Assets
Also see:
Short Answer
Property, of whatever
kind, that is owned by a condominium corporation. Common elements are
owned by the unit owners as tenants-in-common and therefore are not assets of the
condominium. Similarly, assets of the condominium do not comprise part of the
common elements.
Definition
There is some uncertainty as to the correct use of the term "assets" in and under the Condominium Act, 1998 (the "Act"), where it is exclusively used to refer to the assets of a condominium corporation. It is not given any definition in the Act, and is used in ways that might make its meaning seem a little ambiguous.
The term has known and common applications outside of the Act, along the lines of "anything of economic value owned by an individual or a corporation," as suggested at InvestorWords.com, and generally as things that are liquefiable - that can be turned into cash, with cash itself being a kind of asset. As discussed below in this article, this very broad, but typical, definition might cause some complications in application under the Act, and such issues will likely need to be dealt with on a case-by-case basis.
The following are some considerations about how the term could be applied:
The term has known and common applications outside of the Act, along the lines of "anything of economic value owned by an individual or a corporation," as suggested at InvestorWords.com, and generally as things that are liquefiable - that can be turned into cash, with cash itself being a kind of asset. As discussed below in this article, this very broad, but typical, definition might cause some complications in application under the Act, and such issues will likely need to be dealt with on a case-by-case basis.
The following are some considerations about how the term could be applied:
- Real Property and Personal Property. Section 18(1) of the Act authorizes condominium corporations to "own, acquire, encumber and dispose of real and personal property".
- Non-tangible things. Section 23(4) of the Act indicates that where the corporation has commenced an action in court on its own behalf and receives a judgment for payment in its favour, such judgment for payment is an asset.
- Agreements for Services. In Mancuso v. York Condominium Corporation No. 216 (2008 CanLII 20343 OSCJ) the court confirmed the meaning of section 18(1) of the Act but determined that an agreement for cable television services to the property is not an asset of the corporation.
- Easements. In Eglinton Place Inc. v. Ontario (Ministry of Consumer and Commercial Relations) (2000 CanLII 22336 OSC), the court determined that an easement would qualify as an asset of the corporation. However, this case pre-dates the coming-into-force of the Act, and based on the fact that the definition of "property" in the Act (which is expressly distinguished in the Act from the condominium's assets) includes not only the land comprising the condominium but also the "interests appurtenant to the land," it is not clear that easements should be considered to be assets under the current legislation.
- Cash. Section 129 of the Act provides that when a property ceases to be governed by the Act (i.e., the property ceases to be a condominium), "the assets of the corporation shall be used to pay all claims for the payment of money against the corporation" and then "the remainder of the assets of the corporation shall be distributed among the owners in the same proportions as the proportions of their common interests." Presumably, therefore, cash owned by the corporation is one of its assets. Likewise, investments, such as stocks, GICs, etc., should also be considered assets of the corporation. This is also suggested in Dewan v. Burdet (2011 ONSC 5749) in which the Ontario Superior Court of Justice speaks of the taking of a condominium's cash as "misappropriation of [its] assets".
- Common Elements. Common elements are definitely not assets of a condominium corporation. Common elements are all those parts of the property comprising the condominium plan that are not defined as units or parts of units. The common elements are owned by the unit owners collectively as tenants-in-common, in the proportions that are described as their "common interests".
What you need to know…
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…as a Unit Owner
Just as common elements are not assets, assets that are owned by the condominium corporation are not owned by the owners of the units within the condominium plan. There is no common interest in the assets of the corporation. Though not precedent for Ontario courts, this concept is set out succinctly in the judgment of the Alberta Court of Queen's Bench in Northland Bank v. Condominium Plan No. 852 2452 (1991 CanLII 5829), where it says, "[a]n asset owned by a condominium corporation is owned by a separate legal entity. The owners qua owners have certain rights to direct the affairs of the corporation but there it ends. There is no right to claim specific assets of the condominium corporation as the property of any particular owner or any group of owners jointly or severally." |
…as a Board Member or Manager
The corporation has a duty to manage its assets. That duty devolves to the board of directors. Corporation assets must be managed with the same care that is taken in regard to the common elements and units. Physical assets are to be included in reserve fund studies and the reserve fund plan must consider their anticipated major repairs and replacements. Where a corporation possesses assets it would be advisable to seek the advice and assistance of a professional accountant to ensure that such matters as depreciation and income are appropriately dealt with. One important consideration is that a condominium that earns income from its assets could risk losing its status as a non-profit entity. |
…as a Declarant
If the declarant intends to provide "major assets and property" to the condominium corporation, even if there is no requirement to do so, this must be set out in the disclosure statement. The disclosure statement must also indicate any "units and assets" that the corporation will be required to purchase. (See section 17(1)(f) and 17(1)(g) of Ont.Reg. 48/01; and, yes, it is noted that the Regulation appears to distinguish real property from assets, which might not be consistent with the terminology in the Act as discussed above in this article.) At the Turnover Meeting, the declarant must provide the newly elected board of directors with bills of sale or transfers for "all items that are assets of the corporation but not part of the property". (Here again, the language of the legislation increases uncertainty as to the proper use of the word "assets", since there should not be any assets of a condominium that are "part of the property," because "property" as defined in the Act means, exclusively, the land subject of the registered condominium plan which is wholly comprised of units and common elements.) |
Additional Information
It is the (perhaps inevitable) inclusion of cash and its like in the definition of assets under the Act that might cause some concern, particularly in regard to the application of section 97 of the Act.
Section 97 restricts the corporation from making "a change in the assets of the corporation" without following certain procedures depending on the value of the change. Should this be interpreted as applying to a change in the investment plan that the corporation's board of directors is required to make pursuant to section 115(8) of the Act, but which it is not expressly (in that section) required to have approved by the unit owners? And what about major expenditures out of the reserve fund that arise earlier or in greater amounts than anticipated in the reserve fund plan: Would the exemption from notice and approval requirements under section 97(2)(a) apply, or should the board obtain unit owner approval before spending the funds needed to effect such repairs?
It is probable that the legislature was not contemplating such spending as constituting "changes" to "assets" when drafting section 97 of the Act. Likewise, the idea of the condominium's cash as an asset was surely not considered when the legislature drafted section 93(2) of the Act which states that a purpose of the reserve fund is to pay for the major repair and replacement of the common elements and assets. We have experience at an AGM where precisely this question was raised. While certain practical issues dictated our answer at the time, it remains to be seen how a court might respond to such issues.
Section 97 restricts the corporation from making "a change in the assets of the corporation" without following certain procedures depending on the value of the change. Should this be interpreted as applying to a change in the investment plan that the corporation's board of directors is required to make pursuant to section 115(8) of the Act, but which it is not expressly (in that section) required to have approved by the unit owners? And what about major expenditures out of the reserve fund that arise earlier or in greater amounts than anticipated in the reserve fund plan: Would the exemption from notice and approval requirements under section 97(2)(a) apply, or should the board obtain unit owner approval before spending the funds needed to effect such repairs?
It is probable that the legislature was not contemplating such spending as constituting "changes" to "assets" when drafting section 97 of the Act. Likewise, the idea of the condominium's cash as an asset was surely not considered when the legislature drafted section 93(2) of the Act which states that a purpose of the reserve fund is to pay for the major repair and replacement of the common elements and assets. We have experience at an AGM where precisely this question was raised. While certain practical issues dictated our answer at the time, it remains to be seen how a court might respond to such issues.