Newfoundland and Labrador has had condominium legislation since the mid-1970s, following the arrival of condominium developments in other Canadian jurisdictions in the 1960s.
As of December 1, 2011, the condominium legislation in force in this province – the Condominium Act, RSNL 1990, c C-29, as amended [Rep. by 2009, c C-29.1, s. 92 – Dec 1/11] – was repealed and replaced by an updated statute, the Condominium Act, 2009, SNL 2009, c C-29.1.
The new Condominium Act, 2009 includes several significant changes that purchasers and developers should be aware of.
The Act is administered by the Newfoundland and Labrador Department of Government Services (recently rebranded as Service NL). Prior to the introduction of the new Act the Department went through a consultation process in 2008 and released a consultation discussion paper on the issues with the old Act and proposed changes for a new legislative scheme.
As a form of property condominiums are creatures of statute and as such what a condo “is” or can be is limited by the statutory regime it exists under. A primary issue is that the old Act, which was followed condominium statutes that were enacted across Canada several decades ago does not provide for newer forms of condominiums which have evolved, namely phased-development condos, common elements condos, and vacant land condos. Further, many of the changes are clearly intended as consumer protection measures for purchasers of condominium units.
A succinct overview of many of the notable changes has already been prepared by a Newfoundland-based practitioner and is made available on martindale.com here.
A specific issue of importance to developers will be the new rules on reserve funds and reserve fund studies. These rules apply to all new condos and to condominium corporations created under the old statute and continued under the new Act. There are different requirements for condo developments with fewer than 10 and those with 10 or more units.
Reserve funds are described in Part VI of the Act – headed “Operation” – and specifically in section 49:
49. (1) The corporation shall establish and maintain a reserve fund for major repair and replacement of the common elements and assets of the corporation including, where applicable, roofs, exteriors of buildings, roads, sidewalks, sewers, heating, electrical and plumbing systems, elevators, laundry, recreational and parking facilities.
Of course, well-managed condominium corporations would likely budget for the types of contingencies that the statutory reserve funds are aimed at hedging against. But it is important to stress that they are now required. The Act and regulations – the Condominium Regulations, 2011, NL Reg 80/11 – further require reserve fund studies to be conducted to determine the appropriate size of the fund required for the condo development. The studies are to be paid from condo corporation board’s common expense fund, are to be registered with the Registrar of Condominiums, included with the disclosure statements to be provided to prospective purchasers, are required to have certain contents, and may only be prepared by certain classes of persons.
Failure to comply the reserve fund or reserve fund study requirements (or any of the requirements under the Condominium Act, 2009) constitutes an offence under the general offence section 90 of the Act and carries a potential sanction of a fine of up to $10,000 or up to six months imprisonment or both.
Developers will want to familiarize themselves with the requirements of the new Act. Purchasers will also want to make sure that any condo units they are considering are being managed by a condominium corporation that is properly complying with the new rules, and in particular that their disclosure statement seems to be in order. Both developers and purchasers may take advantage of the services of a qualified solicitor.