Shared facilities agreements part 2: the solutions
By AdvocateDaily.com Staff
In the final instalment of a two-part series, Toronto condominium lawyer Warren Kleiner discusses solutions to some of the common issues that arise with shared facilities agreements.
As Kleiner, a partner with Shibley Righton LLP's Toronto office, explained in part one of this series, SFAs, which spell out who is responsible for expenses associated with common facilities, are a frequent source of strife among condo corporations and freehold entities.
However, he says there are a number of steps parties can take to get ahead of disputes or to avoid them spiralling out of control.
“Working together is critically important for parties to an SFA,” Kleiner says. “If it involves three condos, any solutions must work for the entire community.”
Community thinking is even more important for those on the shared facilities committee tasked with making decisions relating to the agreement.
“Boards can often have an us-versus-them mentality, but that’s a recipe for expensive legal battles,” Kleiner says. “The whole point of these agreements is to facilitate sharing and cooperation.”
Even if one condo views itself as the victor in a dispute over the terms of an SFA, he says the attitude can backfire in the long run.
“An individual condo might save $3,000, but if it affects the community and damages the relationship going forward — or results in improperly maintained grounds — then it could hit the market value of units across the complex, and everyone suffers,” Kleiner says. “It’s better for everyone if they all operate as a cohesive community, as opposed to completely separate entities.”
Study the agreement
“One of the big problems I find is that condo corporations don’t know what’s in the agreement,” Kleiner says. “They haven’t read it, and things put in place by the developer early on are allowed to continue without anyone knowing about the details.
“Everything can be fine for years until someone finds out they’re paying for something they shouldn’t. Then you have problems,” he adds.
Kleiner says board members should familiarize themselves with any SFAs their corporation is subject to, and have it reviewed by a lawyer to identify any potential pain points as soon as possible.
From a practical point of view, he says it’s helpful if survey plans are colour-co-ordinated to show who owns what, and precisely which portions of the property are shared.
“Often people wrongly assume how much is shared. You don’t want to go 30 years over-contributing, and then try to recover the excess costs later,” Kleiner says. “Knowing the agreement is crucial for that.”
In some circumstances, Kleiner says it can be in everyone’s best interest to enter into a new or amended SFA that better reflects the actual use of shared facilities.
“If you’ve been doing something for 30 years that works and you feel it is fair, then you can use amendments to the agreement to formalize that practice,” he says.
Frequently, Kleiner says an expansive definition of the shared facilities works well for all parties since it allows them to benefit from economies of scale while improving uniformity and consistency in terms of maintenance and repair.
“Sometimes the opposite is true, and it makes no sense to share certain things, depending on how it works in practice,” Kleiner adds.
Either way, he says parties should remember that an SFA is not a short-term commitment.
“These agreements were never intended to be terminated. They’re supposed to last as long as the buildings, so once you have one, you’re entering a long-term relationship,” he says. “That’s incentive enough to be reasonable and find solutions.”
Click here to read part one where Kleiner explores some of the common problems presented by SFAs.