Prior to the coming into force of the Condominium Act, 1998, (the “Act”) in May of 2001,
the amalgamation of condominium corporations was not possible. Although still only
rarely employed, the usefulness of the option cannot be understated.
Amalgamation is the process whereby a new condominium is created by combining two
or more existing condominiums. Although the various contractual rights and obligations
of the existing condominiums will continue and apply to the new entity, the process
requires a new declaration, description, by-laws and rules. The old governing
documents will be repealed. Thus the input of a lawyer and surveyor are essential, as
well as approval by the municipal approval authority and the applicable land registry
office. For certain parts of the process, the condominiums’ accountants and engineers
may also need to be involved. Accomplishing amalgamation necessitates a group effort
by the boards and professionals serving the subject condominiums, supported by the
unit owners.
This memorandum provides a brief overview of the purposes, benefits, requirements and
procedures relating to amalgamation of condominium corporations under the Act.
AMALGAMATION AND OLD PHASED CONDOMINIUMS
One reason the amalgamation option is so useful is due to the creation prior to coming
into force of the Act of many staged condominium developments involving the creation of
multiple corporations sharing common roadways and other services or facilities without
the benefit of another feature introduced only upon the coming into force of the Act:
phasing.
Unlike phasing as it is under the Act, in which a single condominium increases in size by
registration of multiple amendments to its original creating documents, “old phasing”, as
the previous staging of such developments is sometimes called, required the registration
of multiple separate condominium corporations and plans and complex relationships
supported by agreements, trusts and easements between them. Often this required the
imposition of at least two layers of organizational authority, including a condominium
board (as required by statute) and a committee made up of representatives of each
condominium tied into the project.
In our experience we have seen such arrangements for groups of corporations including
as few as two to as many as twenty condominiums. Imagine the unwieldy nature of their
combined annual general meetings where there would be twenty audits and elections of
boards of directors as well as some manner of electing or appointing the members of the
“Shared Facilities Committee”. Although it works, somehow, the logistics of such affairs
can often be brutal for already overworked property managers and largely inexperienced
volunteer boards.
In addition, often due to the requirements of their agreements every amendment to a
declaration, by-law or rule, required every corporation to undertake the same steps and
register the same document multiple times. Even “group” section 98 agreements would
have to be registered separately for each corporation.
For such condominium projects, the opportunity to amalgamate, to reduce the
administration to one board that covers the whole combined property, and to reduce or
eliminate multiple registration requirements, offers potential savings of both time, energy
and irritation.
AMALGAMATION IN ANY CASE?
Amalgamation can also be useful in other circumstances. In fact, any set of
condominiums that share any sort of relationship can consider amalgamation as a
means of potentially reducing costs and bureaucracy, and increasing contracting power
and fiscal ability, or even simply for the sake of unifying their communities.
Having said this, amalgamation is not to be willy-nilly recommended to every willing
condominium group. Amalgamation is not an inexpensive prospect, and it is appropriate
for each group to consider whether the rewards ultimately outweigh the costs.
For old phased condominiums, they likely almost always do, but for many other groups of
condominiums this might not be the case.
In our view, the ideal circumstances for considering amalgamation, other than old
phased condominium groups, are those in which there is a number of small
condominiums with similar unit types that are situated in close proximity with one
another (ideally on adjacent lands). Although amalgamation might bring benefits in other
circumstances, in these cases it is more likely to bring the greatest measure of the
benefits noted earlier.
STATUTORY REQUIREMENTS FOR AMALGAMATION
Before launching ahead with amalgamation plans based on any of the foregoing
reasons, it is important to understand the statutory criteria and requirements for
amalgamation that are set out in the Act.
Primary amongst them is that each of the amalgamating condominium corporations must
be of the same type. I.e., a standard condominium corporation can only amalgamate
with other standard condominium corporations. Also, if one of them is a phased
condominium, it can only amalgamate once all phases have been registered (or if 10
years have passed since the initial registration of the declaration and description of the
phased condominium).
