Disposition and Sale of Common Property

Sale of Common Property: Legal and Procedural Requirements

Understanding Common Property

Common property in a condominium includes shared spaces such as:

• Parking areas

• Hallways, lobbies, and amenities

• Exterior grounds

• Utility rooms and service areas

  
  

Under the Condominium Property Act (CPA), common property is owned collectively by all unit owners, and any sale or disposal must follow strict legal procedures.

Sale Approval Process

Step 1: Board Resolution and Owner Approval

• The condominium board must pass a resolution proposing the sale of common property.

• A vote of 75% of unit owners (representing at least 75% of unit factors) is required to approve the sale.

• Owners must be notified in advance and given sufficient time to review the proposal.

  
  

Step 2: Legal Documentation

• The board must prepare:

  • A formal sale agreement

  • Land title amendments to reflect ownership changes

  • Documentation ensuring that all encumbrances or restrictions are addressed

    
    

Step 3: Municipal and Regulatory Approvals

• In some cases, the sale may require municipal approval if zoning or land use changes are involved.

• The board must verify local bylaws and regulations to ensure compliance.

  
  

Step 4: Distribution of Proceeds

• Funds from the sale of common property must be distributed fairly among unit owners or allocated to the condominium’s reserve fund.

• The board must consult legal and financial advisors to ensure proper handling of sale proceeds.

  
  

Step 5: Finalizing the Sale

• The sale is finalized when:

  • The Land Titles Office processes the property transfer.

  • Any remaining liabilities or legal disputes are resolved.

  • Unit owners receive a final financial statement showing how the proceeds were managed.

Legal Restrictions on Selling Common Property

1. Ownership Rights:

   • Common property cannot be sold without meeting the approval threshold outlined in the CPA.

   • All unit owners have a shared interest in the property and must be consulted.

     
     

2. Encumbrances and Easements:

   • Some common areas may have easements or usage agreements that restrict their sale.

   • Legal due diligence must confirm that the property is free of liens or legal disputes.

     
     

3. Land Title Adjustments:

   • Any sale must be properly registered with Alberta’s Land Titles Office.

   • Title modifications must reflect new ownership or property boundaries.

     
     

4. Regulatory Compliance:

   • Changes to common property must comply with municipal zoning laws.

   • The board must confirm that the sale does not violate bylaws or existing agreements.

Financial Considerations

The sale of common property can generate significant revenue for a condominium corporation, but the funds must be managed responsibly.

• Proper Allocation of Funds:

  • Proceeds may be used to increase the reserve fund.

  • The board may distribute proceeds to unit owners (as per CPA regulations).

  • Funds must not be used for unauthorized expenses.

• Long-Term Impact on the Condominium:

  • Selling common property could reduce future revenue sources (e.g., rental income from parking spaces).

  • A sale may impact property values if it removes an amenity that enhances the building’s marketability.

• Tax Implications:

  • The board should consult a tax specialist to determine any financial liabilities related to the sale.

  • Owners receiving proceeds may need to report earnings as taxable income.

    
    

Practical Activity: Board Advisory Role-Play

Scenario:

A condominium corporation is considering selling a portion of its parking lot to a developer. The board has requested an advisory report outlining the legal, financial, and regulatory implications.

Instructions:

1. Assess the board’s decision:

   • Does the sale meet the 75% approval requirement?

   • Will the sale impact unit owners negatively?

   • Are there any legal restrictions on selling the land?

2. Prepare an advisory report:

   • Outline the approval process under the CPA.

   • Detail the financial considerations (distribution of proceeds, reserve fund impact).

   • Explain the necessary regulatory steps (municipal zoning, land title updates).

3. Present your recommendations:

   • Should the board proceed with the sale?

   • What are the risks, and how can they be mitigated?

   • How should the proceeds be managed for long-term financial health?

     
     

Submit your report to the board, ensuring that all legal and procedural requirements under the CPA are met.