Simcoe Vacant Land Condominium No. 272 v. Blue Shores Developments Ltd. (Ontario Superior Court)

The defendant was the developer of this project comprised of several hundred dwelling units within four condominiums.  The project also included a community clubhouse (“the clubhouse”) containing swimming pools, tennis courts, meeting rooms and other facilities.  The developer built the clubhouse for membership and use by the various condominium owners and their guests.  The disclosure statement advised purchasers that the clubhouse would be conveyed to the condominium corporations within 120 days following the date that the developer no longer owned any lands of the project (including any of the condominium units), or such earlier time as the developer might determine. 

The developer had not conveyed the clubhouse because it still owned seven of the units (as well as some other abutting lands that were also part of the project lands, slated for additional development).  The developer had also registered a mortgage against the clubhouse, in the amount of $1 million; and was also charging membership fees of $128.26 per unit per month for the clubhouse. 

The condominium corporations claimed that: 

a)      The developer was not making reasonable efforts to divest itself of the unsold units, and was obligated to convey the clubhouse to the condominium corporations without further delay; 

b)      The mortgage was improperly registered without the consent of the condominium corporations and in violation of their rights; 

c)      The clubhouse fees were more than was permitted under the disclosure statement and/or the applicable cost-sharing agreement. 

The condominium corporations’ claims were dismissed.  The Court said:

• “If Blue Shores were found to be making no or substandard efforts to sell the remaining units in order to avoid its future obligation to convey the Clubhouse, the Applicants (or, perhaps, the condominium purchasers) might then have a remedy.”

• The question of what might happen to the clubhouse in the event that the developer defaults on the clubhouse mortgage was moot or speculative.  “Since the Applicants have no presently enforceable property interest or equitable right in the Clubhouse, they do not have the ability to block or to pre-empt the …mortgage.  Whether their future contractual right (to receive a transfer of the clubhouse) would be undermined by a default by Blue Shores is not an active lis that is before the court.  There is no claim or suggestion that Blue Shores has defaulted or that (the mortgagee) is exercising its mortgage remedies, and no hint in the evidence that a default is likely.  Neither the rights of (the mortgagee) nor those of the Applicants should be decided in this type of vacuum.”

• “…the current membership fee is well within amount permitted to be charged under the Disclosure Statements and the (cost sharing agreement).”

The Court’s reasoning was nicely captured in the following paragraph of the Court’s decision:

The Disclosure Statements make it clear that Blue Shores kept for itself the ownership of the Clubhouse until all of its interest in the balance of the project and abutting property was sold.  The reason for this has always been obvious to all concerned:  the Clubhouse, with its social, athletic, and other recreational facilities, is an essential amenity in the marketing of the project.  Ensuring that it was properly operated and maintained until the last of Blue Shore’s property is sold is important to Blue Shores as developer of the entire project.

[Editorial Note:  This is a repeating message that we have been seeing from the Ontario Courts over a number of years:  If the disclosure is adequate, and as long as the arrangement is in compliance with the Condominium Act and other applicable law, it seems that developers are free to make almost any arrangement in relation to a new condominium property.]