Can New Condominium Corporations Get Out of Their Cost-Sharing Obligations for Shared Facilities?
In some instances where a condominium has a shared facility (shared with another party), the condominium developer enters into a Shared Facilities Agreement before the condominium corporation is declared. The Agreement then appears on title to each unit at the condominium with the intention that the Condominium Corporation would assume the contractual obligations even though it was never a signatory to the Agreement.
However, these Agreements sometimes unfairly allocate the cost sharing burden on the Condominium Corporation. In such cases, is the Condominium Corporation obligated to fulfill the terms of the Agreement even if it was never a signatory?
We came across a recent BC case that touches on this point:
In The Owners, Strata Plan BCS 4006 v Jameson House Ventures Ltd, the developer, prior to incorporating the Strata Corporation, entered into an agreement with the city of Vancouver for access to a parkade for the residential strata owners. The agreement required the owners to pay 80% of the parkade’s operating costs and was registered on title to each unit in the Strata. However, the Strata Corporation (and owners) had never signed an assumption agreement. The Strata Corporation sought a declaration that it was not legally bound by the cost-sharing obligations of the agreement, and the BC Supreme Court and Court of Appeal agreed.
The Courts reviewed the caselaw surrounding positive covenants, beginning with the old English decision of Austerberry v Corporation of Oldham, that found positive covenants (such as the paying of money) are not binding upon successors in title. The Court found that while the circumstances of property ownership are now vastly different from when Austerberry was decided, reform of the law is better left to the legislature and not the courts. The BC Court of appeal held that the Strata Corporation was not bound by the cost-sharing obligations of the agreement. [The Court noted that a possible exception to the legal rule that “positive covenants don’t run with the land” had not been pleaded in the Jameson case.]
Based on this decision, newly incorporated strata corporations in similar circumstances might not, at this time, be obligated to pay fees related to maintaining shared facilities. Would this also be the case for new condominiums in Ontario?
The short answer is maybe. Ontario courts have also upheld the principle in Austerberry. However, we think that provisions in the Condominium Act (the “Act”) may perhaps apply. Under sections 89(1) and 90(1), condominiums are required to maintain and repair the common elements. The Act defines the common elements to include any interest in land. [This definition is much broader than what is found in BC’s Strata Property Act, which defines common property/assets only as “land held in the name of or on behalf of a strata corporation”]. Therefore, it is our view that condominiums in Ontario arguably have a duty to maintain shared facilities (in cases where the corporation has some sort of real estate interest in the shared facilities) even where the corporation was not a signatory to the shared facilities agreement.
As many of our readers know, the authoritative case regarding positive covenants in Ontario is Amberwood Investments Ltd v Durham Condominium Corp. No. 123. In that case, the Court of Appeal held that Amberwood Investments was not bound by positive covenants previously registered on title to its property. When Amberwood was being decided, sections 89 and 90 of the Act were already in effect; so why did the Court of Appeal not consider their application to the Amberwood situation?
It is important to remember that Amberwood Investments, the party which sought a proclamation that it was not bound by positive covenants, was not a condominium corporation. Therefore, sections 89(1) and 90(1) of the Act were not applicable to Amberwood investments. Nonetheless, the Court in Amberwood did confirm, at paragraph 51 of its decision, that the Act permits the enforcement of positive covenants for condominiums (which are of course governed by the Act). Therefore, it does seem that the current construction of the Act may require Condominium Corporations to be bound by positive covenants.
Ultimately, this issue should be moot once and for all when the next phase of amendments to the Act come into force. Under s. 21.1(1) (which is not yet in force), a shared facilities agreement (including any positive covenants) will be binding upon subsequent property owner(s) (which is specifically designed to overcome the legal rule that “positive covenants don’t run with the land”).
We don’t know yet when the second phase of amendments will come into force. In the meantime, we feel that the Ontario Condominium Act, even as currently drafted, might be of some help in Ontario.
Stay tuned to Condo Law News and keep up date on the latest developments and amendments to the Condominium Act and other related statutes.