31/05/2016 – Jurisdiction Ontario
Part 62 published on 01/06/2018
Court determines various rights and obligations between developer and condominium corporation, including rights and obligations under certain debt instruments
While in control of the condominium Board, the developer created the following debt instruments:
- A vendor take-back mortgage (payable by the condominium corporation to the developer) worth $2,228,100.00, accruing interest at 10% per annum, for supply of HVAC equipment contained in service units.
- A vendor take-back mortgage (payable by the condominium corporation to the developer) worth $1,026,000.00, accruing interest at 10% per annum, for supply of surplus parking and storage units.
- A promissory note (payable by the condominium corporation to the developer) in the amount of $90,034.26, accruing interest at 12% per annum, for unpaid land transfer tax allegedly owed by the condominium corporation.
The Court held that each of the above mortgages did not properly reflect the developer’s disclosure to purchasers and were oppressive. The Court made adjustments to the terms of the mortgages, to bring them into line with the developer’s disclosure. The Court also found that the promissory note had not been properly disclosed and was also not properly authorized by by-law of the condominium corporation. The Court therefore held that the promissory note was void.
The Court also determined claims of the condominium corporation for:
- Arrears of common expenses owed by the developer and related interest;
- The first-year budget deficit, owed by the developer. [On this issue, the Court said that the developer bears the burden of proving that a first-year expense is unreasonable.];
- Payments to the reserve fund, owed by the developer under Section 80 (5) of the Condominium Act and related interest.
The Court refused the developer’s request that a receiver be appointed for the condominium corporation if amounts owed by the condominium corporation to the developer (under the debt instruments noted above) remained unpaid for a stated period of time. The Court held that a receiver was unnecessary.