Previously granted order varied and restatedto provide that trades by a developer or licensed real estateagents of the developer of Condohotel units not subject to section25 or 53 provided that purchasers receive certain disclosureprior to entering into an agreement of purchase and sale.
Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 25, 53, 74(1), 77, 78, 79, 144.
Condominium Act, 1998, S.O. 1998, c. 19, asam.
Real Estate and Business Brokers Act, S.O. 2002,c. R.4, as am.
IN THE MATTER OF
THE SECURITIES ACT
R.S.O. 1990, CHAPTER S.5,AS AMENDED (the "Act")
IN THE MATTER OF
RULING AND ORDER
(Subsections 74(1) and 144(1))
WHEREAS on May 7, 1999, the Ontario SecuritiesCommission (the "Commission") made a ruling pursuantto subsection 74(1) of the Act (the "Original Ruling")that the sale by Intrawest Corporation (the "Applicant")and agents of the Applicant ("Applicant Agents") licensedunder the Real Estate and Business Brokers Act , S.O.2002, Chapter R.4 (the "REBB Act") of condominiumunits ("Condohotel Units") within certain condohotels(the "Condohotels") to be built by the Applicant onland known as the "Village Core" (the "VillageCore Lands") located next to Blue Mountain Resort nearCollingwood, Ontario is exempt from sections 25 and 53 of theAct;
AND WHEREAS on May 19, 2000, the Commissionmade an order pursuant to subsection 144(1) of the Act (the"Variation Order") which varied certain representationscontained in the Original Ruling that had become inaccurateas the result of, among other things, amendments to Zoning By-Law1983-40 described in the Original Ruling;
AND WHEREAS the Applicant wishes to varythe Original Ruling, as amended by the Variation Order, to permitCondohotel project specific limited partnerships ("ProjectLPs") and agents of Project LPs licensed under the REBBAct ("Project LP Agents"), as well as the Applicantand Applicant Agents, to sell Condohotel Units within Condohotelsbuilt by either the Applicant or a Project LP;
AND WHEREAS in order to so vary the OriginalRuling, as amended by the Variation Order, the Applicant hasmade an application to the Commission pursuant to subsections144(1) and 74(1) of the Act (the "Application") foran order revoking the Original Ruling and the Variation Orderand restating them as set out below;
AND UPON considering the Applicationand the recommendation of the staff of the Commission;
AND UPON the Applicant having representedto the Commission as follows:
1. The Applicant is a leading developer andoperator of village-centered resorts which owns or controls10 mountain resorts, including Whistler Blackcomb, North America'smost popular mountain resort, as well as Sandestin Golf andBeach Resort in Florida.
2. The Applicant is developing the VillageCore Lands by constructing, either directly or through a ProjectLP, a number of multi-family dwellings which will consistprimarily of Condohotels and a limited number of townhomeunits (the "Village Core Project") which are intendedto both support and enhance the Resort by establishing a resortvillage environment that will be attractive to both frequentand infrequent users of the Resort's facilities.
3. Project LPs will be used by the Applicantfrom time to time for the purpose of implementing its strategyof separating the bulk of its production -- phase real estatebusiness into independent limited partnerships. Each ProjectLP will be established by the Applicant to develop all, orpart only, of a Condohotel or a Condohotel project consistingof two or more Condohotels. The Applicant will supervise thedevelopment, construction and marketing of each Project LP'sCondohotel or Condohotel project, and will also provide administrativeservices to each Project LP.
4. A Condohotel is a condominium complex whichconsists of a number of self-contained Condohotel Units andcommon areas and common facilities that are available foruse by the owners and other occupants of Condohotel Units.
5. Each Condohotel Unit has a living area,a kitchen and at least one bathroom and a sleeping area/bedroom,and it is sold fully furnished.
6. The common areas and common facilitiesof a Condohotel will generally consist of central interiorhallways and may also include one or more of underground parking,a lounge area, a pool and spa facility and additional spacethat may be required to support the rental management operationof the Condohotel as more particularly described in paragraph13 below.
7. In addition to his or her own CondohotelUnit, each owner of a Condohotel Unit will be entitled toa proportionate share of the relevant Condohotel's commonproperty and the common facilities and other assets of thecondominium corporation (the "Condohotel Corporation")that will be created pursuant to the Condominium Act,1998 S.O. 1998, Chapter 19 (the "Condominium Act").
8. Each owner of a Condohotel Unit will beresponsible for expenses, such as heat, light, power, cabletelevision, telephone line charges and real property taxes,that are directly attributable to the Condohotel Unit, andwill also be responsible for his or her proportionate shareof certain utilities and other expenses related to the commonproperty of the Condohotel.
