Etobicoke Civic Centre
399 The West Mall
Etobicoke, Ontario
Canada, M9C 2Y2

Tel.: (416) 394-8222

Fax: (416) 394-6063

June 22, 1998

To: Urban Environment and Development Committee

From: Commissioner of Urban Planning and Development Services

Subject: Private Roads and Freehold Developments

Purpose:

To advise Council of issues pertaining to the development of freehold townhouses on private roads pursuant to a request by Etobicoke Community Council dated April 1, 1998.

Funding Sources, Financial Implications and Impact Statement:

City funding is not required. There are no impacts on capital or operating budgets.

Recommendation:

It is recommended that:

(1) Development of freehold housing on private roads generally be discouraged.

(2) The Province of Ontario be urged to enact the proposed amendments to the Condominium Act pertaining to Common Elements Condominiums and Phased Condominiums.

Background:

On April 16, 1998, Urban Environment and Development Committee directed staff to prepare a report reviewing issues pertaining to private roads and freehold townhouse development.

Townhouse development has commonly been one of three types of tenure: rental; freehold on a public street or condominium townhouses with common element driveways. A fourth type has evolved which is a private road "freehold" townhouse development. This last type has become significant in the Etobicoke District since the first such project was approved in 1992. Since that time, six projects comprising 105 units have been approved in Etobicoke; City-wide 15 projects comprising 235 units were approved from January 1, 1995 to December 31, 1997 (see Exhibit No. 1). Typically, these projects contain from 15-35 units and utilize internal circulation routes that are adequate for the project but substantially below municipal standard road widths (e.g. 6-7 metre widths). While these projects have provided quality infill development, compatible with their adjacent neighbourhoods, staff have concerns regarding their long-term maintenance and the potential for redress to the City should future difficulties arise. Recently, an application was filed in the Etobicoke office, to amend the Zoning Code to permit 144 freehold townhouses, of which 130 units would rely on private roads and shared underground utilities.

Comments:

There are significant differences between condominium and freehold private road developments. A condominium unit owner controls the interior space and appliances within the unit. The exterior and structural elements are controlled by the Condominium Corporation. The grounds, utilities driveways and other features are common elements which are also controlled by the Corporation. Maintenance, repairs and replacements of common elements are carried out in accordance with an approved maintenance schedule and funded by reserves which are held by the Corporation and collected from unit owners. Disputes are settled in accordance with Corporation by-laws established under authority of the Condominium Act.

Private road, freehold developments consist of individually owned lots which have access to public roads either by easements over abutting properties or by a commonly owned parcel of land. Maintenance, repair and replacement of facilities such as roads, curbs, utilities are usually funded by agreements (contracts) among the owners. It is anticipated that deed restrictions require owners to bind subsequent purchasers to participate in the maintenance agreements. Disputes would be resolved through litigation among the parties.

A further distinction is that the Ontario New Home Warranty Program explicitly applies to freehold housing and condominiums, including common elements to a maximum of $2.5 million. Staff at the Ministry of Consumer and Commercial Relations have indicated that with freehold housing on private services, the program applies only to the house structure, not the shared facilities.

Proponents of private road developments hold that buyers resist purchasing condominium units and prefer to purchase a house on a lot regardless of obligations to execute a maintenance agreement and to tolerate easements. Financing and phasing of such projects are allegedly easier since banks do not require a high percentage of pre-sales for freeholds as is required for condominium projects. This allows for lower risk and lower financing costs for the builder. Furthermore, delivery of finished homes is speedier since the completion of a sale agreement is not delayed by a lengthy condominium registration process.

Maintenance charges are also less costly since the shared maintenance activities are limited to snow clearance, road maintenance and repair. Repairs to the buildings, which would otherwise be included in common element charges in a condominium, are the responsibility of the unit owner. Since maintenance fees are modest, proponents argue that defaults will be rare.

In the short time that such developments have existed, no default problems have been brought to the City’s attention. Staff’s concerns, however, relate to more long-term issues.

Townhouses share many structural elements such as load-bearing walls and roofs. In a condominium, these are common elements which are owned and maintained by the condominium corporation in accordance with an established maintenance schedule. Repair and replacements are funded by monthly payments to a maintenance fund, part of which is held in reserve for expenditures such as re-roofing, windows-replacement and other major expenses. Similar schedules are in place for other common elements including: landscaping, sidewalks, driveways, roads, underground utilities, electrical service and street lighting. In a rental townhouse situation, the owner of the property is responsible for ongoing maintenance and repair.

Freehold townhouse maintenance, however, is the responsibility of the individual owners since each lot and building are separately owned. Deed restrictions in theory should control many aspects of maintenance; however, enforcement of such agreements in the event of violation would be through civil suits initiated by individual owners. The City is not party to any of the arrangements that are made for maintenance. Although it has been argued that these are "buyer-beware" matters, since the City is frequently requested to intervene in private property matters and enforce property standards, in the event of default or negligence on the part of the maintenance arrangements, owners may approach the City to take control of roads and services which were not designed for maintenance by the City.

Reforms to the Condominium Act:

The Condominium Act has been under review since 1992. The consultative process has ended and the new legislation is expected to be given first reading shortly. The proposed reforms to the Act fall into three general areas, one of which is of particular relevance to the planning process and implications of freehold tenure. These are reforms permitting the development of new types of condominiums.

Two of the new types of condominium proposed would appear to alleviate many of the problems identified by proponents of private road developments. These are:

1. Common Elements Condominiums in which there are no units. The property consists of common elements only (e.g. marinas, ski hills, cottage access roads). These could also include underground services, stormwater facilities, sidewalks and roads.

2. Phased Condominiums in which subsequent phases of development may be folded into the original existing condominium by way of amendment to the condominium description and declaration. This would eliminate the need for each phase to go through the entire approval process and permit phased financing and sales.

These new forms of condominium, if approved, would remove some of the financing and marketing impediments created by the current provisions of the Condominium Act. Furthermore, the Ontario New Home Warranty Program would clearly apply to these forms of condominium, addressing the consumer protection issues surrounding the shared facilities.

Conclusion:

Under current condominium legislation, there appear to be marketing advantages in the private road developments. Staff are concerned, however, that these advantages are short-term and may result in future redress to the City wherein the City will be requested to assume responsibility. Given imminent changes to the Condominium Act, Council should discourage private road developments and urge the Provincial government to enact the amendments as soon as possible.

Contact Name:

Ted Tyndorf

Etobicoke Civic Centre

Telephone: 394-6004

Fax: 394-6063

Reviewed by:

Paul J. Bedford Virginia M. West

Executive Director and Chief Planner Commissioner of Urban Planning and

City Planning Division Development Services

EXHIBIT NO. 1

Based on a survey of the District Offices in the City of Toronto, the following is a list of the number of freehold townhouse projects and related numbers of units within the projects that have been rezoned for development on private roadway systems since January 1995: