Shared facility agreements (SFAs) outline how shared spaces and resources are governed and maintained in multi-purpose developments. Here, our property management company in the GTA help make sense of SFAs and the common challenges they present.

What is a shared facility agreement?

The Condo Act refers to SFAs as “mutual use agreements.” SFAs define and outline the obligations, boundaries, and governance of spaces shared by multiple parties. The SFA helps define the relationships between parties and how they share costs. However, SFAs are typically prepared by the developer’s lawyer before the condo corporation is established. SFAs can lack clarity, have significant omissions, or include unfair provisions that favour the developer. As a result, condo corporations often carry the brunt of the costs.

The difficulties of condo board-managed shared facilities

Condo boards unfamiliar with agreement provisions cannot effectively manage reserve fund planning. How are operating and capital costs shared? When six-figure projects arise, parties are incentivized to review the agreement looking for loopholes to avoid costs.

The solution: Condo boards with SFAs should formally have their legal counsel and engineers review the agreement as soon as possible to identify:

• A list of shared equipment
• Components and spaces shared by all or some parties
• Any components not explicitly mentioned in the agreement
• Cost allotments for each party

Legal teams can seek to renegotiate or amend terms that are unclear or blatantly skewed before significant capital work is required. A property management company experienced in SFAs can also help mitigate financial risks with improved reserve fund planning.

All’s not fair with shared facility agreements.

SFAs often include requirements for committees and disproportionate voting, which requires unanimous consent. For example, a party with 1% cost responsibility can cast a deciding vote when the agreement requires unanimous consent. As a result, parties with full voting rights but limited cost burden can negatively impact major stakeholders.

The solution: Condo boards need to clarify the boundaries SFAs place on their decisions. What parties share what facilities? What committees or boards are also involved? What are the respective roles and responsibilities of those committees? Is there more than one reserve fund involved?

Oppressive mutual use agreements

Developer-written SFAs tend to favour the developer’s interests over that of the condo community. It is not illegal for developers to present a one-sided contract or to serve their own financial self-interests. However, when done so knowingly and with intent to hide facts, the agreement is considered oppressive.

For example, a street-facing commercial space makes extensive exterior updates to their storefront. The party then demands the condo corporation pay their share of the costs even though the investment does not benefit the condo corporation and owners.

The solution: The condo corporation can challenge the agreement when provisions are unclear. If the agreement is not completely transparent and contains hidden or misleading meanings, the court is likely to find it is “oppressive or unconscionably prejudicial” under Section 113 of the Condo Act. Also, under Section 135 of the Condo Act, corporations can take action when an entity is, or threatens to be, oppressive or unfairly prejudicial or unfairly disregards the interests of the condo corporation.

Condo boards face legal challenges when SFA details are difficult to interpret. Property managers help make sense of SFAs by facilitating early reviews, introducing effective financial management, and clarifying legal rights and provisions.

The condo experts at CPO Management Inc, a property management company in Toronto and the GTA, can maximize your reserve fund and budget planning in the face of complicated shared facility agreements. Contact us today.