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Reserve Fund Study Report Cards
The Importance of Section 98 Agreements
Site Description The site consists of a 15-storey residential condominium with 225 residential suites and a two-level underground parking garage. Each suite has a balcony. The building was constructed in about 1983.
Reserve Fund Assumptions
The concrete balcony slabs are in need of structural repair due to delamination of the slab-edges and topsides. Repairs will require removal of the outer edge of the concrete slab in most suites, and topside repairs to the concrete on many balconies.
Many owners have installed tiles or other finishes on their balconies. Management reported that the tile was the responsibility of the unit owners. The reserve fund study provider requested a copy of a Section 98 agreement, and when none could be provided, budgeted for repairs, including the cost of removing the tile finishes and reinstating a reasonable balcony finish.
A Section 98 agreement sets out a unit owner's responsibility for an addition, alteration, or improvement (AAI) that they have made to the common elements. For example, with respect to balcony tiles, an agreement would define who pays for the tile in the event the structural slab below the tile requires repair.
At this site, not all units had Section 98 agreements on title for their balcony finishes. Many unit owners had purchased units with tiled balconies, without the tile on the balconies being flagged as an addition, alteration, or improvement in the status certificate.
Without Section 98 agreements, the corporation is on the hook for the cost of removing the tiles and may even be responsible to replace with similar after the repair.
The tiles also pose other problems to the corporation:
- The thickness of the tile and setting bed make the guards shorter by about 1 inch. In some instances, this makes the guards non-compliant.
- Due to chlorides in the concrete, there is top-side delamination of the slab that is made worse by the tile, because water can get below the tiles and get trapped, keeping the slab wet.
Lessons Learned for Reserve Fund Planners
If you notice that there are varying balcony/terrace finishes that will need to be removed to make balcony repairs, you should confirm with management whether units with AAIs have Section 98 agreements on title. You should also request a copy of a sample agreement to understand unit owner versus Corporation responsibility with respect to the AAI. This helps you know if the finish needs to be covered by the reserve fund study. You may need support from the Corporation's legal counsel to determine if the finishes must be reinstated by the Corporation after the repairs are completed.
Takeaways for Board of Directors and Property Managers
You should never permit a unit owner to make changes to the exclusive-use common elements appurtenant to their suite without registering a Section 98 agreement on title.
Before approving tile or other finishes on balconies, you should have an engineer review to ensure that the height of the guard won't be made non-compliant by the surfacing. They will also be able to make recommendations regarding the installation of a waterproofing membrane on the slab prior to installation of the tile, particularly if your building has chlorides in the concrete (common in buildings prior to about 1987) or posttensioned slabs.