Legal

March 1, 2023 Published by Newfoundland and Labrador Chapter - By David Cumming

Condominium Corporation vs. Home Owners Association – What Are The Issues?

From the CCI Newfoundland and Labrador Winter 2023 Condo Chronicle Newsletter

This CCI-NL Newsletter article was prompted by a CBC News story related to a decision by the Owners of the Seascape Condominium Corporation to transition from a Condominium Corporation to a Home Owners Association (HOA).

Source: https://www.cbc.ca/news/canada/newfoundland-labrador/brookfield-estates-condo-insurance-president-no-option-1.6727287. Media Article: CBC News Posted: Jan 27, 2023

The Seascape Condominium Corporation was a 13 Unit condo (attached townhouses) located at 28 Lion’s Cres., Conception Bay South (CBS).

The Owners of Seascape began reviewing their options after an appraiser completed a study that determined the CBS condo was not allocating nearly enough money to their Reserve Fund. To bring the Reserve Fund up to what was required in their Reserve Fund Study would entail a significant increase in monthly condo fees. The Owners resolved to review their options and, after consulting with different lawyers and insurance companies, the Owners decided to explore whether transitioning from a condominium to an HOA was their optimum course of action.

After much internal debate and discussion, a Notice Of Withdrawal pursuant to Section 63 of the Condominium Act, 2009 was registered on January 5, 2022 with the Registrar of Condominiums and as of this date, Seascape ceased to be a condominium corporation. The decision to withdraw from the Condo Act required the consent of all (100%) of the Owners.

The process to convert the CBS property from a condominium to an HOA took a few months. It was important to all involved that great care be taken to put together an HOA Agreement governing the property that satisfied the goals and aspirations of all the property Owners. Once the HOA was established, however, it now meant that each individual unit Owner was now responsible for such things as their own repairs and insurance.

It was deemed important to the Owners to preserve the overall look of the exterior of the property. There could be no major changes to the exterior colour, fencing, the decks, or make any changes that block the view of Conception Bay etc. without the approval of the Board. Also since the townhouses are attached, it was agreed up front that any major renovation of the roof (or a section of the roof) of the property, for example, would be carried out by a single contractor with the contract costs being divided up among the participating Owners. Thus there were restrictions on the property that everyone, and any new Owner(s) buying a Unit, would have to fully understand and consent to. The primary advantage of the HOA strategy was a significant reduction in overall monthly costs to the Owners. The insurance premium was cut in half for example.

There are many similarities between a condominium and an HOA.

• both have a Board of Directors – the Seascape HOA currently has 4 Owners serving on the Board,
• both have the equivalent of designated common elements described in the HOA Agreement that all the Owners share responsibility for such as the parking lot, landscaping, the two fences as well as a shed on the property used for storing items required for the maintenance of the property,
• both have monthly fees that cover such things as snow clearing and ice control, maintenance of the parking lot (painting lines & numbers etc.), landscaping, garbage/recycling collection etc..

The Board has the authority to establish an annual budget and holds regular meetings to enforce the standard rules and regulations outlined in the HOA Agreement, authorizes expenditures, collects levies, resolves disputes, and makes decisions related to overseeing the maintenance of the common property.

There are also major differences between a condominium and an HOA. A overall focus of the Condo Act is consumer protection. Thus there are Sections of the Act clearly designed to protect the interests of the Owners that are generally not included in an HOA Agreement such as:

• issuing a detailed Estoppel Certificate prepared at the request of an Owner (Condo Act, Sect. 42)
• having the ability to rescind an agreement of purchase and sale (Condo Act, Sect. 43)
• enhanced transparency (for corporations with 10 or more Units) – the requirement for the appointment of an auditor licensed as a public accountant under the Chartered Professional Accountants and Public Accounts Act - retained to prepare an annual audited financial statement (Condo Act, Sect. 38),
• the requirement for a Reserve Fund/Reserve Fund Study for major repair and replacement costs of property designated as the Common Elements and assets of the Corporation (Condo Act, Sect. 49).

HOAs are new to NL and so far the Seascape owners appear satisfied with their new living arrangement. CCI-NL will be monitoring the Seascape strategy over the following months/years as there is certainly community interest in this initiative.

Ref.: Background on Home Owners Associations: https://canadawestmortgage.ca/what-are-home-owners-associations-hoas/

The author acknowledges the past President of the Seascape Condominium Corp., Mr. Neil Quigley, for input to this article.

David Cumming serves on the Board of the CCI-NL Chapter as Secretary/Treasurer. The opinions expressed in this article are those of the author and do not necessarily represent or reflect the views of the CCI Newfoundland and Labrador Chapter. Readers are encouraged to seek the advice of professionals to address specific issues or individual situations. This article may not be reproduced, in whole or in part, without acknowledgement to the author.