then I'll tell you terminating.
Mark:So Okay.
Michael:A condo comes into creation when someone files the developer files what's called a condominium plan at land titles. That takes that parcel of land and condominium izes it. That process creates that Condo Corp, and then there's the bylaws and the board that governs the Condo Corp and all of the common property. And ultimately, what the developer is doing is taking a parcel of land, and by registering that condo plan, they're dividing that parcel into spaces of common property, but primarily a bunch of units that can be individually sold to people. Termination is the opposite.
Michael:So this is the end of the life of the condo. That plan, land titles, will be discharged and the whole property will revert back to an individual title or whatever was registered to begin with. So all of the common property, the units, legally, those cease to exist, and we have one property. And we're seeing a lot of condo terminations now, particularly in Edmonton. There's a lot of investors who are identifying whatever the numbers work for their business model, but they're identifying generally apartment buildings, whether it's low rise or high rise.
Michael:And there's well, they're apartment style condos that they would like to operate as an apartment building. Right. And so they're going to the owners, and there's generally a couple of ways that they're doing it. They're maybe making individual deals with everybody in the building, or they're making a bulk offer and then the owners have to decide if they want to terminate their condo and sell what is basically just the apartment building and land to that buyer on the basis of that bulk offer. Then there's a process in the act that governs how that sale price is divvied up amongst all of the former owners.
Mark:Alright. Okay. I I haven't actually heard of that, but that it makes a lot of sense, and especially with I mean, it happens too that apartment buildings can be condoized. That's something that was happening in seventy, eighties a lot when we had a lot of rental properties. So how can potential termination discussions, investor interest that, you know, the corporation might be getting, or major building issues affect an individual owner who wants to sell their unit?
Mark:If you're trying to sell your unit, then all of a sudden somebody comes in and makes a big offer above that, are you kinda now stuck? You gotta wait?
Michael:So not necessarily. You know, just because a bulk offer has been made doesn't mean you can't privately sell your unit. Mhmm. It's still private property. So the way that the process works, unless there's complete unanimity among the owners, so either they've all agreed on all of the terms, which rarely happens unless maybe they've made individual deals already with the buyer, or the the other side to that is you have to go to court.
Michael:So the process requires court oversight to basically unwind and dissolve a condo in the face of such a a bulk offer. So the owner in in that case would have rights to make their pitch to the court on what they think it's worth, what they think they should be getting out of it. But generally, what I would caution people is your unit has a a value in in the market. The building as a commercial entity, though, in the land, that has a commercial value. And what we have been seeing with a lot of these terminations is that some of these buildings, their value is greater than some of their individual parts.
Mark:Right.
Michael:So for example, I had we've run a number of terminations for our condo clients, and we've seen it be the case where units that are worth, you know, if you were to buy the individual unit, they might only be going for 50 or $60,000. But because of the commercial value of the land, those same owners, if they do the commercial bulk sale through the court process, they're getting over a $100,000 for those units. Better deal with you. Yeah. So could you sell your unit privately?
Michael:Absolutely, you could. But because you have a share in a greater parcel, you should make sure you know what your share is of that commercial value if we're talking a termination.
Mark:Alright. So there have been some real life situations in Edmonton where major construction deficiencies have been discovered years after a building is occupied. You know, you see it in the news, and just it's been devastating for some people. What kind of recourse do condo corporations have if this happens? And and then individual condo owners.
Michael:So what I would suggest well, you know, we've talked about these special assessments and everything. And, you know, if you've got a unit that's worth $200,000 and we're looking at a special assessment of a $100,000, that's, you know, if you're putting that in, if you even have that to put in
Mark:Right.
Michael:Is equity that you're probably not gonna get back. So condos facing significant issues have like that, have a number of options and and the go to for many boards, perhaps too many, is raising fees and doing special assessments. But they can also look at making, if it's within a warranty period, making warranty claims on on the new home warranty protection. They could also look at making claims against the developer subject to statutory limitations and all of that. But if those aren't options, you know, there are other things they can do as well.
Michael:There are many lenders now who have worked out just how to how the business of condos operates. Maybe the condo can borrow some money. And the way that, that would work is the condo could borrow, say, it needs $3,000,000 to fix this major deficiency, it could finance that, And that ends up being sort of a share of that loan to each individual owner as a top up on their monthly fees. Personally, I think that's actually a good option for many condos. Has to work out for the budget.
Michael:But, you know, if you pay a $100,000 special assessment today and you sell your unit tomorrow, you just paid for the buyer's share of of that value.
Mark:Right.
