A Modern Approach: Newfoundland and Labrador’s New Condominium Act
In 2008, the Department of Government Services, Newfoundland and Labrador, initiated a review of the Condominium Act (the “Old Act”). The purpose of the review was to seek additional protection for condominium buyers and owners, improve the operation of condominium corporations and introduce new types of condominium corporations. On December 22, 2009, after extensive consultations and drafting, theCondominium Act, 2009 (the “New Act”) received Royal Assent. The New Act along with the Condominium Regulations, 2011 (the “Regulations”) come into force on December 1, 2011. The following is an overview of the more noteworthy provisions of the New Act.
The Old Act required consent of all unit holders and encumbrancers for an amendment to a condominium’s declaration. Under the New Act, an amendment requires the consent of 80% of the owners of the common elements and does not require the consent of any encumbrancers.
2. Disclosure Statements and Estoppel Certificates
Under the New Act, upon entering into an agreement of purchase and sale, a declarant (i.e., the developer) must attach thereto a disclosure statement, the contents of which are clearly set out in the New Act. Likewise, upon entering into an agreement of purchase and sale, an existing unit owner must attach an estoppel certificate dated within 60 days of the agreement of purchase and sale. Where the disclosure statement or estoppel certificate is not available at the time of entering into the agreement of purchase and sale, the declarant or unit owner must provide it to the purchaser as soon as it is available, and at the latest, within 5 days of receipt by the declarant or the unit owner.
After receiving the disclosure statement or estoppel certificate, a purchaser may rescind the agreement of purchase and sale within 10 days by giving written notice to the declarant or the unit owner. Where an agreement is rescinded, all monies received from the purchaser under the agreement shall be promptly refunded to the purchaser without penalty or charge.
3. Reserve Fund and Reserve Fund Study
The Old Act was silent on reserve funds and reserve fund studies, leaving such matters to the discretion of individual condominium corporations. The New Act and the Regulations establish specific requirements for reserve funds and reserve fund studies. These include:
a) Reserve Funds – Condominium corporations must establish and maintain a reserve fund for major repair and replacement of common elements and assets of the corporation. The reserve fund also constitutes an asset of the corporation. For condominiums of less than 10 units, the corporation shall assess and collect the owners’ contributions to the reserve fund in an amount that would result in the amount of the reserve fund becoming, and continuing to be, within 5 years of the coming into effect of the New Act or the creation of the corporation, 100% of the annual operating budget of the corporation.
A declarant must contribute to the reserve fund in an amount established by the declaration for all units he/she holds and for all units that are not sold.
b) Reserve Fund Studies – For condominiums of 10 units or more, the condominium corporation must engage the services of a certified appraiser, architect, engineer or reserve planner to complete a reserve fund study within 2 years of the coming into force of the New Act. A new study must be completed every 10 years thereafter and must be provided to each of the unit owners upon completion. In the event that a reserve fund is less than the minimum amount recommended in a study, the corporation must assess and collect contributions from the owners in order to meet the minimum amount of reserve funds recommended. This must be done within a timeline set out by the study, and thereinafter maintained.
The Old Act gave a corporation the right to a lien for unpaid fees and the right to register that lien as an encumbrance over a unit that could be enforced in the same manner as a mortgage however, under the Old Act the priority of such a lien is not addressed. As a result, where there are other encumbrances, enforcing such a lien may result in little or no recovery for the condominium corporation.
The New Act closely mirrors the Old Act in the creation of the right to a lien. However, the lien now includes all interest, all reasonable legal costs and all other reasonable costs incurred by the condominium corporation in connection with the collection or attempted collection of the unpaid amount. A certificate evidencing the lien must be registered in the Registry of Deeds in order to have effect. With respect to priority over other encumbrances, the lien now has priority to all other liens, charges or mortgages in respect of the unit and the common interest, other than a lien for property taxes.
5. Dispute Resolution
The Old Act is silent with respect dispute resolution. Under the New Act, where a dispute arises and all parties consent, the dispute may be submitted to a certified mediator selected by the parties. If the parties cannot agree to refer the dispute to mediation, cannot agree upon the appointment of a mediator, or where mediation was unsuccessful, the dispute may be referred to an arbitrator under the Arbitration Act or the parties may make application to the Supreme Court of Newfoundland and Labrador.
6. Composition of Board of Directors
The New Act allows a unit owner to name a person, over the age of 19, as a designate to act on the unit owners behalf in matters relating to the functioning of the condominium corporation. The designate is eligible to be nominated for election to the board of directors, a role limited to unit owners under the Old Act.
The Old Act is silent on insurance requirements for condominium corporations. The New Act requires that a corporation obtain and maintain insurance on its own behalf and on behalf of the owners for damage to the units and common elements caused by major perils, or other perils that the declaration or the by-laws specify. However, unit holders should be aware that the insurance required to be maintained by the condominium corporation does not cover damage to improvements made to a unit.
8. Different Types of Condominiums
The New Act permits three additional types of condominiums:
Common Elements Condominium Corporation (CECC) – A CECC consists only of common elements (e.g., a golf course or recreational facility). In a CECC, each owner must also own the freehold estate in a parcel of land that is not included in the land described in the description and which has been registered in the Registry of Deeds. The owner must sign a certificate stating the owner consents to the registration of the declaration and the filing of the notice. Upon registration of the CECC the common interest of an owner in the CECC, attaches to the owner’s parcel of land.
Phased-Development Condominium Corporation (PDCC) – Under the New Act, a PDCC may be developed in phases. The introduction of the PDCC eliminates the need for constructing and registering individual buildings as distinct condominium corporations. Upon the acceptance for registration of each subsequent phase of a PDCC, the subsequent phase is consolidated into one lot with all phases of the phased-development condominium previously accepted for registration.
Vacant Land Condominium Corporation (VLCC) – A VLCC consists of vacant land and common elements, but the units are all vacant. A person would buy the unit and build his/her own building on the land. As buildings are constructed they form part of the unit or common elements respectively.
The New Act serves to modernize the legislative framework of condominiums in the Province of Newfoundland and Labrador and is a “must read” for condominium owners, developers, lenders, existing condominium corporations or other interested parties.