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Condominium corporation validly caveats developer's unit |
| 12-Jun-06 |
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A Construction Law Update
On May 3, 2006, the Court of Queen's Bench of Alberta released the decision of Condo Plan No. 982 2595 v. Fantasy Homes Ltd., [2006] AB.Q.B. 325 (Alta. Q.B.).
This is an interesting case where a Condominium Corporation (the "Corporation") alleged construction deficiencies associated with the common property and passed a by-law for a special assessment against the respondent, Fantasy Homes Ltd. ("Fantasy"), the developer of a 20 unit condominium project in Edmonton, Alberta, who was also an owner of one of the condominium units.
It was alleged by the Corporation that there were construction deficiencies associated with the common property. A Reserve Fund Study was commissioned and prepared for the Corporation which identified the alleged deficiencies and determined that a special levy of $82,000.00 was required. The Corporation amended its by-laws to impose a special levy upon the single unit owned by Fantasy, due and payable immediately, with interest at 18% per year until paid in full. A caveat was then registered by the Corporation against the unit owned by Fantasy.
Fantasy brought an application to discharge the caveat. Fantasy argued that the by-law and caveat were a colorable attempt to force Fantasy to create or fund the capital replacement reserve for the Condominium Corporation. Further, Fantasy argued that the by-law infringed upon section 14 of the Condominium Act which states that the developer must hold in trust sufficient funds to pay, based on unit factors, proportionate costs of substantially completing construction of the common property as determined by a cost consultant. Fantasy also alleged improper conduct by the Corporation pursuant to section 67 of the Act which prohibits oppressive or unfair acts.
Reviewing the legislation, the Court found that section 39 of the Act gave the Condominium Corporation power to impose special assessments on a basis other than in proportion to the unit factors, if provided for in the by-laws. In this case, the Condominium Corporation passed a by-law sufficient to comply with section 39, and as such, was able to make a special assessment upon one unit, even though such an assessment was not in accordance with the distribution of unit factors.
Further, reviewing the purpose and objectives of the Act, the Court found that the assessment was fair and an appropriate circumstance for the allocation of costs against Fantasy's unit from what appeared to be misconduct of the owner as a developer. The Court was bolstered in its position by the fact that the developer was attempting to reap the profits of the sale of the unit, while potentially failing to meet its obligations to the Condominium Corporation under section 14.
Based on the above, the Court allowed the Caveat to remain in place against Fantasy's unit.
In our view, this case should stand as a warning to all real estate developers that maintain an ownership interest. They may find their interests subject to caveats and assessments unilaterally imposed by the Corporation in circumstances where a dispute develops with the Condominium Corporation.
This update is a general overview of the subject matter and cannot be regarded as legal advice. Please contact Jim Lebo at jlebo@mross.com, Chad Brown at cbrown@mross.com or any member of our Construction Law Practice Group for legal advice on this or any other construction law topic. |
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