Unlimited liability
What does this mean?

Condo corporations have unlimited liability, so its tough for them to go bankrupt. If your condo corporation gets itself into a serious financial mess, the owners must cough up their portion of the costs.

When you buy a condo unit, you have become a business partner in a non-profit corporation. You become a guarantor on all debts, loans, lawsuits, liabilities, settlements and construction defects.

Your financial obligations to the condo corporation only ends when you no longer own your condo unit. The condo corporation has the power to lien all units that fall behind in their monthly payments or fails to pay any special assessments when they come due.

The corporation always has the ability to raise money to pay its obligations by raising the common element fees, levying special assessments on the unit owners and taking on loans.

You can be financially ruined if the builder constructed a shoddy building and then went out of business leaving serious structural defects and the city issues work orders or condemns the structure. It is the same if there is a major fire that forces many of the owners to evacuate their homes as you still have to pay your common element fees and your mortgage along with the costs of renting elsewhere.

You can also be on the hook if the majority of the board of directors are either ignorant, crooked, lazy or deliberately fails to collect sufficient fees to maintain the building and adequately fund the reserves.

Another common problem is when the majority of owners refuse to allow the board to raise the monthly condo fees to pay for required building maintenance.

In times of financial or political crisis, a condo corporation can apply to the courts to have an administrator manage the corporation. The administrator has the power to raise fees and levy special assessments that have, in some situations, been so high, they have driven up to a third of the unit owners out of their homes.

If any of the above conditions exist at your condo, and it does not get rectified fast, you may end up trapped in a unit that you can't sell as you will get too little to allow you to buy elsewhere. (This is a problem in many older condos.) Worst case, you could lose almost everything you own.

Renting your unit?
You are responsible if your tenant, their guests or their visitors breaks the condo's rules, floods the lower units or sets your unit on fire. It's worse if he uses the unit to run a grow-up or chemical lab.

Be careful who you rent to.

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