In a recent decision, a judge ruled that a provision in a condo declaration which imposed on the corporation an obligation to lease back parking spots in perpetuity is unenforceable, against public policy and against the Planning Act. The condo corporation was permitted to terminate the lease.
Facts of this case
This case involved a dispute between a commercial condo corporation and the owner of the 251 parking-space parkade. Of interest, each of the 251 parking spaces were unitized but the parkade structure was comprised of common elements, to be managed, maintained and repaired by the condominium corporation. The developer had retained ownership of all parking spaces and had entered into a 20-year lease by way of which it leased every parking spots back to the corporation. Eventually the 251 parking spaces were sold to the current owner.
Upon expiry of the existing lease, the new owner sought to enter into a new lease. The parties eventually ended up in court with the parking owner seeking, amongst other reliefs, a court declaration that the corporation was required by the site plan, its declaration and the municipal by-law to lease the 251 parking spaces at fair market rent. As such, one of the questions to be adjudicated was whether the condo corporation was entitled to terminate the existing lease or whether it had an obligation to lease the parking spots in perpetuity. On this, the condo's declaration contained the following provision:
The Condominium Corporation shall at the time of registration of this Declaration, lease from the Declarant any available registered parking spaces on Levels 2 and 3 to create additional customer and visitor's parking on the terms and conditions to be negotiated between the Condominium Corporation and the Declarant from time to time…
Decision
While the decision also deals extensively with the validity and enforceability of an interim agreement reached by the parties, the court ruled on the question of whether the condo declaration imposed on it the obligation to lease parking spaces in perpetuity. The Judge concluded that it did not.
The judge first relied on the Planning Act and concluded that section 50(3) does not permit any agreement that has the effect of granting the use of, or right in, land for a period of 21 years or more (except in some circumstances, which did not apply here). The judge also concluded that it would be against public policy to read the site plan, declaration, and by-laws in a way that would require the parties to offend the rule against perpetuity; and, concluded that, to the extent that a provision of the declaration imposed such an obligation, such provision was unenforceable.
The Corporation also argued that a declaration provision imposing on the corporation an obligation to lease the parking in perpetuity was invalid as it did not fall within the provisions of sub-sections 7(1) and (4) of the Condo Act, which, it argued, presents an exhaustive list of the permitted provisions for inclusion in a declaration. The parking owner argued that section 7 of the Act permitted a declaration to include any matter mentioned not only in section 7 but also mentioned in any other section of the Condo Act. The judge opted not to decide this point, concluding that the Condo Act had not been fully canvassed for all potentially relevant section that might save the parking lease provision of the declaration.
When all was said and done, the judge concluded that the site plan, declaration, and/or municipal by-laws did not require the Corporation to lease the parking spaces in perpetuity. The judge did not rule on whether terminating the lease would have any legal implications vis à vis any municipal by-laws requiring that parking be provided (if such obligation exists); and, ruled that this was a debate for a different forum.
Lessons learned
There are many different layers to this case. What the case seems to indicate though is that a declarant may not be able to impose on a corporation a perpetual obligation to lease back parking spaces. Any condo corporation in a similar situation should consult with its legal counsel before renewing or terminating any similar lease.