By Laura Lee
Managing a new building can be challenging and rewarding. For Duka, managing a new building starts 3-4 years in advance, working with the developers, their planners, architects, engineers, and solicitors when the development is just a vision. Duka reviews the proposed plans, provides input and prepares the first-year budget. Once everything is finalized, the Developer will go to market with a Disclosure statement and purchase agreement. These documents include the proposed declaration, bylaws, agreements and budget. The purchase agreement includes the finishes and upgrades that an owner has agreed to purchase, together with the deposit paid for the unit.
Once the property has been built, the developer will prepare for occupancy. For a large property, this may be done in stages with the approval of the fire department. Depending on the agreement with Duka, we may be working on the property 45-90 days before the first resident moves in. Obtaining quotes for key service providers such as security, housekeeping, landscaping and waste management. Administratively, we create the welcome package, forms for the owners, and amenity booking forms. The most important thing during this period is to work with the project management and customer service team. The relationship with the developer and builder is essential to Duka obtaining future business and assisting the future Condominium and Board of Directors to resolve deficiencies. During this time, there is an opportunity to have a hands-on orientation of the property and learn from the installers how things were designed to work, the location of key shut-offs, meter locations and phone and internet services. With this information, we can create the building and office manual, which are invaluable resources for years to come.
Interim occupancy is an exciting time for the purchasers; they will get the keys for the unit and want to book the elevator to move in and list it for lease. The developer typically has restrictions on the purchasers for what they can and cannot do. The purchasers pay occupancy fees during this period, covering interest on the unpaid purchase price, estimated property taxes, and projected condo/maintenance fees, essentially functioning like rent, as these funds aren’t credited to the final price of the unit. Occupancy can be anywhere from 6 months to 2 years. For the unit owner, it also triggers the start of their warranty on the unit, which includes a 1-year, 2-year and 7-year warranty with Tarion. Typically, customer care will arrange a PDI (pre-delivery inspection) before interim occupancy to get a head start on conducting repairs before the occupancy. The most important thing for management during this period is keeping residents safe in a construction zone and staying on top of registering owners and occupants in each suite.
Registration is the next stage; this is the birth of the condominium through registration of the declaration and description, and most importantly, it triggers the start of the warranty for the building. During this period, the Developer, in consultation with their solicitors, will be registering bylaws and various agreements. These documents are important as status certificate attachments and the preparation of a list of agreements under section 115 of the Condominium Act. The developer will start final closings, which is the point when the owners stop paying occupancy fees, arrange their mortgage, and take true ownership of their unit. Once the majority of units close, it triggers the timing of the turnover meeting. The purpose of this meeting is to elect the Board of Directors and have the developer turn over the building to the homeowners. At this point, Duka has a new important long-term relationship to establish with the new Board Members. Building trust and showing the value of working with Duka. Section 43 of the Condominium Act outlines the items required to be turned over.
Registration triggers a few other important deadlines, including the requirement for a turnover audit, performance audit and reserve fund study.
The turnover audit is a financial audit, required to be done for the period from the date of registration till the end of the month of the turnover meeting. The reason for this is that the declarant board is in control of the corporation’s finances during this period. The auditor ensures an appropriate cut-off of payables based on the date of registration and reviews the bills paid and the amounts collected during this period. The financial audit is prepared for the new Board of Directors and should be approved.
The performance audit is a detailed inspection of the common elements to identify warrantable deficiencies covered under the TARION warranty. Tarion covers three warranties: one-year, two-year and seven-year warranties. The following is directly from the Tarion website https://www.tarion.com/common-elements-coverage
One Year Warranty Coverage begins on the date of registration, and covers:
- Defects in workmanship and materials
- Defects that cause the building to be unfit for habitation
- Ontario Building Code violations
- Major structural defects
- Unauthorized substitutions
Two-Year Warranty, includes common elements being free from:
- Water penetration through the basement or foundation walls
- Defects in materials or work (including windows, doors and caulking) that result in water penetration into the building envelope
- Defects in materials and work in distribution systems.
- Defects in materials and work which result in detachment, displacement or deterioration of exterior cladding (such as brickwork, aluminum or vinyl siding)
- Violations of Ontario Building Code regulations under which the Building Permit was issued, affecting health and safety, including, but not limited to, fire safety, insulation, air and vapour barriers, ventilation, heating and structural adequacy
Seven-Year Major Structural Defect Warranty
- A major structural defect is defined in the Act as any defect in work or materials that results in the failure of a load-bearing part of the home’s structure or materially and adversely affects its load-bearing function; or any defect in work or materials that materially and adversely affects the use of the building as a home.
- Major Structural Defect (MSD)
- The Major Structural Defect warranty covers years 3-7 and includes significant damage due to soil movement, major cracks in basement walls, collapse or serious distortion of joints or roof structure and chemical failure of materials.
- In addition to general exclusions such as damage/defect due to condominium corporation action, normal wear and tear, third-party damage, secondary/consequential damage or supplementary warranties/agreements, the MSD warranty specifically excludes: dampness not arising from failure of a load-bearing portion of the building; damage to drains or services; and damage to finishes.
In accordance with the Condominium Act, the first performance audit must be conducted between 6 and 10 months following the date of registration. It needs to be filed with Tarion before the end of the 11th month. The Tarion deadline is slightly different from the Condominium Act in that it allows a Corporation to file deficiencies up to the last day of the year following registration. An example would be if a corporation were registered as of January 5, 2026, the warranty deadline would be January 4, 2027. In most cases, the Engineer will file the performance audit by the end of the 11th month and file an addendum of other identified deficiencies before the end of the 12th month.
For years two and seven, the deadline would be the end of those years. Using the above example, the second year would need to be filed by January 4, 2028 and the seven-year warranty by January 4, 2033.
Once a performance audit is filed, the Engineer will create a PATS list this is the Performance Audit Tracking Summary. It tracks the status of items from the performance audit on the Tarion website. Both the builder and the condominium have access to this document and are able to put notes on file, which creates transparency on progress with Tarion.
The key to a successful relationship is communication. Management should have ongoing meetings with the builder’s representative. Identifying priorities, scheduling trades, inspecting the repairs after the work is completed and making recommendations to the board for sign-off. For complex items, it is important to engage the Corporation’s Engineer prior to making recommendations for sign off. The most important thing to remember as a manager is that we have no authority to sign off on deficiencies, maintain records of recommendations and approved sign-offs. Note: once an item is signed off, there is a one-year warranty on the item. If it fails within the same year, you contact the builder.
Builders have deadlines imposed by Tarion to conduct the repairs. For the first year, they have a period of eighteen months, and for the second year audit, they are given a period of six months.
In summary, it is important for any manager managing a new building to maintain a healthy relationship between the Board of Directors and the Builder to ensure a smooth transition and resolution of deficiencies in a timely manner.