Choosing a Condo Plan That is Right for You – Part 3: Phased Condominiums

Post by: Carly Haynes

Our previous blog post discussed standard condominiums. This week we will offer a discussion on a specific type of standard condominium, phased condominiums.

Phased Standard Condominium Plans

As the name suggests, a phased condominium plan is a condominium plan that is developed and registered in stages.  Currently the Condominium Act, 1998 (the “Act”) only allows standard condominiums to be phased.  In phased condominium projects, there is one condominium plan which is expanded through amendments to the condominium declaration and description plans, with each new registration constituting a phase as new units are constructed. The condominium plan gradually increases in size as phases are added until the project is complete.  This type of project is attractive to builders  as they are able to balance sales of the units and registration of additional phases in order to ensure the project does not become over-extended.  After each phase is registered the builder can complete the closing of the units in that phase which allows the builder to obtain sales proceeds to assist in constructing the next phase.

The registration of the condominium declaration which brings the first building(s) into the condominium plan is not the first phase. Our office usually refers to this first registration as the Initial Registration.  The first “phase “is the next registration after the Initial Registration.  Needless to say this causes confusion.  Most people quite logically assume the Initial Registration is the first phase.  It isn’t.

References in this blog to a “declarant” mean the person/company that registers the condominium.  Often the builder is the declarant.

Typically phased condominium plans are made up of town homes but there are many examples of phased apartment building condominium plans and single family home condominium plans.

When considering undertaking a phased condominium project, it is important to note the first phase cannot register until title to the majority of the units in the Initial Registration of the condominium plan are no longer owned by the declarant and the declarant has delivered certain documents to the condominium corporation pertaining to the phase to be registered (this requirement applies to the first phase only, not subsequent phases). Furthermore, a phase cannot be registered until all facilities and services have been installed as required by the municipality to ensure  the phase being added to the condominium can function properly even if the planned additional phases are never added to the condominium.

shutterstock_93621346

Phase Disclosure

There are specific disclosure provisions for phased condominiums. Section 147 of the Act requires that all purchasers be provided with disclosure statements which provide specific information on phasing, including whether the declarant intends to create one or more further phases, the projected timing of registration of subsequent phases and details regarding units, location of buildings etc.

The Act permits the condominium corporation to apply for injunctive relief or damages if the declarant proposes certain changes to the proposed phase from what was disclosed in the disclosure statement which are “material and detrimental”.  This type of application could result in significant delays for a declarant, and as such a declarant  who is uncertain about future plans for future phases should fairly and completely disclose all options for the project that the declarant is considering in its disclosure statement to purchasers to reduce the chances of this complication.

A successful injunction application by a condominium corporation does not necessarily preclude the registration of the proposed phase.   It may simply mean the proposed phase will have to proceed as a separate condominium.  The approval authority may have concerns with this result but if the declarant has carefully drafted the condominium documents with proper cross easements between the registered condominium and the lands being held for future phases the problem should not be insurmountable.

Take Home: Pros and Cons of Phased Condominium Plans

The most substantial benefit of a phased condominium plan is that phasing eliminates the requirement to have all proposed buildings in a standard condominium plan completed before the condominium plan can be registered.  This allows a builder to build and close units in segments (and get proceeds of these sales) rather than having to wait for all of the proposed units in the condominium to be constructed before registering the condominium plan and transferring title to purchasers, allowing the declarant to start paying down their construction loan.  This can dramatically reduce the amount of the declarant builder’s construction loan as he or she is only borrowing enough at any one time to build part of the proposed development.

A phased condominium can allow a declarant to post less security with Tarion.   Rather than having to post security for the whole development (possibly at $20,000 per unit), the declarant is only required to post security for the units in the proposed phase.  This is subject to the declarant not entering into any agreement of purchase and sale for units in phases not covered by Tarion.

The only significant drawback  associated with phased condominiums is increased costs on multiple fronts for each phase due to the costs related to the registration of multiple phases, including application and approval fees, planner, lawyer, engineer and surveyor fees.

Finally, the individual unit sales agreements cannot be closed until the unit is built and registered within the condominium. As such, in order to justify the costs associated with each new phase, a sufficient number of agreements of purchase and sale need to have been entered into for the proposed units in the new phase. However, it often makes more financial and practical sense to create a phased condominium instead of multiple condominiums.

