Why do we see so many problems with Shared Facilities Agreements? Assuming two or more corporations or other entities are bound by one, it must be remembered that these agreements are often drafted by the developer’s lawyers when the project is in the conceptual phase, before anyone knows how things will really be “on the ground” once the project is built.
Here are a few common problems with shared facilities agreements:
- The Condominium Act does not require shared facilities agreements to be fair and equitable, and often they are not.
- Shared facilities agreements often fail to properly list facilities that are in fact shared. This may result in one party paying all of the costs associated with certain facilities while the other party(ies) to the agreement get to use or benefit from those facilities, providing them with a “free ride”.
- The agreement does not specify how decisions should be made. Most agreements establish committees that are authorized to make decisions, made up of one or more representatives from each corporation or entity, but fail to set-out how decisions should be made. Are decisions made by a majority of committee members, by a majority of the corporations, or must decisions be unanimous? If the agreement is silent on the issue, the default position is that decisions must be unanimous.
- Shared facilities committees should be able to make decisions. Some agreements provide that if the committee cannot agree on a decision, the issue goes to the individual boards or there has to be a meeting of the combined boards. This can delay important decisions. And in these situations, there is often no guidance as to what happens if the boards cannot agree, except dispute resolution.
- The agreement does not fairly provide for cost sharing or the recalculation of cost sharing with the result that one party contributes more than its fair share of the costs for one or more facilities.
- The agreement does not specify the positions of the members of the committee and their obligations. Is there to be a chair of the committee, and if so, how is the chair selected? Is there to be a secretary and a treasurer? How are they chosen and what are their responsibilities?
- The parties to the agreement have never reviewed it and do not know what it actually provides.
- Too often the agreement is not the problem but the boards or committee members are. In these situations, we see that boards or committee members often do not work together for the benefit of the community.
- Know your Agreement
The way to avoid disputes is to know what is provided for in the agreement and to implement its terms. It is better to comply with the terms of the agreement than to, for example, contribute excess costs for several years and then decide you want to bring legal proceedings to recover the overpayment.
It is prudent to have the agreement reviewed by a solicitor who can provide an opinion on what is shared, how the parties should contribute, and how decisions are to be made. It is useful to have the sheets of the description and/or the applicable reference plans colour co-ordinated showing in different colours what belongs to each party and what is shared.
- Work Together
Parties to a shared facilities agreement need to understand that it is important to work together to find solutions for the benefit of the community. Understand that you are on the committee for the entire community, not just your condominium.
Boards should not think in the “us v. them” mentality. This will lead to problems. Shared facilities agreements are intended to allow multiple corporations to share various services and facilities. Shared facilities agreements, and disputes that arise under them, are not supposed to be about one party getting a benefit at another party’s expense. That approach is a recipe for disaster and expensive legal battles. It is in the interests of all the parties to the agreement to work together to seek a reasonable solution to whatever problem arises.
- Enter into a new or amended agreement
In many cases, the most effective solution is to enter into a new or amended shared facilities agreement that properly lists those services and facilities that are shared, fairly allocates costs and adequately provides for how decisions are to be made. Because many agreements are deficient, when the opportunity arises and boards are able to work together, it is time to act. The long term relationships in the community are more important than for one entity to benefit at someone else’s expense. The potential negative effect on market value when there are problems in a community should always be considered.
In some communities, it is often a good idea to expand what is considered to be shared to ensure uniformity and consistency in terms of maintenance and repair standards and renovation projects and to benefit from economies of scale. Sometimes it is the opposite and it makes no sense for certain things to be shared.
If there is a shared facilities agreement, that means that there is a long term relationship involved. That is reason enough for the parties to be reasonable. Too often unfortunately, that is not the case.