TitlePLUS Tips: Keeping up with the changing nature of condominiums
Over the past two decades, as the popularity of condominiums has increased, the legal concept of the condominium has changed and expanded dramatically in various parts of Canada.
The definition of “condominium” is no longer limited to the commonly held perception of a stand-alone residential apartment building. In Ontario, for example, the Condominium Act, 1998 created several new ways of structuring condominium projects such as Common Element, Vacant Land (known “Bare Land” in Alberta), and Phased condominiums.
The legal construct of the condominium is being stretched to new and creative uses in many markets, including urban, retail/industrial, suburban and recreational properties. Regardless of the type or structure, however, the essence of a condominium is that purchasers are buying one or more units, together with an interest in an active corporation, sharing both the benefits and the liabilities of that corporation.
In urban centres, a premium on downtown space and an abundance of developers’ creativity has led to such entities as mixed use “live/work” units and residential properties with an investment component, such as hotel condominiums, often with rental management agreements. In addition to the normal residential concerns, the purchaser may have to take into account business and tax considerations of their investment. The purchaser must also be aware of the exact nature of the condominium corporation’s business, and of the fact that not all investments turn out to be profitable.
In what would traditionally be considered suburban areas, “Vacant” or “Bare Land” condominiums are gaining popularity as alternatives to standard subdivision plans, giving developers and residents more control of the character of their subdivision, while often relieving the municipalities of their responsibilities and expenses with respect to some or all of the services which a municipality would normally provide (such as road and sewer maintenance). Purchasers may not appreciate the potential liabilities that they are assuming when purchasing an interest in a corporation which is responsible for these services.
Recreational entities, such as golf clubs or marinas, or common areas, such as visitor parking lots or parks, can be structured as Common Elements condominiums; its interest is inextricably tied to surrounding freehold properties, called “Parcels of Tied Land.” The purchase transaction then requires two sets of on- and off-title searches, and the review of the Status/Estoppel Certificate for the Common Elements condominium. Again, purchasers may not understand the potential liabilities of the business or other property to which their interest in the land is tied.
Over the past decade, many provinces have amended, or are in the process of reviewing, their condominium legislation. Keeping up to date with the changing legislation, the changing nature of condominiums, and of the commercial realities associated with condominium ownership can assist in properly advising clients as to the rights, obligations and potential liabilities associated with condominium ownership.