The case considered section 62 (3) of the Alberta act, which provides that “subject to any declaration of the Court made under section 61, any funds of the corporation that are left after the payment of the corporation’s debts and liabilities shall be distributed to the owners of the units in the plan in shares proportional to the unit factors of the owners’ respective units.” As a concurring justice noted this provision effectively creates “a presumption that any funds of the corporation left after payment of the corporation’s debts or liabilities are to be distributed to the owners of the units in shares proportionate to the unit factors of the owner’s respective units.”

Termination of a condominium is relatively rare in Canada. When it does occur, the cost of needed repairs or upgrades tends to be what pushes owners to consider it as a viable option. This was emphatically the case here, as 14 units in this condominium had been condemned by Alberta Health due to their state of disrepair. These 14 units were at the heart of this case. The chambers judge had determined that their condemned state should be accounted for in the distribution of the sale proceeds. It would effectively rebut the presumption of distribution according to unit factors. The chambers judge decided that their owners’ shares should be reduced by 20 percent:

I think that the Court can take judicial notice of the fact that a condemned unit would be worth less when sold than a non-condemned unit. And we’re dealing essentially with distribution of sale proceeds. Common sense also, I think, supports the conclusion that a condemned unit would have a lesser market value than a non-condemned unit, so I think it’s fair in the circumstances of this case that some reduction be made in the allocation of proceeds to those condemned units.

The PwC report [which the court had directed be prepared], for illustrative purposes only, uses a 25-percent reduction. I don’t really have any specific evidence, so I’m reluctant to go as high as 25 percent. But I am going to order a reduction of 20 percent in terms of the—of the distribution for those condemned units, and that’s to be obviously distributed to the rest of the owners.

The court of appeal disagreed with this approach. It located an error in the chambers judge’s application of the doctrine of judicial notice:

In our view, the Court could not take judicial notice of the fact that a condemned unit would be worth less than a non-condemned unit given the factual matrix of this case.

***

[A]s the case authority makes clear, in order for the doctrine of judicial notice to be applied, the court can only take judicial notice of facts that are either so notorious or generally acceptable as not to be the subject of debate amongst reasonable persons, or alternatively capable of immediate and accurate demonstration by resort to readily accessible sources of indisputable accuracy: Find at para 48.

The chambers judge’s decision to impose a reduction of 20 percent (or indeed any reduction) of the distribution per unit for those units subject to the AHS [Alberta Health Service] notice falls into neither category. He therefore erred by invoking the doctrine of judicial notice and making this reduction.

It was significant, the court added, that “the purchaser was acquiring the complex for renovation and upgrade”—that is, its plans were to demolish the building and replace it with a higher-value structure.

The post Alberta Court of Appeal grapples with distribution of proceeds from strata’s termination first appeared on British Columbia Law Institute.

Service Alberta will be taking a staged approach to implementing the new legislation. The first stage includes “[c]hanges affecting condominium boards and corporations [which] will come into force on January 1, 2018”:

• Mandating key information about the condo property is handed over from the developer to the first condo board after it has been elected by owners.
• The amendments will protect owners by creating an increased standard of care for board members.
• Allow for the removal of board members by owners through a vote.
• Empower owners by allowing them to call for special general meetings.

Service Alberta also announced the following “enhanced disclosure rules and remedies [which] will apply to sales agreements signed on or after April 1, 2018”:

• More information is disclosed to buyers at the time of purchase, such as a proposed budget and a date that the condominium will be provided to the buyer.
• Remedies are in place if the occupancy date is delayed or if changes that negatively affect the value of the condo were made during construction.
• Purchasers’ deposits are better protected by requiring developers hold these funds in trust with a lawyer.
• Government can inspect condo developers to make sure they are handling trust money properly and giving buyers the proper disclosure.
• New penalties are in place for developers who do not follow the rules.

Service Alberta is consulting on changes to be included in the later phases. A survey is currently ongoing, addressing these second-phase topics:

• Voting Procedures
• Notice of General Meetings
• Corporation Documents
• Money Owed to the Corporation
• Rules of the Corporation
• Borrowing by the Corporation
• Rental Deposits
• Insurance Requirements
• Reserve Funds
• Termination of a Condominium Corporation
• Dispute Resolution
• Condominium Boards
• Additional Comments

Within this broad set of topics, the survey is asking for feedback on specific questions, including the following:

• how meetings are run and how votes take place
• rules on rental deposits for condos
• who should repair units and pay for insurance deductibles
• how reserve fund studies are managed
• what kind of say owners get in the rules the board makes
• how to make sure condo boards have the support they need to fulfil their roles
• establishment of a condo tribunal to more easily resolve disputes as an alternative to the courts

The survey is open for response until 10 November 2017.

