Toronto Condo News first reported in March 2017 about Toronto’s first decommissioned condo – Condo Owners Vote to Disband their Corporation.
The building, 39 Roehampton Court in the Yonge St. and Eglinton Ave. area, consists of four storeys and 27 suites. Condo owners agreed to accept an offer from Metropia, an investors group, which is planning to build a 48-storey condo building on properties currently occupied by six- and eight-storey condo buildings at this address, a parking lot and a house. Metropia is involved in other large condo building developments in the same area.
This is the first instance of Toronto condo owners voting to terminate their condo corporation. The vote required at least 80% of unit owners and mortgage owners to agree to the sale.
Purchasing a condo building is a complex process that had never been undertaken in Toronto. Any deal has to be acceptable to many parties including Condo Corporation, individual unit owners and mortgage holders. Any purchaser must simultaneously purchase all units in the building and the building itself.
The condo corporation held information meetings explaining the proposal before putting it to a vote in which the required 80% threshold of support was met.
A stipulation of the offer was that the property had to be turned over free and clear – meaning that Metropia would not have to deal with legal challenges from those who may oppose the sale. This required the condo corporation to make settlements with those who opposed the deal arguing it was below market value. In the absence of these settlements, Section 125 of the Condo Act requires mediation. Should the condo corporation not succeed in mediation, dissenting owners could receive payments based on a higher market value calculation thus leaving less to be shared among other owners.
Another stipulation of the offer was that the condo corporation obtain written consent to the sale from mortgage holders of individual units in the building and assurances that debtors would pay off amounts owed after the deal closed. Support of banks holding mortgages on individual suites was necessary since the Condo Act does not address what happens to claims against a condo property once title changes hands.
This was the third purchase offer received for the property from different groups. One offer was dismissed as being too low after obtaining a property appraisal to determine its market value. Another failed to clear due diligence. The third offer, from Metropia, was accepted.
The condo corporation negotiated non-refundable deposits paid by Metropia to reassure unit owners of the purchaser’s commitment to close the deal.
During the nine month due diligence period, a conditional sale was recorded on the condo corporation’s declaration thus preventing owners from selling their individual units.
Unit owners will receive a share of sale proceeds based on their proportionate interest in the condo corporation as shown in the declaration. Closing costs, legal fees and real estate commissions are paid before owner shares are determined.
The sale is expected to close in June 2017. The condo board is authorized by owners to remain as their representatives during the closing period. After the closing period, the condo corporation will cease to exist. Condo fees continue to be paid until closing.
After closing, operating and reserve fund account balances are transferred to a trust account. These funds are paid out to unit owners based on their proportionate interest in the corporation after all bills are settled.