Our firm represents a growing number of standard condominiums that are units within larger vacant land condominium communities. It might help to explain it with an example. A developer creates a vacant land condominium (VLC) with 5 units. The developer then takes each of the 5 units in the VLC and creates:
• 1 standard high-rise condominium in unit #1,
• 1 standard townhouse condominium (with phasing to make it extra fun) in unit #2,
• 1 standard mixed-use condominium in unit #3,
• 1 apartment building in unit#4, and
• 1 commercial building in unit #5.
Layer upon layer of condominium. So long as the developer complies with the requirements of the Act and its regulations (and other pieces of legislation) the condominium concept can be used in some very unique ways.
Why would a developer want to create a condo in a condo?
It can be used for planning purposes and to satisfy conditions of the approval authority. Other times there may be a financial motivation. It can be easier to ensure a uniform appearance throughout the entire project as the declarant can put conditions or restrictions in the declaration that would apply to all construction activities carried on within the units. Lastly, it can eliminate the need for a shared facilities agreement since they are all part of one condominium.
The concept can get extremely complex when multiple condominiums are involved. The main reason for the complexity is the Act itself as it was not designed for condo in a condo. Here are some of the issues created by condo in a condo:
• How do you register documents? When the standard condominium is registered in the unit in the VLC the unique property identifier for the unit will likely be deleted by the land registry office. This means when the VLC needs to register any documents on its 5 units, such as new by-laws or notices of change of address, it will need to register it on the units within the standard condominium. If someone searches title to one of the units in the standard condominium they might be confused to see documents for a separate vacant land condominium registered. Our office has even had the land registry office reject documents for registration until we explained the situation to them and they allowed us to register on the units in the standard condominium.
• Who votes for the unit? For units# 4 & 5 in our example above, it would be the owner of the building, so this would work much like a traditional unit where the owner votes. What about the other three units where a standard condominium is constructed inside the unit? Do the majority of owners of the units in the standard condominium need to sign a proxy to exercise a vote at any meeting of the VLC condominium? That could be hundreds of people if the standard condominium has more than 100 units. Can the board of directors be given authority to vote on behalf of their unit owners?
• Who do you contact? Sometimes the VLC and standard condominium have different managers. This can be very confusing to unit owners when they need to contact their manager to report a rule violation or repair issue. Similarly, how does the VLC communicate with the owners? Does it send the document to the board of directors for the standard condominium and have it distribute the document to its owners? Does the VLC need to communicate directly with all owners in the standard condominium? How does it get that information if the standard condominium refuses to provide it?
• How do you collect arrears? If one of the standard condominiums fails to pay its common expenses does the VLC register a lien against all the units in the standard condominium? This might seem unusual but remember there is no way to register against the unit in the VLC once the standard condominium is registered.
• Purchasing or Selling a unit? Make sure you request a status certificate in both condominiums or you could miss out on key information, like legal matters, proposed changes to the common elements, or special assessments.
It is possible to address some of these issues in carefully drafted declarations or by-laws, but some issues will continue to pose challenges for the condominiums after registration.
I am personally not a fan of the condo in a condo concept. In my limited experience with them, the complexity increases the number of disputes. There is also uncertainty as to how the Act would be interpreted for the condo in a condo since there are no reported cases yet. That said, I know others at the firm think they are a good option in some cases, such as where it might be advantageous to avoid a complex shared facilities agreement.