Developer Must Pay Share of Maintenance Fees

Gerry Hyman has a new article about condominiums.  So lets discuss it:

QUESTION:  Following registration of our condo, the developer appointed the first board of directors. The board then passed a resolution limiting the common expense contributions to be paid to the corporation for the developer’s unsold units. The developer, in fact, paid no fees on those units until the turnover meeting held 20 months after the condo registration. Is the developer required to pay its share of common expenses for the units it owns from the date of the condo registration or from the date of the turnover meeting? Can the board appointed by the developer pass a resolution reducing its common expense contributions? How can the board elected at the turnover meeting recover the unpaid common expenses?

ANSWER:  The developer is obligated to pay the common expense contributions from the date that the declaration is registered. The amounts payable cannot be reduced by board resolution. The corporation has the same lien rights against the developer’s units as it has against the unit of any defaulting owner. The lien for each default expires three months after the default unless a certificate of lien had been registered. Given the long period before the new board was elected at the turnover meeting, the liens for many of the defaults would have expired before the new board could register certificates of lien necessitating court action if payment isn’t made.

The developer needs to pay 100% of the maintenance fees for each unit he owns.  There is no way around this.  Of course, the developer still maintains one vote for every unit he owns at owners’ meetings, and will only make money when he sells the units.  The Board needs to insist that the developer pay the proper maintenance fees – otherwise not only is the developer not paying his/her fair share of the condominium’s expenses, but if a lien is placed on a unit it could make that unit harder to sell – and the developer will only turn a profit if he/she sells all the units in the condominium.

Another question is:

QUESTION:  Our 40-unit townhouse complex has had the same five directors for the past eight years. No one else is prepared to stand for election and that will be a problem when some of the current directors leave the board. We should then reduce the size of the board to three. How do we do that and is there a cost?

ANSWER:  A board must have at least three directors and the number is set out in the corporation’s general bylaw. The board must pass an amending bylaw. Passage of the bylaw requires a quorum of three directors. In the event there are fewer than three directors, an owners’ meeting must be called for an election to fill the vacancies. The amending bylaw must be approved by an affirmative vote of owners of a majority of the units at an owners’ meeting called for that purpose. The corporation’s lawyer will then register the bylaw electronically. The cost will be the lawyer’s fees for the preparation and registration of the bylaw, and the Registry Office fees of $70.70.

I think the issue is not so much that the condominium needs to reduce the number of directors from five to three, but to see why other owners are not interested in being on the Board.  Three directors in a 40 unit condominium seems fair, but the condominium has been able to operate with five directors for at least the eight years so the issue here could be that others have not been properly given a chance to be elected to the Board – I’d suggest waiting until after the next annual meeting to see if the Board and see if enough people do not step up to volunteer.  In my experience people tend not to run for the Board either because they figure they would not win in a contested election (i.e. not winning by acclamation), or because they do not want to offend any of the incumbent directors.

The condominium, especially with only 40 units, can easily operate with only three directors.  However, I personally prefer larger Boards as they provide a higher ratio of directors to owners and thus provide a better input of the owners.

The last question raised is:

QUESTION:  Our board carries out inadequate common element maintenance and repairs, and often none at all, notwithstanding repeated complaints. Is there a higher body we could contact?

ANSWER:  The Condominium Act is self-help legislation and does not provide for a government body or tribunal to deal with disputes between unit owners and condominium corporations. A unit owner is entitled to make a court application in regard to breaches of the act and that includes a corporation’s failure to maintain and repair the common elements. The act provides for mediation and, if necessary, arbitration for alleged breaches of a corporation’s declaration, bylaws or rules — but not for a breach of the act.

The Ontario Government has instituted a Condominium Act reform process that has produced recommendations relating to dispute resolution. The recommendations include the creation of a Condo Office which would deal with various minor owner-condominium disputes and provide neutral evaluation, guidance or assistance in regard to the dispute resolution process available for more complex disputes.

The Board needs to be held accountable.  This is where the current Condominium Act is flawed.  Unless there are owners with the income, and the desire, to personally fight the Board, it is virtually impossible for the owners to force the Board to do their job.  Owners have to pay maintenance fees, property taxes, insurance, phone bills, a mortgage, etc. just to live in a condominium, and it can be financially impossible to mount a legal fight.

The proposed Condo Office needs to deal with all disputes in my opinion, and should be empowered to impose punishments as well.  In a case like this, the Board should be instructed to come up with a five year plan to repair the current issues within a six month period.  Failure to develop this plan would either trigger fines for the directors, or would allow the Condo Office to appoint an Administrator to run the condominium on behalf of the owners.

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