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Judge urges Condo Act reform over PI blunder

• Architect got multi-million project’s dimensions wrong

• Judge: ‘None’ of owners paying correct fees as result

• Triggers title disputes over One Ocean penthouses

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An architect’s blunder has ensnared a multi-million dollar Paradise Island project in multiple legal battles and prompted a Supreme Court judge to call for the Condominium Act’s reform.

Legal documents seen by Tribune Business reveal how several sales at the ten-storey One Ocean condo project, which dominates the skyline on Paradise Island’s southern shore, have become embroiled in bitter court fights stemming from disputes over the size of the unit involved.

The controversy, which has been the subject of three separate Supreme Court rulings within a two-month period, stems from “inaccuracies” contained in the original architect’s certificate that were then used to set-out the dimensions of One Ocean’s 79 units in its Declaration of Condominium - the legal instrument that gives effect to the condominium’s creation.

The situation triggered Justice Loren Klein, in one of the verdicts, to assert that “only the Quieting Titles Act has been productive of greater mischief in the law of real property” than the Law of Property (Condominium) Act 1965.

“The claim also illustrates the unique complications that can arise from transactions involving the peculiar legal estate of fee simple ownership of property in a multi-storey building,” he wrote in his judgment.

“It is apparent that the Condominium Act has not kept pace with the mischief which has been generated by some of its provisions. These difficulties are strikingly illustrated by transactions involving the sale (or resale) of units, which seemingly cast an onerous burden on a prospective purchaser to ascertain that the building and units comply with near exactitude to the Declaration and registered plan.

“It has been left for the courts to attempt to ameliorate some of these issues by resorting to common law and equitable principles on a case-by-case basis, which has not always produced a uniform approach. The time may well have come for there to be a review and revision of the Act benchmarked on other jurisdictions to address the unique issues that have developed regarding condominium title.

“It is noted, for example, that modern condominium legislation in Canada and elsewhere provide for what is called an ‘estoppel certificate’ to be provided by the (condominium) association to the purchaser of a resale unit, providing information in relation to the condominium and unit which creates an estoppel in favour of the purchaser, and removes some uncertainty out of the transaction.”

The One Ocean saga’s origins are detailed in a December 20, 2021, judgment by Justice Ian Winder which dealt with an application by the One Ocean condo owners and their association to amend the development’s Declaration of Condominium such that it contained the right unit and common area dimensions/sizes.

The original Declaration, which was recorded in the registry of records on May 11, 2005, had been amended on January 18, 2010. The latter date was some three days’ before Bahamian architect, Leslie Johnson, signed-off on One Ocean’s architect’s certificate on January 21, 2010.

An architect’s certificate is a key document in construction, because it certifies that a property is built in accordance with its approved plans, complies with building regulations and the work is to a good standard. It is especially critical if buyers want to obtain mortgage financing to fund their purchases, as lenders will rely on it to ensure their collateral security is perfected.

However, Justice Winder’s decision hinted at the potential trouble that results when Bahamian professionals are used to merely sign-off on plans and work that has been performed outside this nation.

“Johnson did not design the building, but was engaged to assist the foreign architect that had been hired by the [then] developer,” the verdict recalled. “The foreign architect did not sign off on alterations which Johnson made to the plans. Johnson never spoke with the foreign architect.”

One Ocean itself had an initially troubled history. Its original developer, Albert Ballard and his Peace Holdings, defaulted on repayments to CIBC FirstCaribbean International Bank (Bahamas) over the $37m construction loan they obtained, and the bank placed the development into receivership in November 2012.

Just 25 per cent of the available units had been sold at that time. Simon Townend, a Bahamas-based KPMG partner and head of its corporate finance arm for the Caribbean, and colleague Nicholas Brearton were appointed as receivers/managers for the project.

They eventually closed its sale to Replay Destinations (Bahamas), a subsidiary of Canadian-based Replay Resorts, in July 2015, with the latter acquiring the unsold 52 units. The purchaser agreed to finance improvements to the building and undertake renovations to the penthouses on the tenth floor.

Justice Winder, though, noted that Plan-It Bahamas, the architects hired by Replay, found that on the ninth and tenth floors “there were several infractions of the Bahamas Building Code that had to be brought into compliance”.