9. The Applicant or Project LP, as the casemay be, will cause the Condohotel Corporation to enter intoa property management agreement with a qualified propertymanager, which shall be one of Blue Mountain Resorts Limited("BMRL"), the Applicant or a qualified third party,and the property manager shall manage and administer the Condohotel'scommon property and shall be paid a management fee for itsservices.
10. BMRL owns and operates the Resort.
11. The Village Core Project is subject toa comprehensive scheme of land use regulation pursuant toZoning By-Law 1983-40, as amended by Zoning By-Law 99-71 (the"By-Law"), which establishes certain criteria thatmust be met by multi-unit developments, such as a Condohotel,that are to be established on the Village Core Lands.
12. For purposes of the By-Law, a Condohotelwill be structured and operated as a "Village CommercialResort Unit" which is defined by the By-Law to mean oneroom or a group of rooms forming a single commercial accommodationunit within a Village Commercial Resort Unit Complex in which:
(a) culinary and sanitary facilities areprovided for the exclusive use of the unit; and
(b) access to the unit is provided by aprivate entrance from a common hallway inside the building;and
(c) is not used or designated as a principalresidence;
but does not mean or include a residentialdwelling unit, hotel unit, a motel unit, an inn unit, alodge unit, a dormitory unit, a hostel unit, or any otheruse defined in the By-Law. The term "Village CommercialResort Unit Complex" is defined as a building or groupof buildings containing ten or more Village Commercial ResortUnits which:
(i) is serviced by a central lobby facility;and
(ii) is part of a rental or lease managementprogram, including housekeeping services, with a minimumof 80% of the Village Commercial Resort Units restrictedto occupancy by any one individual person for one or moreperiods of time not to cumulatively exceed a total of120 days per year; and
(iii) the remaining 20% may be exemptfrom the 120 day per year occupancy limitation; and
(iv) contain accessory recreational and/orcommercial uses; and
(v) the maximum number of Village CommercialResort Units that may be exempted under subsection (iii)above shall be 256.
13. Every owner of a Condohotel Unit willbe required to enter into either a rental management agreement(the "Rental Management Agreement") or rental poolingagreement (the "Rental Pooling Agreement") witheither BMRL, the Applicant, or a qualified third party, inorder to (i) permit the establishment and operation of a Condohotelrental or lease arrangement program (the "Rental Program")either by way of a rental management arrangement or a rentalpooling arrangement; and (ii) ensure that the terms of thisRuling and Order (the "Ruling and Order") are compliedwith. If the Rental Program is designed as a rental managementarrangement, each owner of a Condohotel Unit will be requiredto enter into a Rental Management Agreement with either BMRL,the Applicant or a qualified third party, as the case maybe (the "Unit Manager"). If the Rental Program isdesigned as a rental pooling arrangement, each owner of aCondohotel Unit will be required to enter into a Rental PoolingAgreement with either BMRL, the Applicant or a qualified thirdparty, as the case may be (the "Rental Pool Manager").While all owners of Condohotel Units must enter into eithera Rental Management Agreement or Rental Pooling Agreement,up to 20% of such owners may be permitted, on a first-comefirst-served basis, to opt out of participation in the RentalProgram for periods of one or more years so long as at least80% of owners of Condohotel Units continue to participatein the Rental Program ("Rental Program Participants").Owners of Condohotel Units who have opted out of the RentalProgram may subsequently become Rental Program Participantsby opting into the Rental Program in accordance with the termsthereof.
14. A Rental Management Agreement would requirethe Unit Manager so retained by a Rental Program Participantto generate revenue for the Rental Program Participant byrenting the Rental Program Participant's Condohotel Unit tothird parties and generally maintaining the Condohotel Unitfor such purpose.
15. A Rental Pooling Agreement would requirea Rental Program Participant to participate in an arrangementwhereby revenues derived from, and/or expenses relating to,the rental of the Rental Program Participant's CondohotelUnit by the Rental Pool Manager would be pooled with revenuesderived from, and/or expenses relating to, the rental of allother Condohotel Units located in the same Condohotel thatare owned by Rental Program Participants and all such pooledrevenues and expenses would be shared by such Rental ProgramParticipants in accordance with their proportionate interestsin the Condohotel (a "Rental Pool").
16. The Unit Manager or Rental Pool Manager,as the case may be, will be entitled to receive a fee formanaging the Rental Program that is based upon the rentalrevenue generated by the Rental Program.
17. Each Rental Management Agreement or RentalPooling Agreement would have an initial term of not more thanseven years and four subsequent terms of not more than threeyears each and it would renew automatically at the end ofeach term unless terminated in accordance with its terms whichmay permit each Condohotel Unit owner to provide the UnitManager or Rental Pool Manager, as the case may be, with writtennotice of termination no less than 90 days prior to the endof the relevant term or may require termination only withthe approval of a prescribed majority of the Condohotel Unitowners within a Condohotel or within a group of Condohotelsthat is serviced by a common check-in facility.
