In January and April of 2018, the Condominium Property Act of Alberta (the “CPA”) was extensively amended, and further changes will be coming in the future. These current amendments will affect all developers and purchasers of new condominiums in Alberta.
The CPA has for years required that all agreements to sell a new condominium unit or a proposed condominium unit must prominently display certain specific language outlining a purchaser’s right to rescind the contract. That language has now been changed, and all agreements that were previously in use must be amended to reflect this new language, or a developer could risk having an unenforceable contract.
All deposits in relation to the purchaser of a new condominium unit must now be held in a trust account maintained by an individual lawyer or a law firm (called a “prescribed trustee” in the CPA). A lawyer acting as a prescribed trustee must be an active member in good standing of the Law Society of Alberta, or the partners of the law firm must consist of such lawyers. No other person is permitted to retain any deposits, including realtors. There are many rules regarding how deposits are to be handled in a trust account, including notifications to the purchaser, when funds can be released, and what records have to be maintained by the lawyer in relation to deposits.
Occupancy Date Range
A developer is now required to give a fixed date, or a range of dates, by which the purchaser may occupy the unit being purchased. If the developer does not have the unit available for occupancy within 30 days of the fixed date, or the last date of the range, a purchaser may rescind the purchase agreement and be entitled to a full refund of their deposit. There are provisions for amending or extending that date by agreement between the parties. Also, the date may be extended in the case of legitimate delays, including fire, explosion, flood, or some other emergency.
Occupancy Fees and Developers Paying Contributions
It has been a common practice for developers to charge ‘occupancy fees’ to purchasers prior to actual contributions (often called “condo fees”) being levied on the owners. This practice is now explicitly authorized by the CPA. However, whether such occupancy fees will be charged, and in what amount, must be disclosed in writing at the time of signing of the contract.
Developers can no longer totally exempt themselves from paying contributions towards common expenses. Where condominium units are located in a building, if any purchaser in that building is required to pay contributions towards common expenses, the developer must also pay contributions on the same basis, for each condominium unit they own in the building.
Documents and Information to be Disclosed to Purchasers
Developers have always been required to disclose certain documents and information when selling a new condominium unit or proposed condominium unit. The purchaser is given these documents and information to review for 10 days and during that timeframe may rescind the contract without penalty for any reason. The number and scope of the documents a developer is required to disclose to a purchaser have been expanded.
Material Changes in Disclosure Documents
If there is material change in any of the disclosure documents or information, this must be disclosed to a purchaser within a reasonable time after the material change occurs and must in any event be prior to the day the purchaser takes possession. A “material change” is a change or series of changes to a fact or proposal as stated in a document that would have an adverse effect on the value or use of the condominium unit or proposed condominium unit, the common property or the real property of the corporation. A purchaser who receives notice of a material change may commence an action in the Court of Queen’s Bench claiming damages or rescission of the purchase agreement.
Underestimating Expenses in a Proposed Budget
A developer must deliver a proposed budget for the condominium corporation, which must be for a 12-month period and must include a specific list of items. If the actual expenses in the first year after contributions are levied exceed the proposed budget by more than 15%, the developer is required to pay the corporation the amount over the 15% variance.
A developer is required to appoint a board for a condominium within 30 days of the registration of the condominium plan. The members of the interim board have a duty to act in good faith with a view to the best interests of the corporation, and exercise the care diligence and skill of a reasonably prudent person.
Termination of Agreements by Condominium Corporation
A condominium corporation is entitled to terminate many agreements which were entered into on behalf of the corporation by an interim board or the developer, without penalty. This right may be exercised for a period of 12 months after the election of the first owner board.
The CPA now allows for the appointment of inspectors who may inspect a developer’s business records to ensure compliance with the CPA. This includes the ability to enter a developer’s business premises to inspect records, copy records, and require persons to answer questions under oath. The CPA allows the province to appoint a Director who monitors condominium developers’ compliance with the CPA. The Director may accept undertakings from, issue orders to, impose penalties on, and commence court proceedings against developers.