» More options

Choosing a Condo Plan That is Right for You – Part 2: Standard Condominiums

Post by: Carly Haynes

Standard Condominium Plans

Our previous blog post offered an introduction to vacant land condominium plans.  In this post we will examine standard condominium plans.

What is a Standard Condominium Plan?

A standard condominium plan is the traditional form of condominium that people tend to be most familiar with. Under previous condominium legislation in Ontario, only standard condominium plans could be created, as such, all condominium plans registered prior to May 5 2001 are standard condominiums.  Under Ontario’s new legislation, the  Condominium Act 1998 (“the Act”), a standard condominium plan is any condominium that is neither a leasehold condominium, nor any of the other types of freehold condominiums provided for in the Act (for example: common elements condominiums or vacant land condominiums).

Defining something by what it is not may not be very helpful, so what exactly is a standard condominium?

This type of condominium plan is typically comprised of completed buildings which are made up of units and common elements.  Some common elements, for example patios attached to the units, may be deemed exclusive use portions of the common elements, meaning that use of those spaces is reserved for specific unit owners only.  Other common elements may include exercise rooms, recreational facilities, roadways, green space and walkways. Notably, some units in a standard condominium can be left empty at the time of condominium registration, such as parking units, or units intended for commercial or industrial (not residential) use.

Finally, prior to the registration of a standard condominium plan all proposed buildings within the plan must be constructed to the level required by the Act regulations, which is also what forms the basis of “Schedule G” of a standard condominium plan.  Schedule G includes an engineer’s or architect’s certificate (or combination), as to the status of the construction of the condominium’s buildings. A completed Schedule G must be included as part of the condominium declaration in order for the declaration to be registered along with the description plans.

125

Why Develop a Standard Condominium Plan?

One benefit of standard condominiums is that proposed standard condominium units can be marketed to potential unit purchasers prior to obtaining draft plan approval from the approval authority (this is also the case with common elements condominiums and phased condominiums).

Also, pursuant to the regulations, the municipality is not required to provide notice of a public meeting for the approval of a standard condominium plan to the surrounding community nor is any circulation to any agencies required. This factor may increase the efficiency of the development.

The Downside of Standard Condominium Plans

The buildings in a standard condominium plan must all be built at one time, without phasing, therefore substantial construction capital may be necessary at the outset of a project, especially if marketing of the units is slow. Phasing the condominium plan offers a solution to this issue, and will be discussed in the following blog.

Finally, pursuant to the Tarion New Home Warranties Act a developer is required to post security to enroll the condominium in Tarion. Registration with Tarion must occur at least 30 (thirty) days before construction begins.

In our next blog post, we will discuss phasing of  standard condominium plans.

Converting lands to “Land Titles Absolute” before condominium registration

Post by: Craig Robson

In Ontario, before a condominium can register, the lands must be registered in “Land Titles Absolute” or “Land Titles Plus”.  These are the highest categories of title available under the Land Titles Act.  Most Ontario lands continue to be “Land Titles Conversion Qualified”.  The “Conversion Qualified” category has qualifiers that do not apply to the “Absolute” and “Plus” categories, including the qualifier that “Conversion Qualified” lands are subject to “any title or lien that, by possession or improvements, the owner or person interested in any adjoining land has acquired to or in respect of the land”.

The application to convert requires a title search by the project lawyer and a boundary survey by the project surveyor.  The boundary survey is circulated to the neighbouring land owners with a warning that if they do nothing the boundary shown on the survey will be certified as the true boundary of their property.  If a neighbour does not agree with the boundary, then the neighbour can object to the application.

In greenfield developments there are usually far fewer boundary issues than exist in built up areas. In built up areas, very often fences are constructed “off boundary”, sheds encroach and significant use has been made of the proposed condominium property by neighbours.  If the property has been vacant for some time, this use can be significant and long standing.

It is important to respond to neighbour’s objections in a principled fashion to minimize potential for delays in the conversion process, which if lengthy can also delay condominium registration.

For more on options for responding to objections to your LTA conversion application, check out our earlier blog article here: “Responding to Objections to an Application to Convert to LTA”.

http://www.rcllp.ca