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Who gets the money when condo land is expropriated?

The expropriation of a condominium's common property has raised the question of who gets the money — those who owned a unit when the land was officially taken or those who live there at the time of payment for the expropriation, says Toronto condominium lawyer Joel Berkovitz.

Berkovitz, a lawyer with Shibley Righton LLP, says he recently advised a Toronto condo corporation, which had a strip of its land that was part of the common elements acquired by Metrolinx, that payment should go to the people who lived in the complex at the time the expropriation legally took effect. 

He tells AdvocateDaily.com there's no explicit guidance in either the Expropriations Act or in the Condominium Act, 1998. In fact, s. 126 of the Condominium Act only states that owners get their share of the payment.

Berkovitz says it usually takes some time between the expropriation order and when a price is finalized. During that interval in this case, about 20 residents sold their units and moved.

"Who gets the money?" he asks. "Is it the owners when the land was officially taken or is it the owners at the time of payment?

"In this case, the land was "officially taken" in 2014, but the payment wasn't made until 2017," he explains. "Ultimately, the owners who were there when the land was taken were entitled to the proceeds.”

The advice was based on whether the entitlement to the expropriation proceeds was a right that attaches to the land, Berkovitz says.

"So, when you buy a unit, do you acquire the right to the fund or was it a personal right that was an entitlement when the land was taken? This was an interesting dilemma in the condominium industry that we've never come across before,” he says.

"The government came along and told this condo, 'We need a strip of your common elements and we're taking it, but we'll pay you for it, of course.'"

He said while his firm provided its opinion on the issue, there was disagreement among unitholders and other condo lawyers. 

"Until a similar case is decided by the courts, no one can really know for sure," he adds. 

"This is our view on it and we based it on a couple of things," Berkovitz explains. "One approach we took was to see if thee were an analogous situations. For example, if a corporation wants to sell common elements voluntarily —and with the necessary owners' consent — the owners at the time of transfer of title would get the money.

"If that's the case for the voluntary sale, then it makes sense that it would apply in an expropriation; it takes effect when the actual transfer of land took place in 2014."

Berkovitz says the opinion was given to a client, but not everyone was happy with it. 

"Those who moved in and then learned that money was going to be paid to the condo are disappointed that they may not receive any,” he says. “Tensions are high on this issue."

The condo corporation will take reasonable efforts to track down the owners who moved from the property and "we are advising them on how payment can be made. If the previous owners can't be found — or there is a dispute with the current over who should get the funds — then they will be paid into court until the matter can be resolved," Berkovitz says.

"We tried to see if there was any case law dealing with the issue, but it's a unique situation to condos. In any other case, if the government expropriates your land and you sell the rest, you're not selling it with any entitlement to that land, because it's already been taken,” he says.

“But in condos, the ownership of the common elements is tied back to the ownership of a unit. That’s why the question arises whether the entitlement to money transfers with a sale of a unit to a new owner.

"Different principles apply to condos, but from the city's perspective, it's very simple — they just cut a cheque to the condo corporation. For the condo, it was a complex question of who do they pay and that's what we helped them figure out," Berkovitz says.

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