At present, it is also a requirement that only standard condominium corporations can be
amalgamated. Although there would seem to be no good reason for it, the legislature has
not yet seen fit to extend this benefit to vacant land, leasehold or common element
condominium corporations.
Other key requirements before amalgamation can be completed are as follows:
1. each of the participating condominium corporations must have had its turnover meeting
pursuant to section 43 of the Act and have received all requisite
documentation and materials from the declarant;
2. each of the corporations must have conducted a comprehensive reserve fund
study (or an update based on site inspection) within the year prior to the
board sending out notice of the owners meeting required under section
120(3) of the Act (explained below under “Process of Amalgamation”); and
3. each of the corporations must have entered into an interim agreement
dealing with a variety of matters that are set out in the regulations made
under the Act that govern the conduct and management of the corporations
during the period running from date that the said notice of meeting is
delivered until either amalgamation occurs or it is determined it will not
proceed.
In addition, the owners of 90% of the units in each condominium corporation must
consent in writing to the amalgamation within 90 days of the aforementioned meeting.
PROCESS OF AMALGAMATION
The initial stages in the amalgamation are implied by the foregoing comments; their
purpose may be summarized as “getting everybody on board”:
(1) Talk amongst the boards. Get advice. Figure out if your condominiums
meet the basic criteria set out above (or what has to be done to meet them)
and whether amalgamation will work for your community of condominiums.
Without this initial activity, there is a greater risk of spending a fair amount of
money with no positive return. Each board, at least, must really believe that
amalgamation is good for its condominium, and the boards collectively must
believe it will be good overall, or else there is little or no point in presenting
the option to the unit owners.
(2) Talk to the unit owners. This can be accomplished through a meeting of
owners, but this meeting is not the meeting that is required by the Act for
amalgamation to be accomplished. It is simply and information meeting, and
perhaps a “rally” to generate support for the amalgamation. Ideally, what
occurs at this stage is a presentation to the owners of what amalgamation
entails, and what its benefits are to be. The more comprehensive and
precise the presentation, the more likely the owners are to consider the plan
seriously and support the board. (This might include investing in some draft
documents from the lawyer and surveyor, or their presence at the meeting to
explain and answer questions, but it is ideal if costs can be kept to a
minimum at this stage.) However, the board must be careful not to do or say
anything that misleads unit owners as to their right to refuse amalgamation.
The best ‘sell’ is likely the one that clearly and forthrightly shows the burdens
and the benefits and that the latter do ultimately outweigh the former.
Once the boards are reasonably certain they have the support and commitment of the
unit owners for amalgamation, then the following steps can be followed with confidence,
and with the assistance of various professional advisers:
(3) The condominium corporations enter into the interim agreement in
accordance with the regulations under the Act mentioned earlier in this
memorandum. This agreement will regulate matters relating to the conduct of
the corporations until amalgamation and should include provisions relating to
the accomplishment of any incomplete requirements, such as appropriate
reserve fund studies being performed at a suitable time, or completion of
turn-over meetings if applicable.
(4) Engage the lawyer and surveyor to prepare the revised declaration,
description, by-laws and rules for the proposed amalgamated condominium.
(5) Ensure the appropriate reserve fund study has been performed for each
condominium corporation. Engage the corporation’s engineer if necessary to
do this.
(6) Engage the corporation’s auditor to prepare the last annual financial
statements for each amalgamating corporation.
(7) Determine a date for the meeting of owners of each corporation.
(8) Prepare amalgamation status certificates for each condominium
corporation. (These are not the usual status certificates. They are a different
specific form included in the regulations under the Act. Use of the usual form
of status certificate will be insufficient to satisfy this part of the process.)
(9) Issue the notice of the meeting at least 15 days prior to the meeting date.