18. Rental Program Participants will be providedwith the right to occupy their Condohotel Units for no more,and no less, than 120 days per calendar year without restrictionsave and except for restrictions on use that are reasonablyrequired to facilitate the orderly management and administrationof a Condohotel by a qualified Unit Manager or Rental PoolManager which may include advanced notice of use requirementsand peak period minimum use commitments.
19. Condohotel Units will be offered for salein Ontario through one or more of the Applicant, an ApplicantAgent, a Project LP and a Project LP Agent.
20. The offering of Condohotel Units willbe made in compliance with the Condominium Act.
21. The Applicant, an Applicant Agent, a ProjectLP or a Project LP Agent will deliver to an initial purchaserof a Condohotel Unit, before an agreement of purchase andsale is entered into, an offering memorandum (the "DisclosureDocument") in the form of a disclosure statement requiredunder the Condominium Act which will also include additionalinformation in the body of the disclosure statement relatingto the real estate securities aspects of the offering preparedsubstantially in accordance with the form and content requirementsof B.C. Form 45-906F under the Securities Act (BritishColumbia) R.S.B.C. 1996, c. 418, as amended ("Form 45-906F"),including, but not limited to:
(a) a description of the Village Core Projectand the offering of Condohotel Units;
(b) a summary of the material features ofthe Rental Pooling Agreement and/or Rental Management Agreement;
(c) a description of the continuous reportingobligations of the Applicant or Project LP and the RentalPool Manager or Unit Manager, as the case may be, to ownersof Condohotel Units as more particularly described in paragraphs26 and 27 below;
(d) a description of the risk factors thatmake the offering of Condohotel Units a risk or speculation;
(e) a description of the contractual rightof action available to purchasers of Condohotel Units asmore particularly described in paragraph 23 below; and
(f) a certificate signed by the presidentor chief executive officer and chief financial officer ofthe Applicant or the general partner of the Project LP,as the case may be, in the following form:
"The foregoing contains no untruestatement of a material fact and does not omit to statea material fact that is required to be stated or thatis necessary to prevent a statement that is made frombeing false or misleading in the circumstances in whichit was made".
22. An initial purchaser of a Condohotel Unitwill have a statutory right under the Condominium Act to rescindan agreement to purchase a Condohotel Unit within ten daysof receiving the Disclosure Document or a material amendmentto the Disclosure Document.
23. Purchasers of Condohotel Units will beprovided with a contractual right of action as defined inCommission Rule 14-501 - "Definitions". The DisclosureDocument will describe the contractual right of action, includingany defences available to the Applicant or Project LP, asthe case may be, the limitation periods applicable to theexercise of the contractual right of action, and will indicatethat the rights are in addition to any other right or remedyavailable to the purchaser.
24. Prospective purchasers of Condohotel Unitswill not be provided with rental or cash flow guarantees orany other form of financial projection or commitment on thepart of the Applicant or Project LP, as the case may be, BMRL,the Unit Manager or the Rental Pool Manager, save and exceptfor the budget that must be delivered to an initial purchaserof a Condohotel Unit pursuant to the Condominium Act.
25. The economic value of a Condohotel willbe attributable primarily to its real estate component becauseCondohotel Units will be advertised and marketed as resortproperties and will not be advertised or marketed with referenceto the expected economic benefits of the Rental Pooling Agreementor Rental Management Agreement.
26. A Rental Pooling Agreement will imposean irrevocable obligation on the Applicant, Project LP orRental Pool Manager to send to each owner of a CondohotelUnit:
(a) audited annual financial statementsfor the Rental Pool that have been prepared and deliveredin accordance with sections 78 and 79 of the Act as if theRental Pool was a reporting issuer for purposes of the Act;and
(b) interim unaudited financial statementsfor the Rental Pool that have been prepared and deliveredin accordance with sections 77 and 79 of the Act as if theRental Pool was a reporting issuer for purposes of the Act.
27. A Rental Management Agreement will imposean irrevocable obligation on the Applicant, Project LP orUnit Manager to send to each Rental Program Participant quarterlystatements of revenues and expenses for his, her or its CondohotelUnit on or before the 60th day after the date to which theyare made up.
28. A Rental Pooling Agreement or Rental ManagementAgreement, as the case may be, will impose an irrevocableobligation on the Applicant, Project LP, Rental Pool Manageror Unit Manager, as applicable, to deliver to a subsequentprospective purchaser, upon reasonable notice of an intendedsale by the owner of a Condohotel Unit, and before an agreementof purchase and sale is entered into:
(a) the most recent audited annual financialstatements (which include financial statements for the priorcomparative year) and, if applicable, interim unauditedfinancial statements for the Rental Pool (collectively "FinancialStatements"); and
(b) quarterly statements of revenues andexpenses for the Condohotel Unit for the two-year periodpreceding the entering into of the agreement of purchaseand sale for the Condohotel Unit but only to the extentthat the Condohotel Unit was subject to the Rental ManagementAgreement during such two-year period (the "Two YearQuarterly Statements"),
("Financial Statements" and "TwoYear Quarterly Statements" are collectively referredto as "Financial Information").
