Canada: Protection Offered By Section 98 Agreements

Last Updated: October 30 2014
Article by Barbara Zeller

Property managers and boards of directors work hard to protect condominium corporations from harm. One potential source of harm is that of renovations made by unit owners to the common elements of a condominium. The renovations can be of poor quality; result in damage to the common elements, the building as a whole, or to individual units; detract from other unit owners' enjoyment of the common elements; give rise to extra insurance, maintenance or repair obligations for the condominium; or diminish the condominium's value.   

Section 98 of the Condominium Act provides condominium corporations with the means to protect themselves from harm that could be caused by additions made by unit owners to the common elements and also to ensure that the responsibility for the insurance, maintenance and repair of the addition remains with the unit owner. The section limits the circumstances in which additions can be made and provides a guideline for the approval process for proposed additions. It is an important tool to have in your arsenal.

Section 98 states that an owner can make additions to exclusive use common elements as long as:

  1. the addition is not contrary to the Condominium Act or the Declaration;
  2. the condominium board has approved the proposed addition by way of a resolution;
  3. the owner and corporation have entered into an agreement that

(i) allocates the cost of the proposed addition between the owner and the corporation

(ii) sets out the responsibilities of the owner and corporation with respect to the proposed addition, including the costs of repair, maintenance, and insurance (the corporation will want to ensure that the unit owner is responsible for all of these costs);

(iii) and specifies who will own the proposed addition.

In addition to the requirements set out in (c) above, a Section 98 agreement should state that the unit owner is responsible for removal of the addition upon notice from the corporation and that the addition is subject to inspections. An agreement should provide that construction will be completed in a defined timeframe and, if the nature of the construction warrants it, can require building, electrical and plumbing permits and depending on the scope of work, can also provide that a security deposit be provided by the unit owner and held by the corporation for the period of construction.

Additional requirements are imposed under Section 98 and the related regulations if:

  1. the proposed addition relates to a part of the common elements that is not exclusive use; or
  2. the board believes that the proposed addition will have an adverse effect on other units or the rest of the common elements; cost the corporation money; detract from the building's appearance; affect the structural integrity of the building or involve a change to the building's structure; or contravene the declaration, by-laws, or rules of the corporation.

The Section 98 agreement does not take effect until all of the relevant steps described above have been taken and the agreement has been registered against title to the owner's unit. That means that, even if the corporation has had the agreement signed and has gone through all of the other steps described above, if the condominium's lawyer has not registered the agreement against title to the unit, the agreement is not effective and will not protect the corporation. You should make sure that your lawyer has prepared the agreement and is responsible for its registration. The costs of this should be borne by the unit owner.

Once the agreement is registered on title, it will bind any future owners of the unit until it has been removed. Its presence on title allows the corporation to lien the unit for any failure by the owner to comply with the agreement. The existence of the agreement must be noted in any Status Certificate issued for that unit and the agreement must accompany the issued Status Certificate.

In order to complete the agreement you should provide your lawyer with the following, as soon as you can:

  1. unit owner's full name;
  2. unit number and legal description;
  3. earliest date on which the work could begin; and
  4. description of the addition and the work, including a copy of the plans and/or drawings showing the renovation the unit owner intends.

You should also ensure that any concerns the board has about the nature of the addition and its effect on the condominium are dealt with by obtaining further information from the unit owner or by revising the basic Section 98 agreement, which is a flexible form and can be changed to address any situation.

A Section 98 agreement provides a valuable tool for any property manager or board seeking to ensure that an addition by a unit owner to the common elements does not  put the residents of the condominium, its structural integrity, or value, in jeopardy or leave the corporation exposed to extra insurance costs, maintenance and/or repair obligations. A well drafted Section 98 agreement will clarify, allocate, and minimize risk.

* In order to make this article easier to read, I have used the word "addition" as shorthand for the phrase "addition, alteration, or improvement", which is used in Section 98 of the Condominium Act and related regulations. There is case law as to what constitutes an "addition, alteration, or improvement", so speak with the condominium's lawyer if you are not certain as to whether or not a particular renovation requires a Section 98 agreement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Barbara Zeller
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