First Year Budget Deficits and Phased Condominiums

Under Section 75 of the Condominium Act, 1998, the Declarant is accountable for any amount by which the first-year expenses exceed the Declarant’s budgeted expenses for the first year (the “first year budget deficit”).

In a phased condominium, this obligation also applies to each one year period following creation of each phase.

But there is a further question: Does the Declarant’s obligation for the “first year budget deficit” following creation of a particular phase apply to the full deficit for the entire condominium (during that one year period)? Or is the Declarant only obligated for the part of any such deficit that applies to the units in the particular phase?

This question has not been answered by the Courts. However, from a review of Sections 75 and 147 (4) of the Act, it appears to me that there is certainly an argument that the Declarant is accountable for the full deficit for the entire condominium (during the one year period following creation of each phase). This is also necessary to ensure that all purchasers are rendered “whole” (i.e. do not suffer any loss due to such a deficit).

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