Copies of the following must be included with each notice of meeting:
a. Copies of the proposed documents prepared by the lawyer and surveyor;
b. Copies of the status certificates for each of the amalgamating
condominium corporations;
c. Copies of the auditor’s report for each of the condominium corporations;
d. A copy of the requisite reserve fund study for the corporation;
e. A copy of the interim agreement amongst the amalgamating corporations;
f. An estimate of the costs of amalgamation for each amalgamating
corporation; and
g. A statement that indicates whether there are any provisions in the
proposed declaration, description, by-laws or rules of the amalgamated
corporation that differ significantly from those in the corporation’s original
documents, and, if there are any, describes what they are.
It is also advisable to enclose a proxy for the meeting to help ensure there will
be quorum, but note that the proxy should not provide for the proxy holder to
consent to the amalgamation on behalf of the unit owner. A proxy holder
cannot be authorized to do so. If the owner will be unavailable to provide his
or her consent at or after the meeting, a person appointed by a power of
attorney may be entitled to do so, if the power of attorney is sufficiently broad
or specifically permits it.
(10) Hold the owners meeting. It is advisable to have consent forms prepared
for the date of the meeting and available at the meeting.
(11) Collect consent forms. Consents must be submitted within 90 days of the
date of the meeting. The owners of at least 90% of the units must consent to
the amalgamation. If these two criteria are not met, the amalgamation has
failed and the process must commence again if the board is determined to
accomplish it.
(12) Commencement of an application for approval of the amalgamated
condominium corporation by the municipal approval authority can be started
at an earlier stage, but generally the municipality will want to know whether
the unit owners are in favour of the plan before approval will be granted, so it
is identified at this point in the process. The approval process is identical to
the process for approving a new condominium plan. However, having said
this, in most cases an application for approval is not actually necessary: what
is generally done instead is submission to the municipality (by the
corporations’ solicitor) of a request for exemption from the approval
process pursuant to subsection 9(7) of the Act.
There generally will be a fee payable to the municipality, and the municipality will still be required to sign off on the amalgamation description plans in order for them to be
registered; however, the time and potential costs associated with full-blown
approval process, including circulation of the proposed plans to various
agencies for comment, will be avoided.
(13) The final approval that is required is submission of the proposed
declaration and description to the applicable land registry office (where
they are ultimately to be registered) for approval. The land registrar will
review the same for technical errors and instruct the lawyer and surveyor as
to any requisite changes.
(14) Once:
a. Requisite consents have been collected;
b. Municipal approval or exemption is obtained;
c. Registry office approval is obtained;
then the proposed declaration and description can be put in final form,
executed by the signing officers of each of the amalgamating condominium
corporations, and submitted again to the land registry office with the
appropriate fee for registration.
BUT WAIT, THERE’S MORE…
Once the process is completed (the documents are registered) there is reason for
celebration, but no time for rest. There is still somewhat more to do:
1. All the directors of the amalgamating corporations become (instantly) the
directors of the new amalgamated corporation;
2. they meet immediately after registration and appoint an auditor for the new
corporation;
3. they call and hold an owners meeting within 60 days of the date of
amalgamation;
4. at the owners meeting a new board of directors is elected and the auditor
appointed at step 2 above is confirmed or another auditor is appointed.
It is also advisable to take steps at this time to formalize the rules and by-laws that were
put in place through the amalgamation process, just as is usually done upon the
registration of a newly constructed condominium corporation. In particular, the new bylaw
ought to be registered. Otherwise, it will be in the odd position of being an in-force
by-law that does not appear on title, which will likely cause somebody significant
confusion (and consternation) at some point in the not too distant future thereafter.
CONCLUDING COMMENTS
As the foregoing illustrates, amalgamation is not for the faint of heart. It is a complex,
somewhat costly and somewhat lengthy process requiring good communication and
cooperation by various parties. Its rewards for the amalgamating corporations can be
significant, but any corporation seeking to undertake the process must be prepared to
wade through it with both persistence and patience to reach that goal.