Michael:If it is a a loan transaction, the loan is to the Condo Corp. You pay a monthly share of that loan. You sell. The buyer picks up your share because the share goes with the unit.
Mark:Right.
Michael:And that carries on. But as well too, knowing the option to terminate, take a look at what the commercial value is. It might be the case that, you know, the owners, they just don't have the money. They don't have the wherewithal. They're not gonna realize on any of the value of putting that huge amount of money into it, but there might be value in terminating and selling.
Michael:And we've actually seen that in a number of the cases where there have been major court order terminations. Condos in those cases have just basically been at the end of their economic life. The commercial value needed to be realized and the owners were just never gonna do it, so they went to take a good deal. And sometimes, like I said, these deals can be really worthwhile to the individual owner. Instead of putting, you know, a $100,000 special assessment in, maybe I can cash in on that commercial value.
Michael:And so that's something to explore as well.
Mark:I mean, in in some of these cases where we've had I think there was one in Fort McMurray that that basically evacuated everybody out of the condo and said, you can't go back, and you probably can't fix it, or it's gonna be, you know, hugely expensive. Did did the condo legislation that's recently come in, did it deal with any of that to give protections for folks who, you know, bought a condo in in good conscience, but the developer made some kind of mistake along the way or the builder did possibly? Any any of that is covered by the new legislation?
Michael:You know, claims against developers are for those sorts of things are still a very tricky one. And a lot of it turns on you know, we've seen it be the case that the developer didn't actually build the building. They subcontract that out. And so the unit owners in the condo, you know, they might have that statutory relationship with the developer, but they don't have any direct relationship with the builders. So I would whether it comes further clarification from the court or some changes that make developers more responsible for what they actually build or at least what they sell, that would be probably a welcome introduction.
Michael:There's not a lot there right now for that beyond what we've talked about in terms of developer obligations and for disclosure mostly.
Mark:Okay. Now since we're speaking about construction, what is a construction lien, and why can they be especially complicated in a condominium setting?
Michael:So a construction lien is effectively I hire a contractor to do some work on my property, and I don't pay the contractor, but they have put some work in and that adds value to that property. So they have special lien rights. They can register this lien against my title to secure the payment of whatever their contract price is.
Mark:Right.
Michael:So in a condo, it gets really complicated because that contract maybe the condo hires an elevator contractor to redo the elevators, and that's common property shared by everybody. And because it's shared by everybody proportionally, let's say that contractor registers a lien against the condo plan and maybe even all of the individual titles, it gets complicated because that, say, $500,000 elevator refurbishment, everybody in the condo has a share of that, but it might they are not gonna have the documents. They didn't hire the contractor. But what ends up happening is all of a sudden, maybe there's depending on how the contractor registered it, a $500,000 lien that shows up on my title. And my unit's only, you know, a small portion of that.
Michael:So it becomes messy when well, what's the condo share? What's every individual owner's share? How do we organize that? You know, I've seen some where the condo has settled with the contractor, but then individual owners have paid out their shares. And there's you know, as the condo lawyer, I would say it should be funneled through the condo corp so that it's dealt with for everybody.
Michael:But owners have it's their proportionate property. They have their own rights. And if an owner wants to pay out some share of a builder's lien and they don't tell the condo about it, it can be a mess to deal with afterwards.
Mark:Oh, I bet. Alright. Let's go back to the buying and selling then part. What what should buyers, sellers, and realtors know if a construction lien appears on title or is connected to a condo corporation? Is that a is that a red flag, or is it just another piece of information that you should take into consideration?
Michael:It's definitely another piece of information to take into consideration. So there's two kinds of liens that can be filed in condos. There, of course, if I redo my kitchen in Unit 501, the builder may file a lien against my title, and that's my problem. It doesn't have an impact on any other owners. But just like buying a house with a lien on it, you're probably gonna wanna make sure that that's either discharged or paid for out of the sale proceeds, and the lawyers can can deal with that.
Michael:Then the other lien is that bigger one. It's the common property lien. Everybody has their proportionate share in that. What what we have seen on sales where there is a building with a lien like that is adjustments for that unit's individual share. Typically, the buyer's lawyer will require the seller's lawyer to hold back some proportionate share of that lien to make sure it's covered because, obviously, the buyer doesn't wanna have to pay for the seller's share of the condos lien that came up before they ever owned the place.
Michael:So that will usually should be dealt with at that stage. And it's being proportionate in the basis of unit factors. A little bit of math, can find out what the share of any major builder's lien is to any individual unit.
