When Developers Abandon Unsold Units

stencil-default-2I’m sure some of you have experienced it before. For whatever reason, sometimes developers have units that they have not sold. Typically, it is the parking units or storage lockers. Other times the developer fails to transfer telecommunications, mechanical, or service units, and has disappeared since the condominium was created. The abandoned and unsold units can be a source of frustration for the new board. Common questions include: Who is liable for injuries or damages because of the abandoned units? Who pays the monthly fees? Who repairs and maintains them?

Often the developer is a corporation created for a single project. When the corporation has since been dissolved or otherwise ceases to exist, it can be even harder for a condominium to manage because real property held by a corporation when it is dissolved (or allowed to lapse) reverts to the government. This can cause a whole host of problems.

Fortunately, this situation is about to change (in some circumstances).

On December 10th, 2016 the Forfeited Corporate Property Act, 2015 and the Escheats Act, 2015 will come into force. The FCPA, 2015 will allow the government to, by order, transfer forfeited corporate property to condominiums (and others). The legislation only permits transfers of units intended for “accessible parking”,”storage purposes”, or “providing space for services or facilities or mechanical installations”. It will still require an order, but it should hopefully make the process quicker and less costly for condominiums.

For situations where the new legislation will not be of assistance, the old routes will have to do for now. The condominium can lien the units. If no one comes forward to pay the arrears, the condominium can sell the units to a third party via a power of sale proceeding. In some instances, the condominium may become the owner of the units after a foreclosure action. Both routes are very costly and can take several months or more to complete depending upon the availability of the lawyers and court. Some condominiums decide to ignore the amounts owing for the units and readjust the monthly fees for all of the other owners as if those units did not exist. This option is riskier as it is, in my opinion, a violation of the Condominium Act, 1998, and does not address other issues. In some cases, there will be no monthly fees on the unsold units and the right to force a sale of the unit would be more limited (i.e. dangerous condition, oppression).

If you are facing a situation where the developer appears to have abandoned unsold units, you should speak with the condominium’s lawyer about your rights and obligations.