29. A Rental Pooling Agreement or Rental ManagementAgreement, as the case may be, will impose an irrevocableobligation on:
(a) the Applicant, Project LP, Rental PoolManager or Unit Manager, as the case may be, to deliverthe Disclosure Document to a subsequent prospective purchaserof a Condohotel Unit upon receiving reasonable notice ofa proposed sale of the Condohotel Unit that is to take placeeither prior to, or within 12 months of, the issuance ofpermission to occupy the relevant Condohotel Unit; and
(b) the Applicant, Project LP, Rental PoolManager or Unit Manager, as the case may be, to delivera summary of the Disclosure Document (the "DisclosureDocument Summary") to a subsequent prospective purchaserof a Condohotel Unit upon receiving reasonable notice ofa proposed sale of the Condohotel Unit that is to take placeany time following the expiration of a period of 12 monthsfrom the date of issuance of permission to occupy the relevantCondohotel Unit.
30. A Disclosure Document Summary that isdelivered to a prospective purchaser of a Condohotel Unitwhich is subject to a Rental Pooling Agreement will include:
(i) items 1, 3(1), 6,7, 9(1), (2), (3) and(4), 10(b) and 16 of Form 45-906F with respect to the proposedsale, modified as necessary to reflect the operation ofthe Rental Pool and the form of disclosure, and
(ii) items 12(2), (3) and (4) of Form 45-906Fwith respect to the Rental Pool Manager under the RentalPooling Agreement modified so that the period of disclosureruns from the date of the certificate attached to the DisclosureDocument Summary,
and will be certified by the Rental Pool Managerin the form of the certificate required pursuant to item 19of Form 45-906F.
31. A Disclosure Document Summary that isdelivered to a prospective purchaser of a Condohotel Unitwhich is subject to a Rental Management Agreement will include,
(i) the Rental Management Agreement; and
(ii) a summary of the Unit Manager's pastexperience that includes items 12(2), (3) and (4) of Form45-906F with respect to the Unit Manager modified so thatthe period of disclosure runs from the date of the certificateattached to the Disclosure Document Summary,
and will be certified by the Unit Managerin the form of the certificate required pursuant to item 19of Form 45-906F.
32. A Rental Pooling Agreement or Rental ManagementAgreement will impose an irrevocable obligation on each ownerof a Condohotel Unit to provide:
(a) the Applicant, Project LP, Rental PoolManager or Unit Manager, as the case may be, with reasonablenotice of a proposed sale of the Condohotel Unit; and
(b) a subsequent prospective purchaser ofa Condohotel Unit with notice of his, her or its right toobtain from the Applicant, Project LP, Rental Pool Manageror Unit Manager, as the case may be, Financial Informationand the Disclosure Document or Disclosure Document Summary,as the case may be.
33. A Rental Pooling Agreement and RentalManagement Agreement will not require purchasers of CondohotelUnits to give any person any assignment of their right tovote in accordance with the Condominium Act or condominiumbylaws, or to waive notice of meetings of the condominiumcorporation in respect of the Village Core Project and theCondohotel.
AND UPON the Commission being satisfiedthat to do so would not be prejudicial to the public interest;
IT IS ORDERED, pursuant to subsection144(1) of the Act, that the Original Ruling and the VariationOrder are revoked except in respect of any subsequent tradeof a Condohotel Unit acquired pursuant to either the OriginalRuling or the Original Ruling, as amended by the Variation Order;and
IT IS RULED, pursuant to subsections74(1) and 144(1) of the Act, that the distribution of a CondohotelUnit by the Applicant, Project LP or a Licensed Agent is exemptfrom sections 25 and 53 of the Act, provided that:
(i) every purchaser of a Condohotel Unit receivesprior to the completion of the purchase transaction all ofthe documents and information referred to in paragraph 21as well as a copy of this Ruling and Order;
(ii) any subsequent trade of a CondohotelUnit acquired pursuant to this Ruling and Order shall be adistribution unless:
A. notice is given by the seller to theApplicant, Project LP, Rental Pool Manager or Unit Manager,as the case may be, of the seller's intent to sell his orher Condohotel Unit;
B. the prospective purchaser of the CondohotelUnit receives, before an agreement of purchase and saleis entered into, all of the documents and information referredto in paragraphs 28 and 29 above; and
C. the seller, or an agent acting on theseller's behalf, does not advertise or market the expectedeconomic benefits of the Rental Pool Agreement or RentalManagement Agreement to the prospective purchaser.
June 27, 2003.
"Paul M. Moore"
"H. Lorne Morphy"