Condominiums: The Treatment of Shared Facility and Other Post-Incorporation Agreements

By Slonee Malhotra

When a Condo is created, numerous other agreements are registered against title to set out how the condo shall be run. Shared Facilities Agreements are one such type of document. This type of agreement is created when separate condos share assets like an amenity space or parking. The agreement sets out how each condo shall use the shared asset and details how each party shall be responsible for costs and maintenance.

In October 2020, the Supreme Court of Canada released its decision Crystal Square. The question before the Court was whether an obligation on the part of a strata corporation that was registered against title prior to registration of the strata plan, and thus the creation of the strata corporation, was binding. The Court upheld the Court of Appeal's decision that the strata corporation had entered into a post-incorporation contract on the same terms as the registered agreement, and therefore it was bound to make the ongoing payments that were contemplated in that registered agreement.

A recent BC Court of Appeal case considers whether two condos are bound by an agreement which came into existance post-incorporation. In The Owners, Strata Plan NW 2364 v. The Owners, Strata Plan NW 2301, 2023 BCCA 55, the parties are strata owners of side-by-side parcels of land that, for more than 30 years, have shared the use and cost of recreational amenities. A Covenant was registered against the title for each parcel before the lands were developed and before the strata corporations were established. The Covenant stipulated that certain recreational amenities be built on each parcel and that the “registered owners” of the parcels share the use and maintenance costs of the said amenities. Following registration of the strata plans, the parties entered into a post-incorporation contract which mirrored the Covenant. After receiving notice of numerous anticipated repairs, the appellant notified the respondent that it no longer intended to contribute to expenses for the amenities on the respondent’s land. 

As a general rule, negative covenants that are registered against land are enforceable against subsequent owners, whereas positive covenants are not. At common law, a positive covenant can only be enforced against a subsequent owner if it is assumed by way of contract.

The original judge found that the parties had entered into a post-incorporation contract on the same terms as the Covenant. He found that before the appellant provided notice of its intention to terminate, members of both strata corporations enjoyed the amenities built on each other’s parcels, and the costs were shared per the terms of the Covenant.

The Supreme Court accepted that strata corporations can enter a post-incorporation contract based on their conduct. To determine whether a contract exists, a court must examine how each party’s conduct would appear to a reasonable person in the other party’s position. The petition judge was satisfied that the uncontradicted evidence in this case established the requisite “outward manifestation of assent” by each of the parties to the terms of the Covenant, including the equal sharing of expenses. In the appeal court’s view, the appellant has not established an error in principle that would justify setting aside the Supreme Court order.