Post by: Carly Haynes
Ontario’s Condominium Act, 1998( “the Act”) provides for different types of condominiums, which in turn allows developers to utilize a condominium plan which is best suited to their needs. These variations include vacant land, leasehold, common elements and standard condominiums. Only standard condominiums can be phased although there is hope the ability to phase condominium plans will be extended to other types of condominium in the expected updates to the Act. The type of condominium development undertaken by a developer will vary based on a range of factors including the type of interest held in the land, intended future use and development plans. It is important to be aware of the various positive and limiting aspects of each form of condominium when undertaking a development project in order to insure an efficient and successful project.
Vacant Land Condominium Plan
A vacant land condominium plan (“VLCP”) refers to a condominium plan that contains at least one unit with no structures on it at the time of registration of the declaration and description (the documents that are registered to create the condominium).
A VLCP allows the condominium plan to be registered on the land before structures are constructed on all of the units. In other words, what usually presents as a vacant “lot” is the unit, and the common elements are made up of any other parts of the plan outside the units such as for example, roads, visitor parking, sewers, recreational facilities etc.
Pursuant to the Act, the following qualifications must be met in order to register as a VLCP:
1. No unit in a VLCP can be part of a building;
2. If at the time of registration of the condominium, a unit in the VLCP contains any structure, the structure must be within the boundaries of the unit and cannot “straddle” a unit boundary. For example, a foundation for a town home block cannot be in place at the time of the registration of the vacant land condominium plan as it would constitute a structure crossing a unit boundary; and
3. Units in a VLCP cannot be stratified. This restriction does not preclude the construction of multi storey buildings on units in a VLCP. Rather, it prevents having units above or below each other.
VLCPs are generally intended for the development of units containing single buildings, whether they happen to be residential, commercial or industrial. However, town homes can be constructed on a vacant condominium plan. The foundations cannot be put in place until after condominium registration because of wording in the regulations to the Act.
If there are incomplete common elements at the time of condominium registration the municipal approval authority may allow the condominium plan to be registered but the approval authority is obligated to take sufficient security from the developer to ensure the common elements will be completed at a later date.
As any experienced developer will tell you, Tarion New Home Warranty enrollment fees for condominium projects represent a significant cost for residential developments. Tarion can require security of up to $20,000.00 for each proposed condominium in a standard condominium plan. The good news in regards to VLCPs is that Tarion treats these condominium units as a freehold homes, therefore no Tarion security is necessary for the common elements in the condominium. That being said, while Tarion doesn’t provide any warranty on the common elements of a VLCP, it will in almost all cases continue to apply to the new homes which are constructed on the units.
Upon completion of construction of the buildings on the condominium units, maintenance and repair obligations regarding each unit fall to the owners of the unit, not the condominium corporation. The Act prohibits the condominium from doing any maintenance or repairs with respect to a vacant land condominium unit unless the owner fails to do so.
The Act also makes all insurance obligations with respect to the unit the responsibility of the unit owner. While the unit owners are responsible for the units themselves, the vacant land condominium corporation remains responsible for the common elements.
Positive aspects of VLCPs include:
- registering the whole condominium at one time, prior to building
- sales agreements for new homes on a VLCP can be closed as soon as construction is completed because the unit is already registered within the condominium; and The builder does not have to wait for condominium registration or a phase to register.
- developers are not required to post security to Tarion to enroll the condominium in Tarion.
The downsides of a VLCP include:
- certain municipalities may be wary about foundation walls being situated on lot lines (see requirement #2 above) after condominium registration .
- all units must be registered at once, and once registered the lot and parcel sizes are fixed;
- no sales agreements can be finalized until the draft plan of approval of the proposed condominium is complete and construction cannot begin for any structure (such as town home) that will straddle a unit boundary until the condominium plan is registered, meaning all conditions placed on the draft plan must be met prior to such construction. Single family home construction that will not straddle a unit boundary is not affected by this restriction. ; and
- the inability of the condominium to insure any part of the units may result in the buildings having inadequate insurance which can result in serious repercussion in the event of a fire or other damage particularly if the units are semi-detached homes or townhomes.
In Part Two of this blog series we will discuss the pros and cons of standard phased condominiums.