Development of a Condominium – Basic Steps
The first and foremost step in the development of a condominium is acquiring the land. While evaluating land options the developer would like to assess numerous situations that will play a major role in ascertaining, whether to acquire the lot and what should be done with it. This typically includes town planning, municipal planning conditions, geographic characteristics, and proximity to other locations such as schools, railways, airports, etc.
If there are existing buildings on the land that the developer plans to include in the project, a thorough evaluation by the engineer will prove to be very useful to calculate the life span and future repairs and replacement costs.
It is very important to remember for the developer availing a mortgage that the mortgagee agrees to the proposed condominium. Part of the documentation required to register the condominium is consent by all mortgagees.
What is to be created
The next important step for the developer is to determine what type of condominium they intend to create, i.e., standard, phased, vacant land, common element, or a leasehold condominium. Further, the condominiums may be high-rise, low-rise, townhouse, detached, industrial, commercial, etc. To make the best decision, the developer may consider taking advice from experts such as lawyers, surveyors, engineers, real estate professionals, and others. Additionally, the developer may review the development plan with the local municipal planning department to ensure their support and future approval with no or minimum conditions attached. It is important for the developer not to make rigid plans and add an element of flexibility to meet uncertain conditions which might arise and require alteration of the plan. These may include legal issues or changes in the market conditions etc.
Once the developer is ready with the land and a plan and presuming that the local municipal authority is in favor of the project, the next stage is to file a draft plan of condominium application for approval with the municipal authority. The most crucial part of the draft application is the drawing of the site showing the proposed units, common elements, and other features of the proposed condominium. It is prepared by the architect or the engineer or by the surveyor. Additionally, a written application form usually prepared by a lawyer, or planner or surveyor is filed. Once the required number of copies along with the applicable fee is filed, the concerned municipal authority circulates the application to other departments and agencies such as utility providers, conservation authorities etc. for their comments or any approval conditions. The developer may consider taking the services of a lawyer to deal with the comments of such authorities for an effective and speedy approval of the project.
Drafting Condominium Documents
A condominium corporation is not a business organization and is not governed by the Federal or Ontario legislation as incorporated business enterprises. It is important to understand that a condominium corporation is not incorporated, it is created by the registration of declaration and description. The declaration deals with the framework of the condominium corporation, in other words, it is the ‘constitution’ of the condominium. It must set out the address, how the common interests and common expenses are apportioned among the units, any exclusive use common elements and to which units they are allocated, conditions if any imposed-on condominium approval and consents of mortgagees.
The description on the other hand includes the plan of a condominium corporation. It focuses on the boundaries of units and common elements, the buildings, including surveys, architectural plans. Diagrams of units’ common elements and certificates of qualified professionals.
The declaration and description must be filed with the concerned Land Titles Office where the condominium is to be registered for review prior to registration.
Further, the developer according to the Condominium Act, 1998, S.O. 1998, C. 19 (“Act”) must provide the purchasers with a disclosure statement and a proposed budget for the first year of operation of the condominium. The developer may consult their solicitor to prepare the disclosure statement and hire a condominium property management company for the preparation of the budget. With the agreement of purchase and sale, the developer must provide the purchasers with these documents, and the purchasers within the later of 10 days after the date a copy of the accepted agreement is received may rescind the agreement and receive a refund of all deposit monies, with interest from the date monies are paid to the developer. In the case of any material change to disclosure materials, a further rescission period may arise.
Additionally, the declaration has a number of schedules that are to be signed by the solicitor, architect, surveyor, mortgagees (if there is any registered mortgage) and before it can be registered it must be signed by the developer. In the case of a common element condominium, there is an additional schedule to be signed by the owner (s) and mortgagees (s) (if any) of the proposed parcels of tied land.
The local municipal authority and other agencies to which the draft plan was circulated may impose conditions before approving the plan for registration. A great deal of work may be involved to clear such conditions; therefore, the developer may consider hiring a specialized condominium lawyer to deal with the comments and conditions imposed. Once the conditions are satisfied the developer will provide the appropriate authorities with the final condominium plan (description) for execution along with which a letter drafted by a solicitor, may be sent specifying as to how each condition has been satisfied.
Once the appropriate authority is satisfied, they will sign the final copy of the plan and deliver it to the concerned Land Titles Office to be registered. The Condominium on registration of declaration and description comes into existence.