Condominium Act - Loss of Owner’s Right to Vote; Contract of Purchase and Sale - Paragraph 9 Exclusions of Representations, Etc. #268

By Gerry Neely
B.A. LL.B

Section 125(6) of the Condominium Act states that except where a unanimous resolution is required, an owner is not entitled to vote at a general meeting, unless all contributions payable for the owner’s strata lot have been paid. An owner/developer of a newly-created strata corporation, who follows the not uncommon practice of paying all of the actual common expenses, except for the amount to be paid into the contingency reserve fund, may have acted to its detriment.

Section 128 of the Condominium Act lists the owner/developer’s obligations with respect to payment of the estimated common expenses. The first is to prepare a budget of the estimated common expenses for the first nine months following the registration of the strata plan. The owner/developer then must pay the actual common expenses, until the earlier of the date the first strata lot is occupied or conveyed to a buyer.

Thereafter and until the first annual budget is approved at the first annual general meeting, all owners must pay their proportionate share of the estimated common expenses contained in the interim budget, according to their respective unit entitlements. (The first annual general meeting, which is to be called by the owner/developer, must be held upon the earlier of the date when 60% of the strata lots have been conveyed, or nine months following registration of the plan.)

If during this period the actual expenses exceed the estimated expenses, the owner/developer must pay the excess. If the reverse is true, each owner, including the owner/developer, is entitled to a rebate of payments made in excess of the actual expenses.

Once the first strata lot is occupied or conveyed the owner/developer, to comply strictly with section 128, should pay its proportionate share of the estimated common expenses in accordance with the unit entitlement of the unsold strata lots. The owner/developer should then pay the costs in excess of the estimated common expenses. In doing so, the owner/developer’s conduct would fall within a strict interpretation of the meaning of "contributions payable for his strata lot."

A more liberal interpretation of the word "contributions" would protect the owner/developer who paid the actual expenses and a proportionate share of the estimated contingency reserve fund.

Regardless of how a judge interprets this section, an owner/developer who paid the actual expenses remaining after the contributions of the other owners, but did not pay the amount budgeted for the contingency reserve fund would, if challenged, have forfeited its right to vote.

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A licensee had obtained a Property Condition Disclosure Statement, which was not given to a prospective buyer until after the buyer’s offer had been made and accepted. The statement disclosed that additions or alterations had been made to the property without permits. The buyer claimed that he was advised by the licensee that extensive renovations had been done to the property, by professionals, and in conformity with applicable codes and standards. This was denied by the licensee.

Paragraph nine of the Contract of Purchase and Sale excludes representations, warranties, guarantees, promises or agreements other than those set out in the contract. When the buyer repudiated the contract, the seller sued for the deposit, arguing that paragraph nine prevented the buyer from relying upon the representations made by the seller’s licensee.

For this argument to succeed, the seller had to first establish that the licensee’s representations were minor and immaterial. The judge rejected this, holding that the representations were material and that they were made to induce the buyer to enter into the agreement. He decided that the licensee had made an innocent, but negligent misrepresentation.

If the seller had succeeded on that point, he would then have had to establish that paragraph nine had been drawn to the attention of the buyer and that its meaning had been explained to him. If the seller were able to do this, the judge would have concluded that in making the offer the buyer had accepted the exclusions described in paragraph nine. Since no one had explained to the buyer the significance of paragraph nine, the result was that the seller lost on this point as well and the buyer regained his deposit.¹

1.

Pearce v. Chacon, B.C.S.C., Reasons for Judgment, January 1, 1997.

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