eCaseNote 2012 No. 04

The New Condominium Act – What Purchasers/Owners Need to Know

Condominium Act, RSNL 2009, c.C-29.1

The present growth in popularity of condominium ownership in Newfoundland and Labrador makes timely the newly-updated Condominium Act, which came into force on December 1, 2011. It replaces the original 1975 legislation. All condominiums regardless of age are now governed by the new Act, even those registered before that date. Condominiums of 10 units or less are regulated less rigorously in some important aspects than those of more than 10 units.

This second in a two-part series focuses on what condominium purchasers and owners need to know about the new Act. The new Act has a decided consumer protection thrust. The following is a review of some of the consumer protection features with which an owner or prospective purchaser should be familiar.

But first – some basics. A condominium unit as a form of home ownership is becoming increasingly common in the St. John’s region as it is throughout the country. While a condominium unit purchaser in Canada’s largest centres might be an investor who will not likely see, much less occupy, the unit purchased, in the St. John’s region a condominium unit is typically purchased to be occupied as a home either immediately or “down the road”. The decision to purchase a condominium unit is related to considerations of convenience and lifestyle. Seniors, particularly those away a lot, look forward to being relieved of the nuisance and expense of maintaining and protecting a house. Younger adults in many cases see little appeal in the investment made by their parents of time, energy and resources involved in house ownership and would prefer to direct their time, energy and resources to business and career advancement, travel and leisure pursuits.

To touch upon the basic legalities, a condominium unit is considered real estate for all purposes, for example for the purpose of securing a mortgage loan, bequeathing it by will, or as a matrimonial home under the Family Law Act. A condominium building is made up of its units and its common elements. The common elements include the grounds, parking lot and garage, the common areas within the building, hallways, stairs, elevator, the roof and the exterior shell of the building. A purchaser therefore receives a deed to a specific unit and a proportionate interest in the common elements in common with the other unit owners. The common elements are held and managed by a Condominium Corporation which is owned by the unit owners.

In shopping for a condominium unit, you would be well advised to inquire as to the reputation and track record of the developer (called the “Declarant” in the new Act - the party filing the Declaration that constitutes the condominium). A word with an owner or two in an earlier condominium project by the same developer would be a good idea. You might consider as well making your offer subject to an independent appraisal producing a value equal to or higher than the purchase price you have agreed to pay.

When you sign up to buy a condominium unit the developer is required to provide you as soon as possible with a package including the Declaration setting up the Condominium, its By-laws, a budget and a Disclosure Statement containing the basic information respecting the property. Following receipt of that package, the new Act provides for a 10 day “cooling off period” during which you may withdraw from the Agreement to Purchase and receive the return of your deposit without penalty. There is a similar provision if you are purchasing a previously-owned condominium unit.

Under the new Act you are permitted to appoint a Designate, being any adult person who will represent you in your dealings with the Condominium Corporation. A Designate may be very useful in situations where you expect to be away a lot, or you are just not inclined to be bothered with the details of the Corporation’s business affairs. Your Designate is eligible to be elected by the unit owners as a director or officer of the Condominium Corporation.

The new Act is much more rigorous concerning the financial management of the Condominium Corporation. Annual financial statements must now be audited and signed by a person who is a licenced public accountant under the Public Accountancy Act.

As to the long-term upkeep of the condominium building and the protection of your investment in it, all Condominium Corporations are now required to have a professionally prepared Reserve Fund Study which forecasts future major maintenance items and their cost. The setting up of a Reserve Fund in an amount sufficient to pay the cost of these items as they become necessary is mandatory and regulated. Unpaid contributions by a unit owner to the Reserve Fund constitute a lien on his/her unit.

The new Act aims to simplify dispute resolution between one or more individual Unit Owners and the Condominium Corporation. The parties to a dispute may agree to have their differences mediated by a certified mediator. If that does not resolve matters, either party may invoke the provisions of the Arbitration Act, or make application to the Supreme Court.

The new Act requires that the Declaration define a “standard unit” meaning a unit completed with basic finishes and fixtures. The fire insurance, which is carried by the Condominium Corporation on all the Units, insures all Units as if they were “standard units”. Finishes and fixtures within a unit that are more than basic are referred to as “improvements”. Insurance on improvements must be arranged and paid for by the unit owner.

Predictably, the consumer protection provisions of the new Act result in more paper to be reviewed. You should therefore allow your legal counsel ample time when setting a closing date for your condominium purchase.

The comments contained in this eCaseNote provide general information only and should not be construed as legal advice or opinion. For more information or specific advice on matters of interest, please call our offices at (709) 579-2081.