Cost Sharing Agreements Not Required

What happens when three condominium corporations share facilities or services with a freehold commercial/retail owner and there is no cost sharing or reciprocal agreement which allocates any costs to the freehold commercial/retail owner?

A recent decision of the Ontario Superior Court of Justice, M.T.C.C. No.1272 v. Beach Development (Phase II) Corp., held that there is no requirement to have a cost sharing agreement and the failure to provide such an agreement in the original disclosure statements of the condominium corporations, was found not to constitute oppressive conduct under Section 135 of the Condominium Act.

The court held that although having a cost sharing agreement might have been the preferred way to determine a fair allocation of expenses between the condominium corporations and the freehold owner, the corporations still had remedies available at common law which could protect their interests.

This case is interesting in that it highlights the importance of disclosure statements and the protection given to developers, where a decision is made by a developer to place more of a financial burden for shared costs on one party or parties and less on another, merely by not providing any cost sharing agreement documentation or references in a disclosure statement.

It is interesting to note that where a developer includes a cost sharing agreement as part of the disclosure statement, Section 113 of the Condominium Act provides that a court may make an order amending or terminating the agreement if it is satisfied that the disclosure statement did not clearly and adequately disclose the provisions of the agreement and the agreement produces a result that is oppressive or unconscionably prejudicial to the corporation or any of the owners. In the context of this case, had the developer had an agreement in place between the condominium corporations and the freehold commercial/retail owner which provisions were not adequately disclosed and the provisions were oppressive, then the condominium corporations may have been in a better position to amend the terms of the agreement in their favour.