What is a POTL and why do I pay a fee on a freehold home?

If your freehold home comes with a monthly fee, this is almost certainly why, and it confuses a lot of buyers who were told freehold means no fees.

What it is

A POTL is a parcel of tied land: a freehold lot whose ownership is legally tied to a unit in a common elements condominium corporation. The corporation does not own any homes. It owns and maintains only the shared parts.

You own your house and your lot outright, in fee simple. The corporation looks after the bits nobody individually owns.

Why it exists

Newer low-rise communities are often built with shared private infrastructure that the municipality will not assume:

• Private laneways behind rear-lane townhomes.
• Visitor parking areas.
• Private roads in enclave developments.
• Park blocks, walkways, landscaped entries and stormwater features.

Someone must maintain, insure, plough and eventually replace those. A common elements corporation is the mechanism. Before POTLs, municipalities simply assumed this infrastructure; as standards and costs rose, many stopped.

What the fee covers and costs

Typically snow clearing and maintenance of the shared areas, insurance for the common elements, management, and a reserve fund for eventual replacement, repaving a laneway, for instance.

Expect roughly $75 to $250 a month in most new low-rise communities, considerably less than a full condo fee because there is no building envelope, no elevators, no amenities and no shared structure.

What to check before you buy

• The fee amount, and that it is in writing in the agreement or an amendment.
• What it covers, and specifically whether it covers anything on your lot, which it usually does not.
• Whether a reserve fund study has been done. First-year budgets in new corporations are estimates, and they rise. A fee that looks low at launch may not stay there.
• What the corporation can enforce. Common elements corporations generally have fewer rules than full condos, but there can be provisions about parking, storage or alterations near the shared areas.

The cooling-off question

This is the one genuinely important legal consequence. Because a POTL purchase includes an interest in a common elements condominium corporation, a statutory rescission right may be engaged where that interest is acquired from the declarant, unlike a pure freehold purchase, which carries no cooling-off period at all.

Whether it applies to your transaction depends on how it is structured and documented, and this is genuinely nuanced. If your agreement mentions a POTL or a common elements condominium corporation, ask your lawyer immediately, if a right exists it is measured in days, and it is the only exit a new low-rise buyer is ever likely to have.

Is a POTL a problem?

No. It is normal in current low-rise development, and buyers resell these homes without difficulty. Just price the fee into your carrying costs and know what you are agreeing to.

Let’s review the agreement before you sign.