Shared facilities agreements (also called cost sharing, joint use and mutual use agreements) are agreements covering lands or facilities which are shared by a condominium and another entity. The shared facilities or amenities may be exterior components like roadways, landscaping features, and underground services, or interior components like swimming pools, fitness facilities, and meeting rooms.
Interestingly, the Act does not currently require condominiums to have a shared facilities agreement. That will change once the amendments to the Act are in force so condominiums without them should discuss the issue with a condominium lawyer.
A shared facilities agreement typically includes a formula for sharing costs and expenses; creates a board or committee to make decisions; defines the rights and obligations of the parties; and sets out various other matters related to the facilities. The terms can vary significantly from one agreement to another since the Act does not currently have any requirements for these types of agreements.
The most common questions that I receive about shared facilities agreements are: How can we change it? Can we terminate it? So that is where I’ll begin.
It is important for new boards to review any shared facilities agreements entered into by the declarant. Section 113 of the Act allows the new board to terminate or amend a shared facilities agreement within 12 months following its election by applying to the court for an order terminating or amending it. The court will only grant the order if the disclosure statement did not clearly and adequately disclose the agreement, and the agreement is oppressive or unconscionably prejudicial to the condominium or any unit owner. This is not an easy hurdle to overcome!
Terminating & Amending Agreements
If you thought it sounds nearly impossible to satisfy the requirements of section 113 to terminate or amend an agreement for condominiums within the first 12 months of turnover, wait until you hear how difficult it is for condominiums after the first 12 months! The condominium’s ability to terminate or amend an agreement will usually be very limited after the initial 12 month period has expired. Absent consent of all of the parties, it is almost impossible to amend or terminate an agreement. A court order may be possible, but only in very rare circumstances.
It should be hard to terminate a shared facilities agreement. If it was easy for one party to unilaterally terminate an agreement there would be too much uncertainty, which would render them useless. For example, say four condominiums (A, B, C, and D) share the costs of certain facilities located completely within one of the buildings (D). If A, B, and C decide that they don’t want to use the facilities anymore or contribute toward the costs, D would be saddled with facilities much larger than it needs for its residents and the associated costs. Not a great position to be in.
Working Together to Make Changes
The easiest and most cost-effective way to amend or terminate a shared facilities agreement is usually to sit down with the other parties and discuss the terms that you would like to change. Maybe they want to change them too. Maybe not. Like any negotiation, there should be some give and take by all of the parties.
There is no best way to go about changing the agreement. It depends on the relationship between the parties. Sometimes lawyers help negotiate the terms, and other times the parties can handle the discussions without a lawyer. Once everyone is in agreement, an agreement should be prepared and registered on title.