Condominium Mortgages


The system of land ownership in which each and every individual owner holds the title to a specific unit as well as participates in a common ownership or a share of the common property - usually termed "common elements" is called a condominium. In any given market, a variety of condominium units or types can be found. These can include an apartment suite within a high rise complex or building block, it can be one unit in a row of townhouses, it can also include a detached or semi-detached house, and even a vacant lot in a series of lots. In certain provinces, leasehold as well as freehold condominiums can also be found.

All these different forms of ownership in a condominium have a common characteristic that is in each and every one of such properties - every single owner of a condominium unit also shares an undivided interest in the common elements of that condominium. These common elements can include the landscaped areas of the property, the hallways and the elevators, the parking areas or lots, as well as the recreational facilities, the roadways, and all other places shared and used in common by all the unit owners in the condominium.

The introduction of common element condominiums where projects have no distinct units but only consist of a common property  - such as a golf course - has meant that this fundamental distinction has started to disappear. When speaking of the term unit under such legislation, it explains the common interest held in a project by an individual and not the specific units that exist outside the common elements which are owned by individuals. In all cases, the proportionate share of ownership is usually registered when speaking of the property that lies beyond the common elements in a condominium project.


Condominium units are subject to mortgages similar to those that apply to conventional residential units. When the first condominium projects were planned, many of the lenders in the market were reluctant to advance money on this form of security as it was a radically new idea. This has changed; nowadays most institutional lenders treat a condominium unit like they would any other form of property and grant a mortgage if it satisfies the various criteria that are applicable to other housing projects.

When lenders give mortgages on condominiums, it will usually be registered against the entire project and not be applicable to one unit. Such mortgages will apply to all the units within the condominium as well as all the common elements which are shared by owners - this is the reason it is called a blanket mortgage, as it literally "blankets" or covers the entire condominium project. However, this blanket mortgage is fragmented into mortgages for individual units as each unit is sold to different owners. Whatever mortgages are registered after closing will stay in the hands of the lender who financed the entire condominium project. Different lenders can as time passes make subsequent transactions, and finance individual condominium units as in any subdivision of a project.

Different types of mortgages

It is worthwhile to pay attention to certain important distinctions between the mortgages on condominiums and mortgages given on other types of residential real estate. Many provincial Condominium Acts will specify these distinctions in clauses within the act.

Whenever the condominium corporation meets, all the borrowers must agree to give their lenders the right to exercise the borrower's vote at the meetings. This clause is important, as many lenders use this instrument to take over the complete management of a condominium corporation immersed in a financial crisis or mismanagement of any kind - in this way they protect their investment in the project. It follows that if a large number of lenders hold voting right for unit mortgages at such meetings, it will lead to a dilution of the ability of an individual lender to influence the condominium corporation; however, having such voting rights allows a lender individually or collectively with others, to protect the investment made in the property. Lenders do not normally exercise this right to vote, however, the power to vote remains with them as a precautionary measure to protect their stake. In this regard, all the borrowers remain under obligation of providing their mortgage lender with a copy of all relevant notices and documents whenever such instruments are issues at meetings, and borrowers have the responsibility to do this as soon as possible. The lender must also be kept informed of any breaches that the borrower becomes aware of, these can be problems or issues caused by the condominium corporation or the other unit owners.

This responsibility placed on the shoulders of borrowers arises due to the lender's desire to be kept informed about events in the condominium - as any event can have financial implications. Lenders also keep all their borrowers under agreement to punctually remunerate all money due to the condominium corporation, including costs that arise from common expenses, and borrowers are also under obligation to provide proof of such payments upon request to their lenders. The lender can pay all such dues and add them to the mortgage debt of the borrower in cases of default on the part of the borrowers. This obligation is a mandatory requirement set by all lenders in any market, as the total of three months' worth of unpaid common expenses, including various taxes, will easily rank higher than a first mortgage given to the borrower. At the same time, all borrowers have the responsibility to agree and comply with, faithfully observe and perform all duties and obligations imposed by the Condominium Act, the declaration, the by-laws, and to follow all the rules and regulations of the Condominium Corporation, applicable at present as well as those to be made later.

It is extremely important for any condominium owner to stay aware of these clauses, as the consequences of noncompliance with any of these clauses can be very serious. The lender has the legal option to demand from the borrower the outstanding principal if the borrower fails to comply with any of these clauses at any time. Thus, the lender has the upper hand and the non-payment of the maintenance or the violation of the simple rules and regulations like a ban on the keeping of pets on the premises of condominium by the owner will not only constitutes default under the terms of the mortgage, but it also enables the lender to "call-in" the mortgage from the borrower. These are the rules of the game, and even though they can be seen as being very harsh, they have always been played this way.

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