A condominium corporation wants to convert a ground floor superintendent’s suite from common element to unit, with the idea that the unit can then be sold. The funds generated by the sale will be used to offset common expenses and boost contributions to the reserve fund. The owners are in favour of the idea and the board does not anticipate problems in obtaining the required approvals.
The creation of the unit will involve an amendment to the declaration and description and a reworking of Schedule “D” to the declaration (common interests and contributions to common expenses). The plan sheet for the ground floor will also require amendment to show the boundary of the unit in relation to the common elements and to identify the new unit by number.
The proposed amendment will require the written consent of owners who own 90% of the units under section 107 of the Act. The board has called the required meeting of the owners to consider the amendment. There will be no vote taken on the issue of the amendment because a vote is not required by section 107. However, the board is hoping that many owners will simply deliver the required written consent at the close of the meeting.
The agenda for the meeting includes a motion under section 97 of the Act to approve the modification to the common elements. The board’s proposal will involve two modifications: (a) a proposed amendment to the declaration and description to remove the superintendent’s suite from the common elements; and (b) the subsequent sale of the unit to a third party purchaser. The asset will ultimately be converted to cash.
The owners vote in favour of the proposed modifications and the board gathers the required written consents to the amendment under section 107 of the Act. Surveying work is completed and the plan sheets submitted to the City of Ottawa and the Registry Office for approval.
Upon submission of the amendment for registration, a new title will be created. The registrar takes the position that title to the new unit must be registered in the name of all unit owners as tenants in common. The whole process grinds to a halt. If title is registered in the name of all owners then the proceeds of sale are an asset of those owners who happen to own units at the date the amendment is registered, whether or not they continue to own a unit in the corporation on the date that the new unit is sold. The intention of the owners in approving the amendment was that the corporation would hold title to the unit and the proceeds of sale would be an asset of the corporation.
The position taken by the registrar is the result of problems with the strict wording of the Act. Unless and until the act is amended, the problem will remain. The owners, from time to time, are the owners of the common elements and hold title to the common elements as tenants in common. “Common elements” means all of the property except the units so that, by definition, a unit cannot form part of the common elements. There was no authority to register title to the unit in anything other than the name of all unit owners. There is no specific provision to confirm that property acquired by the corporation can be held by the corporation on behalf of all unit owners from time to time.
There are numerous examples of similar circumstances where the corporation holds property in trust for the owners. All funds received are held by the corporation, in trust, so that the corporation will be able to fulfill its obligations with respect to the management and operation of the property. All proceeds of insurance are held in trust. All judgments obtained by the corporation in respect of the property are an asset of the corporation. On termination of a condo, all property is held in trust and must be distributed among the unit owners in the same proportions as the proportions of their common interests.
In spite of the clear authority on the part of the Corporation to hold title to property on behalf of all of the owners from time to time, and in spite of the approvals given by the owners under section 107 and section 97, the Registrar is hamstrung by the Act.
The position of the registrar forced the corporation to go back to the owners and obtain the written direction of all of the owners directing the Land Registrar to register title to the unit in the name of the corporation. Such a direction might have been included with the consents given to the owners under section 107 of the Act. Even then, the consent of all owners would be needed to transfer title to the corporation. Directions from ninety percent of the owners would not be enough. In the alternative, the registrar will accept a court order confirming the owner’s intention to vest title to the newly created unit in the name of the corporation. Either way, the process serves only to add expense and does not assist the corporation in achieving its objectives or carrying out the intention of the owners.
(from Condo Law Newsletter, Summer 2007)