Finally, Service Alberta reports:

The third stage will establish a condominium dispute tribunal that is intended to be an affordable and efficient forum to resolve condo disputes between condo boards, owners, occupants, and other interested parties. Once available, it will provide a lower-cost alternative to the courts for condo owners. This stage will include the determination of the tribunal’s jurisdiction and structure.

The post Alberta: Update on new condominium legislation and new survey first appeared on British Columbia Law Institute.

• Strata-lot purchasers, who were claiming “priority under a statutory trust created by s 14(3) of the Condominium Property Act, RSA 2000, c C-22. Their interests were registered against the title to the Land, albeit after several other interests had been registered.” (British Columbia’s Strata Property Act doesn’t have an equivalent provision to Alberta’s section 14. The closest BC parallel to Alberta’s legislation would be sections 18 and 19 of the Real Estate Development Marketing Act.)
• Various construction companies, which were claiming “priority entitlement to the Proceeds pursuant to their builders’ liens . . . that were registered on the title to the Land.”
• An individual caveat holder, who was arguing “that priority to the Proceeds should be determined based on the order in which the interests were registered against title to the Land pursuant to the Land Titles Act.”
• A mortgagee.

The mortgagee “did not participate in this application,” leaving the case as a contest between the purchasers, on one side, and the lienholders and caveat holder, on the other. The court defined “the sole issue to be determined on this application” in the following terms:

Does the trust claim being advanced by the Purchasers, based upon the foregoing assumptions, have priority over the registrations on title to the Land?

The “foregoing assumptions” were the “common set of factual assumptions” the parties agreed to for the application. These assumptions were as follows:

• Under agreements for purchase and sale, the Purchasers paid deposits to the Developer to purchase condominium units to be constructed on the Land as contemplated by s 14(3) of the Condominium Property Act. . . . The agreements expressly provided that the Deposits were to be used to purchase the Land and construction of a commercial condominium unit and project on the Land.
• Deposits were paid both before and after builders’ liens were registered on title to the Land.
• All Builders’ Lien claims are valid and enforceable as registered. In a separate action, pursuant to an application by the owner of the Land[], the lien fund was set.
• The caveat re [sic] agreement charging land is valid and enforceable as registered.
• The Developer did not hold the Deposits in a separate trust account as required by the Condominium Property Act.
• The Developer used the Deposits to fund the construction of the Condominium Project on the Land[].
• The Developer was unable to complete the project, a Receiver [of the Land] was appointed and the Land[][was] sold in the receivership.
• The Receiver paid the net sale proceeds from the sale of the Land[] into Court. [Brackets in original.]

The court viewed its task as involving “the interpretation and interplay of two provincial legislative regimes.” These two regimes were Alberta’s Condominium Property Act, which was characterized as “remedial consumer protection legislation designed to protect purchasers,” and Alberta’s Land Titles Act, which was characterized as being intended to assure “commercial certainty for those who deal with land.”

The court noted that

As the Land Titles Act contains specific provisions for determining priority of interests in land, the question becomes whether the Condominium Property Act repeals, modifies, alters or ousts these provisions of the Land Titles Act.

The court answered this question in the negative, spelling out its reasons in detail:

The Lienholders and the Caveat Holder are persons who took an encumbrance, as defined by s 1(e) of the Land Titles Act, from the Developer, who was the owner of the Land. The Lienholders and the Caveat Holder added value to the Land; the Lienholders through their work efforts and the Caveat Holder through its alleged injection of cash. These parties were able to review the registrations on the title to the Land prior to making their decision to add value to the Land. They then registered their interests on the title to the Land, in order to establish the priority of their claims and protect their interest. That same option was open to the Purchasers.

Section 203(a) is clear that the Lienholders and the Caveat Holder were not required, for the purpose of obtaining priority for their interest, to inquire into how the purchase money for the Land was sourced or applied. They were also not affected by notice of any trust interest in the Land that was not registered by instrument, any rule of law or equity to the contrary notwithstanding.

The legislative intent is to ensure that persons seeking to acquire new interests in land can rely on the existing title with no need to make any further inquiries about competing claims, title defects or equitable unregistered claims. In accordance with the Land Titles Act registry system, registered interests take priority by date of registration and therefore take priority over any unregistered interests. Thus, absent fraud as set out in the Land Titles Act (which fraud is neither alleged nor proven), the Purchasers’ unregistered trust claims do not create an interest in land that would take priority over registered encumbrances. To do so would contradict the plain words of ss 14, 56 and 203 of the Land Titles Act.

