Our firm represents a growing number of condominiums that are units (or more commonly parcels of tied land) within larger condominium communities. Layer upon layer of condominium. The top layer is often a common elements condominium. The other layer could be high-rises, a cluster of townhouses, single-detached homes, or a combination of them all! As long as the developer complies with the requirements of the Act and its regulations (and other pieces of legislation) the condominium concept can be used in some very unique ways.
The sketch above shows a top layer common elements condominium (in yellow). It is basically a roadway and some underground services. The other colours show the parcels of tied land (POTLs). Each POTL contains another condominium (or proposed condominium as some are not yet constructed). In the case of the green condominium, it is a phased standard condominium consisting of over 100 units.
You might be asking yourself, “Why on earth would someone want to create a condo in a condo?” There are a number of reasons. It often makes sense for planning purposes and to satisfy concerns or conditions of the approval authority. Other times there may be a financial motivation. Maybe the developer liked nesting dolls as a child?
All joking aside, these types of developments can have benefits to the condominiums once created. It can eliminate the need for a shared facilities agreement (and the disputes that often come with them) since they are all part of one condominium. Similarly, it can be easier to ensure a uniform appearance throughout the entire project as the declarant can put the same conditions or restrictions in the declaration, by-laws, and/or restrictive covenants agreements for all of the condominiums (Note: The appropriate document depends on the type of condominiums involved). Lastly, larger condominiums can often benefit from economies of scale and secure lower per unit contract prices on products and services than smaller condominiums.
The main disadvantage is the complexity. The concept can get extremely complex when multiple condominiums are involved. For one, the Act was not designed for the condo in condo communities, which can lead to different interpretations of the requirements in the Act. Who votes for the POTL that includes a 100-unit condominium? Is it the board of directors or owners? Does it depend on the vote? Sometimes there are two (or more) managers for the condominiums. Who do you contact if you have a concern? Also, it often takes several years (or more) to complete the entire project. This means living or working in a construction zone for years. It could also mean a complex cost sharing arrangement while the developer has undeveloped POTLs or units that they may not pay monthly fees for until they are developed or sold. This shifts the burden to the developed and sold units or POTLs.
For the managers and self-managed directors, it is essential to be organized and aware of all decisions made by the condominiums involved. It means that you need to review two sets of documents (declaration, by-laws and rules) when determining if an activity is permitted. What do you do if there is a conflict between the documents? When preparing status certificates, do you include copies of documents for both condominiums, or only the one you manage? Do the owners receive copies of notices and certificates provided by the larger condominium, or only board of directors? How does Tarion work with the condo in condo situation? A lot of questions. Unfortunately, the Act doesn’t have many answers for the condo in condo situations so you may need to seek legal advice more often.
I better end this post here before I go too far down the rabbit hole. On that note, Happy Easter to all who may be celebrating this weekend.