Condominiums—condos, for short—are a unique form of homeownership. When you own a condo, you own your home, yes, but you also share, with your neighbours, the ownership of some common property.
Millions of Canadians live in condos, and they’re growing in popularity. But what is a condo? How is it different from regular homeownership? Condo life isn’t complicated, but it is very different from detached homeownership.
Let’s take a look at exactly what a condo is, and how they work.
A condo is an individually owned home within a community of similar homes. Together, these homes form a condo corporation.
When you buy a condo, you are buying both your own home, and a share in the corporation.
In addition to the sole ownership of your unit, that share represents your stake in the common property belonging to the corporation. Common property includes things like elevators, parking garages, lawns, public pools… anything that’s part of the condo property but is open to all the owners.
Condo vs. strata
A quick note: condo is the most common term for this form of homeownership. However, in BC and parts of Alberta, you may hear the term strata. Strata and condo are interchangeable terms that mean the same thing—we’re just going to use “condo” in this article.
Condo is not a type of building; it’s a form of property ownership. Thus, many types of buildings can be condos.
The majority of condos are apartment-style condos; owners own everything within the walls of their unit, plus a share of the common property. These buildings may be just two or three storeys high, or they may be towering 70-storey highrise. In fact, many people who own this form of condo simply refer to their home as an apartment. However condo and apartment aren’t quite interchangeable terms. As mentioned, a condo refers to the form of ownership, while apartment is a style of building or living unit.
However, townhouse complexes can also be condominiums. The owners own their own townhouse, and perhaps an attached yard, but still share in some common property with their fellow owners. Most notably, the exterior of the townhouse is often common property. In such cases, the owners are not permitted to, for example, swap out siding or shingles for other styles.
On the other hand, a townhouse that is not part of a condo corporation is called a freehold townhouse. Freehold owners own their own unit and do not share in common property, nor are they beholden to a condo corporation or its bylaws.
Finally, there are also bare-land condos, also known as detached condos. These are a rarer form wherein the owners each have a detached house and yard, but still own a share of common property with their neighbours. This common property is often in the form of jointly-owned land or community amenities, like fountains or tennis courts.
Condo corporations are just that: corporations. Accordingly, it’s helpful to think of a condo property as though it were a business.
For illustrative purposes, let’s imagine a condo building that holds 10 equal units.
Each of the 10 unit owners is an equal shareholder in the condo corporation. Each shareholder has sole ownership of their own unit, and a 10% share in the common property—the yard, the elevators, the hallways, the lobby, and so on.
Now, like any business, a condo corporation needs people to lead it.
Each condo property must have a board of directors, also known as a strata council (in BC) or a syndicate (in Quebec). The condo board is composed of several owners, who are collectively responsible for operating the condo property. Board members are typically elected by the other owners.
The board is primarily responsible for creating, changing, and enforcing the property’s bylaws and rules (more on those in a moment). The board holds meetings regularly; exactly how often is determined by the corporation’s bylaws and the Condominium Property Act of the province where it is located.
Other board responsibilities include:
Sometimes, the board hires a property management company to oversee some of the day-to-day operations—especially in large condo buildings.
Read more about condo boards in our complete article on the subject.]Condo bylaws are a series of regulations that govern the operation of a condo property. We have an in-depth definition of bylaws on another page, but here’s the short version:
Basically, condo bylaws are unique to each property, but cover most of the same things. Bylaws control things like:
Each province has legislation governing condos and their bylaws. For example, in BC there’s the Strata Property Act, while Alberta has the Condominium Property Act. Each condo corporation may make changes to the basic bylaws, but normally may only do so when the corporation is first created or by a majority vote of the owners. Sometimes, a supermajority of two-thirds or higher is necessary.
Speaking of changes, bylaws can be changed at any time. However, there is a process for doing so. Typically, the condo board drafts potential changes, but the property’s owners still must vote on those changes before they can take effect.
That’s how condo bylaws work. Now let’s talk about condo rules.
Rules are similar to bylaws, but smaller in scope. Bylaws are big-picture, governing the operation of the property and what owners can do to their units. Rules, meanwhile, are for regulating the use of common property—things like where cars can park and whether pets need to be leashed in common areas.
An owner vote is always necessary to change bylaws. A condo board may be permitted to add rules with no vote, however. The board’s right to modify rules is another thing that bylaws control.
The penalty for breaking a bylaw or rule is most often a fine. The amount of these fines is specified in the condo’s bylaws. The condo board will enforce fines as necessary.
Bylaws draw larger fines than rules. Usually, the offender will get a warning (or series of warnings) before the board issues a fine. In serious cases or repeat offenses, the board may also restrict the offender from using common property, or even pursue legal action—possibly even including the forced sale of the offender’s unit.
