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Linda Palfi
CNC Properties
47033 Creekside, Calgary, Alberta
P: 403-998-7732
F: 403-592-8002
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Unit factors better disclosed under new Act

 

Note: This article is still relevant, even though I wrote it in 2001. Unit factor is also addressed in the article titled "What the heck is condominium unit factor?" under the heading Introducing Condo Concepts.
 

The expenses to operate common services in any condominium complex must be allocated among the owners. Enter the "unit factor", which is simply the basis for allocation, by percentage, taken to two decimal places; in other words 1/10,000.

 

In many-if not most-residential condominium projects, the unit factors have been allocated on a square-foot measure basis. Here's a simple example. Let's say your condo building has 20 units of equal size. Each owner must thus carry 5% of the collective costs for maintenance, heating and common-area janitorial services (20 X 5% = 100%). Add two zeros to the numbers and you have 500/10,000, which is how expenses will be apportioned among all the owners. This system creates fairness in cost distribution, of course, when condo projects have varying sizes of suites, townhouses or villa homes.

 

Sadly, the world is more complex than that, and there are many exceptions to the above. First, neither Alberta's old Condominium Property Act, or the new Act in force as of Sept. 1, 2000, nor its regulations, require that square-foot calculations be the basis for allocating condominium plan unit factors. Yet there is new protection in that the rules will in future require new condominium plans to state, "the basis for determining the unit factor."

 

Note that this clarity is only required of condominium plans registered after the new Act came into effect Sept. 1, 2000. Old plans--even for buildings currently under construction--may not indicate how unit factor allocations were arrived at. In one luxury Calgary highrise condo tower, for example, the unit factors were allocated in proportion to sale price. That might make sense, as it means people with the best views and thus property values pay operating expenses in the same proportion. That's kind of like our graduated income tax system.

 

Yet just as we're having a national debate about "flat" income tax, so too will that condominium family of owners likely soon be having an in-house discussion about changing who pays how much. And, in fact, such re-allocation of unit factors has become possible under the Sept. 1, 2000 Act and Regulation.

 

This option will be music to the ears of some condominium owners who discovered after buying their brand new or renovated homes that the developer retained several residential and/or commercial condos for himself, and allocated them a single unit factor each. That's not fair to everyone else, of course. In the past, corporations have then had to sue their development firm, doubtful of the outcome. But now the condominium corporation can pass a special resolution to reallocate the unit factors more fairly-perhaps in proportion to each unit's square footage.

 

This new option may also be used by condominium corporations who realize they have more modest unfairness in their unit factor allocations. One example might be residential buildings with a roof deck that is used exclusively by one suite owner. Right now that owner pays no condo fee for the deck, yet there will be an additional cost to all the owners when the deck must be removed to re-roof the building, and the deck must be restored afterwards.

 

Who knows what would be fair? That's up to each condominium corporation to sort out for itself. Many will chose not to act at all. Others will grapple with the political issues, do the best they can to sort out more fair-if not perfect-unit factor allocations, and impose them by the required 75% vote of owners representing at least 75% of the then-current unit factors. At least under the new Alberta Condominium Property Act and Regulation every condominium corporation will have options. And new building developers and rental conversion developers will at least have to say on what basis unit factors were allocated.

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