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Developer-Controlled Condos and the CAO
| Dec 11, 2018
Does the Condominium Authority of Ontario (the “CAO”) treat developer-controlled condominiums differently than post-turnover condominiums? With respect to the obligation to pay CAO assessments and file condominium returns, the answer is no.
For the purposes of this article, a developer-controlled condominium means one for which a turnover meeting has not been held and the declarant owns a majority, and typically all, of the units or parcels of tied land.
A condominium could remain developer-controlled for decades. A developer may subdivide property it owns into a condominium plan because, in some municipalities, property taxes are cheaper after the property has been subdivided. Following the registration of a condominium declaration and description, the developer may operate the property as it had before (e.g. a rental property). However, in addition to subdividing the land into units and/or common elements, condominium registration triggers two additional consequences: the Condominium Act, 1998 (the “Act”) now governs the property and a condominium corporation is created.
The amendments to the Act include the following CAO-related obligations: condominium corporations are required to pay CAO assessments and file condominium returns, and directors appointed, elected, or re-elected on or after November 1, 2017 must complete CAO director training within six months of that date. The first two obligations apply to all condominiums, but the director training requirement does not apply to directors of condominiums that have not held a turnover meeting.
Accordingly, developer-controlled condominiums are required to pay CAO assessments and file condominium returns. The assessment fees are currently set at $1 per voting unit per month. The types of condominium returns include an annual return, a transitional return (for corporations created before January 1, 2018), an initial return (if created on or after January 1, 2018), and a turnover return. The turnover return would not apply to developer-controlled condominiums.
These obligations apply regardless of whether developer-controlled condominiums are operated like a typical condominium. Arguably these condominiums derive no benefit from the CAO’s services, particularly where the developer owns all units or parcels of tied land. However, as the legislation currently stands, developers that obtain the benefits of condominium subdivision (e.g. lower property taxes) must also take on the associated obligations under the Act.
If a condominium fails to pay the CAO’s assessments or file returns, the condominium corporation and its directors and officers may be guilty of an offence under Section 136.2 of the Act. The penalty for a person convicted of an offence under that section is a fine up to $50,000 if the person is a corporation or up to $25,000 if the person is not a corporation. In addition to fines, the Registrar of the CAO may obtain a compliance order from the Licence Appeal Tribunal directing a person to comply with the assessment and return requirements.
Additionally, the CAO has announced that it will charge a late filing fee of $200 per return to condominium corporations starting in early 2019. It was inevitable that the CAO would begin taking additional steps to obtain the compliance of condominiums that have yet to pay assessments or file returns. We suggest that all condominiums, developer-controlled or otherwise, comply with their obligations before the CAO levies late filing fees and pursues a fine or compliance order.