The Condo Origin Story

The North American concept of co-ownership of a building divided into separate dwelling units began in New York City in the late 19th century. Wealthy businessmen lived in rented apartments in the city during the week. Wanting to take control of their living environment to better suit their needs and tastes, they created corporations to purchase the building, or to erect new buildings which became co-ops. Shares were sold that permitted shareholders to reside in their apartment and to sell their shares at will.

In 1960 the concept of condominiums entered North America when the first condo was registered in Salt Lake City, Utah. Canada quickly followed suit and registered its first condo in 1967 in Edmonton, Alberta. Condos were structured using the same corporate governance model. This model worked well for co-ops. Wealthy businessmen understood the corporate governance model, and applicants to buy shares in the co-op were interviewed by the Board of Directors and required their approval for the share purchase to proceed.

And this is where things started to go sideways. Interviewing prospective neighbours afforded an opportunity to set realistic expectations regarding the maintenance, repair and replacement of the shared property in the co-op. In other words, the cost of ownership. They understood the preservation of capital, in this case the real estate asset. To this day, there is reportedly far less conflict in the governance of co-ops than exists in the world of condos.

One of the reasons, to continue the analogy of a profit-based corporation, is that the governance structure of condos is analogous to a volunteer board of directors of a corporation making business decisions without the expertise required to run the corporation. This is said with all due respect to the wonderful volunteers who serve on their condominium boards. This is not intended in any way to demean the contributions they make to their condo communities. But with some remarkable exceptions, the deck is stacked against them.

Profit-based corporations are not managed by their board of directors. They don't live side by side with shareholders who clamour for lower costs and higher dividends. They don't suffer an interminable elevator ride with a disgruntled shareholder berating them for any number of decisions they have made in an effort to achieve that impossible threshold: pleasing all of the people all of the time.

Condos don't enjoy the benefit of advance education for new owners, making sure that they fully understand their responsibilities as a co-owner in their new community. No one sits them down and fully explains to them what condo fees are and what they can expect from the condo lifestyle and ownership of a unit.

This is not a scenario that is going to change overnight. But there are small steps that can be taken to get the attention of condo owners in realistically small increments (ie, soundbites). Better explanations of why boards take certain actions, and budget breakdowns that show each owner what they pay every month for insurance, utilities, maintenance and repairs, etc. are two examples. A strong explanation of the concept of co-ownership and why each owner has to pay for the depreciation of the common property throughout the duration of their ownership.

These are all small measures that can go a long way toward avoiding that uncomfortable elevator ride. It might still happen, but at least a board member can console themselves with the knowledge that they tried.

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