Mixed use property is a conundrum. Awful relationships have been spawned out of commercial and residential owners being party to the same condominium corporation. That is not to say that condominium corporations are a lousy tool for mixed use property. It means that there is opportunity for improvement. Thankfully some ingenious developers in Alberta are using strata titling to circumvent the Alberta Condominium and Property Act, flaunt established rules and processes and generally invent their own legal paradigm in an attempt to do whatever they feel like to make money.
This new paradigm is called "Strata Titling."
Strata titling in Alberta does not have a legal equivalent in Canada. It is not like strata titling in B.C. which must conform to rules and regulations that are similar to Alberta's Condominium Property Act. Instead this is a legal agreement that is signed at the time of development that defines common property, spells out maintenance liability and names the parties to the contract. Strata agreements can include condominium corporations, but those condominium corporations do not need to include all the owners in a building.
Let's make a concrete example to illustrate how strata titling works. In this hypothetical example you are a developer. You've recently decided to build a major sports and entertainment district in the downtown of a metropolitan center in Alberta. You know that aside from your sport and entertainment complex you need commercial tenants that provide supplementary services. You want hotels, restaurants, bars and other entertainment around your new location to make for a vibrant community. So you provide the first few floors around your complex for this infrastructure. But you want higher density and less transience in the neighbourhood. Full time residents are just the answer you are looking for. Now you want to make some nice tall residential towers on top of your commercial buildings. That tower closest to the stadium would make a great hotel, but it wouldn't make sense to provide a hotel the size of the tower you want to build because it would have too low and occupancy rate. The solution to this is to divide that tower into part full time residential, part hotel and part commercial space for exciting tenants like restaurants and bars! You've created a plan for the ultimate night life. You just need a way to sell this dream development. A strata titled property provides an excellent opportunity. In these sorts of agreement you can sell the commercial space on the lower floor to a commercial property management firm, the hotel can buy the space for its suites and the residential can be a condominium corporation. Legal access, liability and responsibility can all be spelled out in a contract. Perfect!
That is the ideal use of strata titles. A single physical space that is divided between very different users of the space. Each has their authority and responsibility spelled out and held separately from the next. You avoid situations of commercial tenants clashing with individual home owners or the condominium board. The entire opportunity sounds tidy.
There is no evidence that strata titling in Alberta, especially in the theoretical example above, will be anything but tidy. While strata titling has been used before, this sort of application is new. Time will tell whether the implementation of strata to avoid conflict in mixed use development will be successful.
We are hosting a luncheon in Calgary on May 12 on the of topic strata titling in Alberta. We'll be joined by Greg Cortese and Tony Reed of BFL Canada Insurance Services ltd. and Bonnie Anderson of Bennett Jones LLP and Heather Bonnycastle of McLeod Law LLP at Venue 1008.