If the Legislature wished to give priority to an unregistered trust claim created by s 14(3) of the Condominium Property Act over registered interests on land notwithstanding the provisions of the Land Titles Act to the contrary, clear language would have been used. It did not do so. To suggest otherwise, would defeat the Legislature’s intent in adopting the Torrens land registration system for determining priority of claims to interests in land and would undermine the commercial certainty created by our Land Titles Act registry system. In Alberta, all persons dealing with land are entitled to rely on the face of the certificate of title in determining the interests to that land. Absent fraud as set out in the Land Titles Act, priority created by registration should remain intact.

In the result, the court held that

the Purchasers’ unregistered statutory trust claim does not take priority over the registered interests on the title to the Land. Instead, priority to the Proceeds is to be determined and set in accordance with registration under s 14(3) of the Land Titles Act.

The post Alberta court holds that creditors with registered builders liens and caveats have priority over strata-lot purchasers’ unregistered trust interests first appeared on British Columbia Law Institute.

1597130 Alberta Ltd v Condominium Corporation No 1023241, 2016 ABQB 195, involved a 24-unit condominium complex. The condominium was made up of 22 units of residential apartments, one unit representing “essentially the common property surrounding the existing building,” and “Unit 1,” which was “assigned to developer for future re-division.”

The developer ran into financial trouble at some point during the development phase. Title to Unit 1 ended up being held by “the successor to the [developer’s] mortgagee which acquired title through foreclosure.” An administrator was appointed, and it had “supervised remedial construction to complete the Residential Units and acquire occupancy permits.”

Faced with cost overruns and further construction, the administrator

applied for an Order directing that the costs of this construction be distributed proportionately among only the Residential Unit holders. The Administrator argued that Units 1 and 2 (the bare lot units) should not have to pay a portion of the construction cost based on unit factor because those lots did not receive any benefit from the construction.

The court refused to grant this order. The administrator, in turn, sought to change the basis for calculating contributions, using a statutory procedure analogous to section 100 of British Columbia’s Strata Property Act. In BC, such a change would require a resolution passed by a unanimous vote, but Alberta’s legislation contains a different voting threshold: passage of a special resolution.

Under Alberta’s Condominium Property Act, “special resolution” is defined to mean “a resolution

(i) passed at a properly convened meeting of a corporation by a majority of not less than 75% of all the persons entitled to exercise the powers of voting conferred by this Act or the bylaws and representing not less than 75% of the total unit factors for all the units, or

(ii) agreed to in writing by not less than 75% of all the persons who, at a properly convened meeting of a corporation, would be entitled to exercise the powers of voting conferred by this Act or the bylaws and representing not less than 75% of the total unit factors for all the units.”

Paragraph (ii) of this definition was at the heart of this case. The resolution was supported by the administrator and one other owner. Four residential owners opposed the resolution. The supporters commanded 8779 unit factors out of a total 10 000 for the condominium as a whole, easily surpassing the threshold of “75% of the total unit factors for all the units.” (Alberta’s “unit factors” are roughly the equivalent of British Columbia’s “unit entitlement.”) The question for the court was whether the resolution’s supporters also had the support of “not less than 75% of all the persons who, at a properly convened meeting of a corporation, would be entitled to exercise the powers of voting conferred by this Act or the bylaws.”

The administrator argued that any question about whether this threshold was met should be determined by counting the number of units voting. According to its argument, “as there are 24 units, there should be 24 persons entitled to vote. As the Administrator owns 18 units, those 18 votes alone met the 75% threshold.”

The residential owners argued that these votes should be tallied in a different way, by counting up the number of persons voting. Since there were only six persons voting in this case, and four opposed the resolution, the statutory threshold wasn’t met.

The court ultimately agreed with the residential owners, stating that:

Logically, once an owner or mortgagee becomes a “person . . . entitled to exercise the powers of voting,” that person does not then become multiple persons simply because they own multiple units. That owner is still one person. He simply owns more than one unit. The Administrator is only one person entitled to exercise the powers of voting.

The value of this decision as a precedent may be limited, however. As the court noted, Alberta has already enacted legislation bringing its rules on voting into line with the one-vote-per-strata-lot standard that currently prevails in British Columbia, Ontario, and Newfoundland and Labrador. Alberta’s legislation is not yet in force.

In the result, the court found that “the Special Resolution did not pass as the voting response was insufficient to satisfy the threshold of s 1(1)(x)(ii) of the [Condominium Property Act].”

The post Alberta court considers how to tally votes on strata-property special resolution first appeared on British Columbia Law Institute.