Sometimes, the penalties for breaking rules and bylaws are more extreme than fines. For example, an owner contravening pet rules could be forced, by the condo board, to get rid of their pet. Repeated and severe bylaw breaking (or failure to pay fines and fees) can even lead to an owner being forced to sell their unit—though that’s only in the most extreme cases.
Condo fees are a monthly payment that all condo owners need to make to the corporation. Condo fees are set by each condo board, so they vary between properties. You might also call them strata fees or maintenance fees.
Condo fees primarily go towards the maintenance and operation of the property. Taking care of the common property costs money, and condo fees cover the costs that any homeowner would otherwise need to pay themselves: natural gas, water, sewer, garbage removal, etc. However, condo fees do not include property taxes—owners need to pay those separately. And, while condo fees cover many utilities, there may be certain utilities (like internet) that the condo owner has to pay separately as well.
The difference is that, in a condo building, all owners jointly buy these services in bulk via condo fees, rather than purchasing them individually for their own homes. Condo fees also contribute to a reserve fund, which is required by law as a rainy day fund for significant repairs, upgrades, replacing major building components that wear out over its lifetime, or to cover certain large emergencies.
If you’d like to learn more about these fees and how they work, check out our guide to guide to condo fees.
Another thing condo fees pay for? The condo corporation’s master insurance policy.
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One of the more complicated aspects of condo life is condo insurance.
That’s because condo owners have to think about two insurance policies where a detached homeowner has just one. There are basically two types of condo insurance: condo properties need to have one master policy and each owner needs their own individual owner policy.
So, if we imagine again the 10-unit condo building, there would be one master policy, and 10 owner policies.
Master policies and owner policies work together so that everything is insured, but nothing is insured twice.
The condo board is responsible for the master policy, and there’s only one master policy per condo property. The master policy protects the common property—usually including the physical structure itself—from accidental damage arising from fires, windstorms, or other perils. It also includes liability coverage in case someone is injured in the property’s common spaces.
The master policy does not protect anything inside the individual units—that’s where condo owner policies come in.
Condo unit owner policies protect the owner’s personal property (their furniture, their clothes, and so on). Unit owner policies also include liability protection for the owner, for injuries that might happen within their unit or injuries that they’re otherwise liable for.
Now, here’s the important part:
If a condo building is severely damaged or destroyed, the master policy typically covers the costs of rebuilding it to its original specifications, including the individual units and the fixtures within. Many condo corporations have a detailed definition of a standard unit that describes what a rebuilt unit would look like.
If an owner has made any upgrades to their unit, like hardwood floors or marble countertops, those upgrades are not part of the rebuild cost; the owner would be responsible for the added cost of restoring their upgrades.
Coverage for upgrades (sometimes called betterments and improvements) is an option on many condo owner policies. You can read about Square One’s Condo Owners Protection as an example of this coverage.
We’ve explained how master and owner condo policies work together to insure the entire condo property and the owners’ possessions.
But master policies aren’t perfect. For example, they’re rather expensive, and often carry sky-high deductibles. In both cases, it’s the owners that need to cover the costs and shortfalls.
If a condo property is underinsured and suffers a huge loss, any rebuild costs that aren’t covered by the master policy would fall to the owners. This is a loss assessment—when the corporation requires the owners each pay their share of the shortfall. Sometimes, condo owner policies offer coverage for loss assessments, too.
If the master policy’s deductible is very high (and they often are), the condo board may require the owners to each pay a share of the deductible in the event of a loss. With master policy deductibles sometimes exceeding $100,000, that can be a significant chunk of change.
To learn more about loss assessments, check out our full definition.
Special assessments are similar to loss assessments, but with one major difference: special assessments are for expenses that are not covered by the corporation’s master insurance policy.
When the condo board needs some money for unexpected expenses, they can issue a special assessment to the owners, requiring each to pay their share of the assessment. Special assessments are often issued for major repairs that are too expensive for the corporation’s reserve fund to cover, or large optional projects like repainting or relandscaping a complex.
Since insurance doesn’t cover maintenance issues or wear and tear, special assessments are often required for one-time jobs like replacing elevators or repaving the parking lot.
Typically, special assessments aren’t covered by condo owner insurance policies, as most special assessments are meant to address issues that wouldn’t be covered by insurance in the first place.
Want to learn more? Visit our Condo Owner resource centre for more helpful articles about the intricacies of condo life. Or, get an online quote in under 5 minutes and find out how affordable personalized home insurance can be.
About the expert: Daniel Mirkovic
A co-founder of Square One with 25 years of experience in the insurance industry, Daniel was previously vice president of the insurance and travel divisions at the British Columbia Automobile Association. Daniel has a bachelor of commerce and a Master of Business Administration (MBA) from the Sauder School of Business at the University of British Columbia. He holds a Canadian Accredited Insurance Broker (CAIB) designation and a general insurance license level 3 in BC, Alberta, Saskatchewan, Manitoba and Ontario.
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