Condominium Act – Revisions
The new revisions to the Condominium Act came into effect on May 5, 2001. A number of the changes affect builders, purchasers, sellers and realtors. For a complete set of the changes please visit the Ministry of Government and Consumer Services website and check Ontario Regulation 48/01. Following is a list of the changes which strengthen the position of buyers and owners enabling them to be better informed.
- Status Certificate – A Status Certificate, previously known as an estoppel certificate, is a document issued by the condominium management providing information regarding the financial, legal and physical status of the condominium. The Status Certificate is accompanied by the declaration, by-laws, rules, fees, reserve funds, future projects, and any existing liens or other related topics.
Anyone, including a prospective buyer, mortgage lender or real estate agent can request for a status certificate in writing with a fee of about $100. Upon the receipt of the request, the management has ten days to provide the Status Certificate.
A new statement in the Status Certificate obligates the condominium corporation to report the number of leased units as compared to residential units in a condominium complex.
It is advised that the vendors request a Status Certificate before they put a condominium up for sale. For purchasers, it is advised that their purchase offer should ask the vendors to obtain the Status Certificate and pay for obtaining it. This can save time for both parties.
- Reserve Fund Study – The revised Condominium Act obligates the condominium corporation to provide more information regarding the funding for the reserve amount that may be used for expansion or maintenance and repair costs. Every registered condominium corporation is to conduct a study every three years starting May 5, 2001. The study will determine the funding required to the reserve account. Previously 10% of the monthly common expenses were set aside. The purchaser should be aware of how much and at what interval will he or she will have to contribute towards the reserve fund.
Once the condominium management receives a reserve fund study, it has 120 days to propose a plan of funding. It then has 15 days to send the funding plan to owners and 30 days to implement the plan.
- Rescission Period – The purchaser has a period of ten days to cancel the purchase following which all deposits must be returned to the purchaser including interest for any condominiums where no units had been sold before May 5, 2001.
The written cancellation must reach the builder within ten days from the later of:
-the date on which the purchaser received the disclosure package.
-the date on which the purchaser received a signed Agreement of Purchase signed by both the builder and the purchaser.
-A second rescission period may follow if the builder makes any material changes and sends a revised disclosure package to the purchaser before closing.
- Greater Interest to the Purchaser – Under the new Condominium Act, the builder is required to pay interest to the purchaser from the time the deposits are received until the time of occupancy. This interest is calculated based on a regulated formula. This is not applicable where the condominium corporation had at least one accepted offer of purchase of a unit before May 5, 2001. Under the old Act, interest was paid to the purchaser from the date of occupancy to the final closing date.
- Interest to the Builder – The interest payable to the builder by the purchaser on the unpaid balance of the purchase price as part of the monthly occupancy costs is based on the rate of interest reported by the Bank of Canada as the chartered bank administered rate for a conventional one year mortgage, as of the first of the month in which the purchaser is required to assume occupancy.
If the purchaser wishes not to pay interest on the balance of the purchase price, then he or she can send a written notice to the builder during the rescission period to let the builder know that the balance will be paid on the occupancy date. A purchaser who has to arrange a mortgage does not have this option since a mortgage cannot be registered until the Condominium Corporation is registered.
- Phased Condominium Corporations allow for different phases at which a particular condominium project is expanded and completed, for example a four phased condominium or a four tower condominium. Rather than registering a new condominium corporation each time a tower is completed, the entire project can be registered by adding each phase to the original condominium corporation. This reduces the cost of management, easements, and reciprocal agreements. However, all proposed phases must be completed within ten years.
- Vacant Land Condominium Corporations sell vacant lots to purchasers with common elements such as recreational facilities. There are usually rules set by the corporation on the type of houses to be built on these lots.
- Common Element Condominium Corporations do not create residential units. The builder sells shares of for example, recreational facility to property owners within the same land registry division in which the condominium is registered. For example, a freehold townhouse with all the recreational facilities (clubs, swimming pools) as well as roads, parks and lighting maintenance is taken care of as in a typical condominium complex.
- Leasehold Condominium Corporations refers to organizations that have excess land and wish to lease it out at a term between 40 and 99 years. The leaseholders have the right to mortgage or sell such leasehold interest. The lease can be renewed for a minimum ten year period with a required written notice, at least five years before the date of expiration of the lease term.