Mark:Now I wanna go go back to condo fees just for a second because one thing about condo fees is they can always change. Right? You buy a condo, and the condo fees are, say, $500. In three months, that could go up to $7.50. Right?
Mark:You you don't know what might happen. And that's one of the unknowns about condos that always give me pause.
Michael:Yeah. So because the developer not the developer. Sorry. The board sets the budget every year. Yeah.
Michael:Maybe they the next board that comes in says fees weren't high enough, and they decide to jack them up. That could absolutely happen. Two things I I would say on that. First of all, condos are nonprofit entities, So they're supposed to be setting their fees just to cover their expenses as well as budget for those reserve contributions to maintain the capital infrastructure. And that should all be somewhat clear in the documents you get to review.
Michael:But as well too, boards are democratically accountable. So if you have a board that doubles your fees and they can't justify it, the owners have the power to kick that board out. Now I will say too, condo condo fees being on a cost recovery basis, if there's things the boards can do, like make the building more energy efficient and, you know, improve insulation, improve some of the infrastructure through the capital plan and budget, that might actually bring some of those costs down, and I've seen it happen. What I rarely see happen is fees going down Yeah. Commensurately.
Michael:But
Mark:Right.
Michael:They could. And and with a good board and a, you know, good financial budget, you can get control of your expenses.
Mark:And I guess that's where it comes into sort of examining the condo documents. To look for red flags that say, yeah, they've got low condo fees, but they also owe a little bit of money here, or they're in a bit of a deficit here. Things that might indicate that these fees might not stay that low forever.
Michael:Yeah. Exactly. So if you see low fees, there's nothing in the reserve fund. The reserve fund study says you've got all these things coming up. They've been running deficits for a few years.
Michael:That low fee is probably not staying low for too much longer.
Mark:Yep. Now, do you have a favorite professional story you could share that would be maybe eye opening for our listeners?
Michael:I I have a lot of them. You know, I one of the exciting things is I never know what's going to come across my desk. I have seen files where we've had drug dens in condos and the impact that that's had on the neighboring units. I have seen an actual brothel in a townhouse in a actually, it was a nice area of town. And then the the you know, there were professionals, the doctors, and lawyers on on that board, but there was also a a brothel operating out of one of the units.
Michael:Yes, it was outside the bylaws.
Mark:That must be outside the bylaws, I would think.
Michael:We was some enforcement there. Yeah. So, you know, you never know what's gonna happen. What I will say, people buy a condo unit, they treat it as private property, then all of a sudden, you know, they're doing whatever they're doing in the unit, then they get a knock at their door, and that probably ends up being a file in our office. What you need to know is you're buying into a collective.
Michael:It's not an acreage hidden far away in the country. You probably share a wall or a ceiling below the floor with, you know, three, four of your neighbors, they can hear what you're doing. And there's a lot of people coming and going. If there's a lot of power or water being used, it has an impact on everybody else. So Mhmm.
Mark:I guess in in a lot of ways, it's like going into business. You go into business for yourself. You only have yourself to blame when something goes wrong or when it goes right. You have a business partner. Well, the two of you can work things out.
Mark:If you have a group of people, there's 10 owners, and that's what happens in a condo. It's 10 or it's a 100. There's a lot more to consider. Exactly. Yeah.
Mark:Well, you know, we always like to wrap up these interviews, Michael, with a question that we didn't preview for you, but so I'll give you a chance to think about it if you have to. But to you personally, what makes a house, or in this case, a condo, a home for you?
Michael:Well, for me personally, I guess it would be the fortress of solitude. It's it's where I like, I I used to actually, I grew up in condos. I've I've lived in townhouses and and apartment style condos. And, I'm in a a home now, and what I I look to wherever it is or whatever type of property it is. For me, personally, I wanna come home.
Michael:I want to shut the world off and put up my feet and watch a movie or read a book. And, as long as I'm able to do that, that's what's important to me. So if I'm looking at a condo and there's a lot of noise from the mechanical room that might be just above that unit, there's, you know, the neighbors or the community isn't isn't kept up the way that is gonna allow me to enjoy the lifestyle I'm looking for in my unit. That's gonna that's gonna have an impact on my choices to where to buy and what to buy.
Mark:Michael, appreciate this. Michael Gibson is a partner at Miller Thompson at LLP. He's an expert in condo law. He wrote the book, teaches it at the U of A. And, Michael, we really appreciate all the insight you've given us into condos in Alberta and how it might apply elsewhere as well.
Mark:So thanks very much for joining us.
Michael:Well, thank you so much for having me.