Tuesday, October 16, 2012

A Court Ordered Limit to Bareland Condominiums and the Regime of Managed Property

Post script:  The Alberta Government amended the Condominium Property Act in 2013 ameliorating most of the difficulties which the Maciejko decision solidified:

Reserve fund
38(1)  A corporation shall, subject to the regulations, establish and maintain a capital replacement reserve fund to be used to provide sufficient funds that can reasonably be expected to provide for major repairs and replacement of
                                 (a)    any real and personal property owned by the corporation,
                                 (b)    the common property, and
                                 (c)    any property of an owner in respect of a bare land unit that the corporation is required by bylaw to repair and replace,
where the repair or replacement is of a nature that does not normally occur annually.
(1.1)  If, before the coming into force of subsection (1)(c), a corporation was required by bylaw to repair and replace property of an owner of a bare land unit, the collection and expenditure of funds to repair and replace that property are valid if
                                 (a)    the collection and expenditure occurred on or after the date the bylaw took effect under this Act, and

                                 (b)    the collection and expenditure would have been in compliance with subsection (1) if subsection (1)(c) had been in force at the time the collection and expenditure occurred.

The consequence of this intervention is that the onus is now clearly on all bareland condominiums to ensure that their bylaws clearly identify the obligation of the condominium corporation with respect to what is ususaly defined as and referred to as Managed Property.

There is a dearth of case law dealing with the limits imposed upon owners in a bareland condominium.  The Honourable Mr. Justice A.W. Germain in Maciejko v. Condominium Plan No. 9821495, 2012 ABQB 607 has chipped away at this by providing an interesting overview of the history of bareland condominiums and coming to a surprising conclusion to a dispute between owners at "The Shores" condominium.  Justice Germain states: 
It is now decided clearly that "managed property agreements" are enforceable and like bylaws are legally binding on owners.  However, they cannot be used to allow owners to "precollect" funds for payment of expenses which are not related to common property.  That is, reserve funds are limited to common property and cannot form part of an agreement of owners in a managed property agreement.  Justice Germain stated in this regard:

and as follows:

I have always thought that the "bait and switch" from a bareland condominium to a more ordinary condominim structure would be problematic.  Justice Germain has now concluded that it is.  Let the condominium buyer beware.