Condominium Corporation

A condominium corporation is the legal entity created when a condominium plan or declaration is registered, and it owns and manages the shared common elements of the building or complex on behalf of all unit owners. Each owner holds title to their individual unit plus a share of the common property, and that share is tied to the corporation as a whole.

In provinces such as Ontario and British Columbia, the corporation is governed by a board of directors elected from among the owners, and day-to-day operations are usually handled by a property manager. The board sets the annual budget, collects common expenses, maintains reserves for major repairs, and enforces the declaration, bylaws and rules. Statutory rules for how corporations must operate are set out in provincial condominium or strata legislation.

Why lenders care about the corporation

When a mortgage is secured against a condominium unit, the lender's security depends partly on the health of the corporation. Before funding, the lender typically reviews the corporation's financial statements, reserve fund balance, insurance certificates, and any special assessments or litigation. Documents such as a status certificate or estoppel certificate are ordered so the buyer and lender can see fees, arrears, and pending issues.

• A weak reserve fund can mean a special assessment is likely.
• Unpaid common expenses can become a lien or charge on the unit.
• Some lenders apply stricter rules to certain buildings, including those with high rental ratios or commercial space.

How it affects your monthly cost

Your condominium fees, sometimes called strata fees, are set by the corporation and are separate from your mortgage payment. Lenders generally include a portion of these fees in the housing costs used to calculate your GDS ratio and TDS ratio, so higher fees reduce how much you may qualify to borrow.

For example, two units priced identically can produce different qualification results if one corporation charges higher monthly fees. A buyer should also budget for the one-time closing costs of buying a condo, which can include a status certificate fee and a review of the corporation's documents.

Because reserve fund rules, insurance requirements and document disclosure vary by province, confirm the current requirements with the relevant provincial regulator or the corporation itself before making an offer.