June 2015
PFD | Real estate

Long-term contracts for new condo projects and the contract period

By Isabelle Gingras

When a new real estate project is launched, the developer that owns most of the units controls the project syndicate.

The developer therefore exercises control over the contracts between the syndicate and the building services and maintenance providers.

There may be benefits to entering into service agreements while the project is still in its earliest development stages since suppliers such as cable, alarm, air-conditioning and heating companies may find it easier to install their products before the walls are put up.

Certain providers will even waive their installation fees in exchange for a long-term commitment from the client, subject to penalties in the case of early termination. But what about the contracts signed by the project developer when it still controlled the syndicate?

During construction, the developer gradually loses control over the syndicate as the units are sold. When the developer no longer possesses the number of units that make up a majority at the co-owners' assembly, a board of directors must be elected.

The new syndicate then has 60 days to terminate without penalty any contract of a duration of more than one year for building maintenance or services entered into by the former syndicate.

A service provider therefore takes a considerable risk when it offers a substantial discount in return for a long-term contract with a syndicate that is still controlled by the developer since the contract could be terminated early without penalty.

Don't hesitate to contact us if you are unsure if you are dealing with a syndicate controlled by a developer or if your agreement is considered a service or maintenance contract. It's better to know the rules of a contract before signing it!