Cost-Sharing
Short Answer
Two or more condominium corporations (or a condominium corporation and another person) may share the costs of facilities or services that benefit both.
Definition
Generally, when a condominium corporation has an arrangement with another condominium corporation or other person, the terms should be set out in an agreement which may be termed a "cost-sharing agreement". Even where there is no written contract, the corporation may be bound by an arrangement whereby financial burdens between or amongst condominium corporations, or between the condominium corporation and any person (e.g., the declarant) are defined and allocated, as they relate to the sharing of facilities or services. Such an agreement or arrangements might not stand alone, but will often be based on or included in a mutual use or shared facilities agreement. Cost-sharing terms could also be found in an easement agreement or in an agreement made pursuant to section 98 of the Condominium Act, 1998 (the "Act"). Some cost sharing obligations may arise out of common law, such as where there is a right to use or rely on a facility on another person's property.
This article speaks primarily to the situation where two or more condominium corporations have entered into a cost-sharing agreement.
This article speaks primarily to the situation where two or more condominium corporations have entered into a cost-sharing agreement.
The Protecting Condominium Owners Act, 2015, when it comes into force, will require that any and all shared facilities arrangements - apparently including those already in existence - will be required to be made subject to agreements that meet particular requirements to be set out in the regulations made under that Act. This article will be updated once the regulations are drafted and made available for review.
The new Act also provides that all easements or covenants included in such agreements will run with title to any lands subject to them. This last point is an important and beneficial change to the law that should help protect some condominiums where the current situation is that some or all provisions in an existing shared facilities agreement might be rendered unenforceable when ownership of the non-condominium property changes hands.
The new Act also provides that all easements or covenants included in such agreements will run with title to any lands subject to them. This last point is an important and beneficial change to the law that should help protect some condominiums where the current situation is that some or all provisions in an existing shared facilities agreement might be rendered unenforceable when ownership of the non-condominium property changes hands.
What you need to know…
|
…as a Board Member or Manager
The proportion of the costs that the corporation is required to pay pursuant to a cost-sharing agreement should be included in the budget of the corporation. The board is responsible to ensure the same is paid as and when due in accordance with the agreement and avoid any defaults or penalties that are not in the best interest of the corporation. A cost-sharing agreement relating to the repair or replacement of a part of the common elements of the condominium does not override the responsibility of the corporation to maintain a proper reserve fund, and does not entitle the corporation to keep a shared reserve fund with another condominium corporation. Section 113 of the Act provides that where a cost-sharing agreement has been entered into by the corporation prior to the Turnover Meeting, then within 12 months following the election of a board of directors at such Turnover Meeting any party to the agreement is entitled to apply to the Superior Court of Justice for an order terminating or amending the agreement. The court may terminate or amend the agreement only if it is satisfied that the disclosure statement did not clearly and adequately disclose the provisions of the agreement or the agreement or any of its provisions produces a result that is oppressive or unconscionably prejudicial to the corporation or any unit owner. This section of the Act also applies to mutual use agreements even if they do not include cost-sharing provisions. |
…as a Declarant
If making a cost-sharing agreement with or for a condominium development, the declarant should ensure that the agreement fairly allocates the financial burdens amongst the parties to the agreement, and that such provisions are clearly and adequately set out in the disclosure statement. This may help avoid litigation and the early termination or amendment of the agreement by the court pursuant to section 113 of the Act (explained above). |