These violations included the fire stairwell “stopping short of the tenth floor”, meaning that direct escape into it was not possible from that floor. And the machine/equipment rooms for two of the five elevators “had been constructed inside the escape stairwell”, creating another breach.

And it was during Replay’s renovations that questions arose as to whether the size of the penthouse units, as stated in the Declaration of Condominium, were accurate and if the changes “encroached upon” and reduced the size of the common areas.

Justice Winder, in his ruling, said he was “satisfied that there are inaccuracies contained in the architect’s certificate, and that the inaccuracies which I have found were in place prior to certification”. He noted that Mr Johnson accepted “an error” was made in not measuring the extent of the top-floor balconies and to the exterior of the doors and windows.

Finding that no unit owner was paying their correct common area fees as a result, Justice Winder ruled that the Declaration of Condominium be amended. “It is clear from my assessment of the evidence that the calculation of the square footage for the penthouse units are inaccurate with respect to each of the three areas in dispute,” he concluded.

“As a result of the inaccuracies, none of the unit owners are paying an accurate amount to the Association respecting any fees associated with the unit entitlements. Those with more square footage ought to pay their fair share of the fees/assessments.”

In the meantime, though, Replay’s efforts to sell two of the penthouse units had become embroiled in separate litigation due to concerns over exactly how big these properties were. Justice Klein, laying out the case made by one purchaser, Belitza Marling Sagaray Silva, said she sought to withdraw from the sale as a result due to fears Replay was unable to provide good title.

“At the heart of this dispute is a discrepancy of some 1,300-plus square feet,” Justice Klein wrote. “It is the approximate difference in the size of a luxury penthouse advertised for sale in an exclusive condominium complex on Paradise Island called the One Ocean Condominium after extensive renovations and the dimensions recorded in the statutory declaration containing the certified architectural drawings and plans of the building (the Declaration of Condominium).

“This discrepancy led the plaintiff (the purchaser) to rescind the agreement for sale over concerns that the defendant (the vendor) was unable to convey good title to the unit and has resulted in this litigation.”

Acknowledging that the case was part of “a litany of legal issues that have affected the sales of units of One Ocean”, Justice Klein recorded how Penthouse 901 was offered for sale at $4.1m with the buyer paying a $410,000 deposit. While “containing 6,165 square feet of living space..... the Declaration registered under the Condominium Act described it as comprising 4,801 square feet”.

Sagaray Silva and her attorneys, Paul and Sarah King, sought to withdraw from the transaction and requested that the deposit be refunded due to concerns that Replay was unable to give good title to the property.

However, Replay and its Bahamas managing director, Michael Sneyd, viewed this as “a blatant attempt ...to exit a binding agreement for sale” and refused to return the deposit. Mr King replied that “our client’s patience and trust are no longer salvageable” on the basis that the 22 percent difference in size was a material factor, and both parties headed to court.

Justice Klein declined to find in favour of Sagaray Silva’s argument that the sales agreement “was effectively rescinded and/or terminated”, and refused to order that the deposit be returned. But, while finding that the contract was still in effect, he added that the deposit should be returned to the buyer if no deal is consummated.

And, in similar fashion, Justice Winder, declined on February 4, 2022, to give a summary judgment in favour of the purchaser of another One Ocean penthouse. That purchaser, a corporate entity named Gathina, had argued it was entitled to be refunded $1.105m because Replay was unable to provide it with good title.

Like Sagaray Silva, it had argued that Replay only had good title to the 4,801 square feet represented as the unit’s size in the Declaration of Condominium, whereas the true area involved was 6,419 square feet. As a result, Gathnia claimed it could not obtain good title to 25 percent of the space.

Comments

tribanon 3 months, 3 weeks ago

The situation triggered Justice Loren Klein, in one of the verdicts, to assert that “only the Quieting Titles Act has been productive of greater mischief in the law of real property” than the Law of Property (Condominium) Act 1965.

Justice Klein has obviously heard a lot about Sir Snake and his wife Sharon's frequent use over the years of the Quieting Titles Act. LOL

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