A Purchaser’s Guide to Section 98 AgreementsBy Kormans LLP
Maybe you are thinking about putting in an offer on a unit and your agent tells you the unit is subject to a Section 98 Agreement. Maybe the lawyer reviewing your Status Certificate just told you that the unit owner/Seller is violation of their Section 98 Agreement. Whatever brought you to look into this question – you are in the right place!
Before we can jump into exactly what a Section 98 Agreement entails, we are going to give you the groundwork – explaining Common Elements.
Defining a Common Element
If you purchase a unit in a condominium, what will you actually own? Your unit, sure, but where does your unit end? What about everything else? Why are you allowed in the exercise room, but not the public? Because when you purchase a unit in a condominium, you are also purchasing part ownership of the “common elements”, or (just about) everything in-between the units. Examples of common elements include:
- The exercise room
- The furnace room
- Swimming pool
- The lobby
- Event or party room
Some common elements may be “exclusive use” to your unit. This means that only a certain unit owner is permitted to use that certain common element. For instance, this might include your:
- Parking spot
Now you have the groundwork, let’s talk about Section 98 Agreements! What are they?
Section 98 Agreements (sometimes called a “Modification Agreement” or “Indemnity Agreements”) refer to agreements between unit owner(s), and the Condominium Corporation, to modify a part of the condominium’s common elements, or exclusive use common elements. These Agreements are governed by – you guessed it – section 98 of the Condominium Act.
A Section 98 Agreement acts in many cases to provide the unit owner with an option to modify common elements as specified in the Agreement. In most cases it does not require the unit owner to make those modifications.
Seven Basic Things to Know About Section 98 Agreements
- Mandatory: Section 98 Agreements are not optional. If you want to make a modification to a common element or exclusive use common element, you must enter into a Section 98 Agreement.
- Consent: You cannot modify common elements without permission from the Condominium Corporation.
- Binds future owners: If you purchase a unit from a unit owner that has entered into a Section 98 Agreement, you are bound by its terms. In other words, most Section 98 Agreements are binding to future owners.
- Maintenance: Once a unit owner modifies a common element, they become responsible for maintaining that modification. The Section 98 Agreement will set out the standard for that maintenance.
- Compensation: Section 98 Agreements will set out a unit owner’s obligation to “indemnify” or compensate the Condominium Corporation if the Agreement is broken.
- Compliance: The Condominium Corporation may not necessarily know that the unit owner you are purchasing from has violated the Agreement. Regardless, when you purchase that unit, you will be responsible for the violation. It will be your job to correct the violation if the violation is discovered by you or the Condominium Corporation in the future.
- No Modification: It is possible that there is a Section 98 Agreement in place, but the unit owner has not modified anything. For example, just because a Section 98 Agreement gives permission to paint a garage door, does not mean that the garage door has been painted.
Why do Section 98 Agreements exist?
Condominium Corporations have an interest in maintaining the uniform appearance of the building(s). If they do not regulate uniformity, so the argument goes, the attractiveness of the complex decreases and the marketability along with it.
Also, if a unit owner is making a personal choice to change a part of a common element, the Condominium Corporation does not want to be financially responsible to maintain those changes.
Examples of Section 98 Agreements:
This could be an Agreement to:
- Install carpeting, or remove carpeting from a balcony
- Change an outdoor light fixture on the balcony
- Replacing plumbing
- Replace a screen door
- Paint the garage door
- Re-shingle the roof
- Re-pave the driveway
- Replace a fence
- Move a flower garden
Your lawyer needs to have experience interpreting these very important contracts and it is critical that they be able to give you proper advice about Section 98 Agreements to keep you protected. If you have a question on Section 98 Agreements, please contact a real estate lawyer with Kormans LLP and we would be pleased to assist you in any way that we can!
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