Nov 2022
An Overview of Condominium Conversions: What You Need to Know
Waterloo Region Official Plan, Ayr Meadows Developments and Tenant Rights
By Slonee Malhotra
Did you know that land owners are able to convert existing buildings into condominiums? For example, a land owner is able to convert their existing residential rental property (i.e. an apartment building) into a condominium building by changing the legal structure of the development.
An Overview of Condominium Conversions
Condominium conversions have many advantages and disadvantages for developers and owners alike.
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Advantages
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Disadvantages
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Condominium ownership is generally a more affordable solution to home ownership
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Conversion can be a long and expensive process
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Increased flexibility to buy and sell individual units
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There is no Tarion warranty protection if the building was already used for residential purposes
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There are potential tax advantages to operating a condominium building instead of a residential rental building
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Municipalities can reject proposals to convert, and may even pass policy to specifically prevent it
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How to Start the Process of Conversion
Condominium buildings in Ontario are regulated by the Condominium Act, SO 1998, C-19. If you are a building owner who has gone though a cost-benefit analysis and conversion is a good decision for you, you can get started on the two-step process to achieving this.
- Submit a Condominium Conversion application
This application will be submitted to the relevant Municipality and go through their particular process for approval.
*Note that the City of Stratford requires a pre-application consultation before you can submit an application. See above links for more information.
The fees for these conversions vary and can be found on their respective websites.
- Registration
If the Municipality approves the conversion, you must apply to the local Land Registry Office for Registration. This requires the preparation of a Condominium Declaration, among other requirements. At this point, you would hire a lawyer to guide you through this process. The lawyer would be able to assist in satisfying any conditions imposed by the Municipality and would spearhead drafting all of your condominium documentation such as the Declaration, Bylaws and Rules. These are the constating documents which are required to create your Condominium Corporation.
The Applicability of Tarion to your Condominium Conversion Project
A pre-existing building which historically was not occupied as a residence or multiple residences (such as a church or warehouse) may be converted into a residential condominium (but different rules apply). One of these rules is that the project must be covered by Tarion. Conversions from buildings that are already being used for residential purposes (such as an apartment building or home) are exempt from this requirement. The rational for this difference is that increased protection is required for consumers when the extent of the conversion is so significant that a full renovation is required.
It is important to note that an Application for Condominium Conversion can take significant time and resources. Further, the application might be rejected, as was recently witnessed in Waterloo Region.
The Waterloo Region Official Plan and Conversions
The Region of Waterloo’s Official Plan was approved on December 22, 2010. This plan will direct growth until 2030.
Chapter 3, Liveability in Waterloo Region, states that as part of its affordable housing goals, the conversion of rental buildings that are considered “affordable” into condominium housing will only be permitted under a number of conditions. One of these conditions is that the rental vacancy rate for comparable units in the Kitchener Census Metropolitan Area (or the Area Municipality) must have been at or above three percent for the preceding three years. Otherwise, the conversion must create affordable housing or home ownership, or rectify any applicable health and safety issues.
In the last ten years, vacancy rates in the Waterloo Region have only risen to three percent twice (2013 and 2018). The vacancy rate has been two percent since 2019.[1]
Regional Responses
The practice of condominium conversion has been the focus of significant criticism in recent decades. The rise in urban intensification coupled with housing affordability and availability crises, have polarized people on both sides of the debate. The Planning Act, R.S.O. 1990, c. P.13, establishes the right of municipalities to discourage conversions in their Official Plans. The Court of Appeal in Goldlist Properties Inc. v Toronto (City) confirmed this.
The municipalities of Kitchener and Waterloo have been more silent on the matter than Toronto. However, a recent decision involving a proposed conversion suggests that the practice is being met with scrutiny in the region.
Ayr Meadows Developments proposed to convert 170 and 180 Northumberland St from rental apartments to condominiums. This was rejected by the Waterloo Regional Council. [2] The Councillors voted against the proposed conversion, citing the distress the conversion would inflict on the apartment tenants. They further reflected concerns from the public that the rental housing supply in Ayr is low.
Residents expressed concern that converting these rentals into condominiums would only exasperate the shortage of attainable rental housing. However, in a report to the committee it was stated that the average monthly rent in the building was not considered “affordable”. Therefore, the conversion of this building is not anticipated to have any impact on affordable housing supply. If Ayr Meadows Developments can show that the buildings do not qualify as affordable housing, then there is no policy reason supporting the rejection of the conversion.
Several Councillors believe that denying the conversion was the incorrect decision and that Ayr Meadows Developments should appeal the decision to the Ontario Land Tribunal. There is no word yet on whether they plan to pursue an appeal.
A Word on Existing Tenants
A large public policy concern around condominium conversions, as was witnessed in the Ayr Meadows Development rejection, is the impact of these conversions on existing residential tenants. Despite this concern, existing tenants have substantial rights upon conversion.
- Right of First Refusal
If an owner has converted a building into a condominium unit and receives an acceptable offer to purchase that unit, the existing tenant will have the right of first refusal to purchase the unit at the same price.[3]
- Security of Tenure
If the existing tenants do not choose to purchase the unit once the property is condominiumized, upon conversion the existing tenants cannot be forced to move out of the occupied unit.[4]
Conclusion
Overall, there are many factors and considerations if you are considering a condominium conversion. The Municipality that you are in will have the biggest impact on whether you are successful.
If you are considering a condominium conversion, contact one of our qualified real estate lawyers today!