Purchasing a new condominium unit often involves relying on the developer’s budget to estimate future expenses. But what if the actual first-year expenses exceed the budget? In the case of 90 George Street Ltd. v. Ottawa-Carleton Standard Condominium Corp. No. 815 [2015 ONSC 336], the Ontario Superior Court provided valuable insights into recovering first-year budget deficits and highlighted the rights of condominium corporations. In this article, we will explore the key points of this case and outline the steps condominium corporations can take when faced with a budget shortfall.
Section 75 of Ontario’s Condominium Act, 1998, interpreted in the 90 George Street case, holds the developer (declarant) accountable for the entirety of the first-year budget deficit, regardless of the cause. This means that regardless of whether the deficit was due to unforeseen costs, budgeting negligence, or intentional reduction for marketing purposes, the developer must “make good” the difference between the actual first-year expenses and the budgeted amount.
Upon receiving the audited first-year financial statement, it is crucial for the condominium corporation to promptly assess if the actual expenses exceed the budget. If a deficit exists, the corporation should send a written demand to the declarant, requesting payment for the shortfall. This step alerts the developer to the deficit and provides an opportunity for them to fulfill their obligation.
If the declarant refuses to pay or if there is a disagreement regarding reimbursement, the condominium corporation can initiate mediation and arbitration procedures outlined in section 132 of Ontario’s Condominium Act. Mediation aims to facilitate resolution, with the mediator assisting the parties in finding a mutually agreeable solution. If mediation fails, arbitration allows the parties to select an adjudicator who will render a binding decision.
Before resorting to legal action, it is vital to consider the potential costs versus the anticipated recovery. Mediation and arbitration can be costly, and the condominium corporation should evaluate whether the amount to be recovered justifies pursuing legal avenues. Making a good-faith effort to settle the dispute before initiating legal proceedings can potentially result in the recovery of legal costs or even avoid them altogether.
90 George Street Ltd. v. Ottawa-Carleton Standard Condominium Corp. No. 815 [2015 ONSC 336] sheds light on the rights of condominium corporations in recovering first-year budget deficits. The case reaffirms the developer’s responsibility to “make good” any shortfall and emphasizes the importance of prompt assessment, written demands, and considering mediation and arbitration as dispute resolution methods. However, careful consideration should be given to the cost-benefit analysis before pursuing legal avenues. By following these steps, condominium corporations can effectively navigate the challenges of first-year budget deficits and safeguard the financial stability of their properties.
This article is based on the case study provided and the interpretation of Ontario’s Condominium Act. It is not intended to be legal advice. It is recommended to seek legal counsel for specific situations and circumstances. The mentioned case is 90 George Street Ltd. v. Ottawa-Carleton Standard Condominium Corp. No. 815 [2015 ONSC 336].
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