Ontario Condo Law Blog : Toronto Condominium Lawyer & Attorney : Gardiner Miller Arnold Law Firm : Ontario, Ottawa, Hamilton, Kitchener

Calgary condo built in 2008 condemned to demolition after major fire - (via CTV Calgary): http://bit.ly/9KtVOP

Burned-out condo likely to be rebuilt, but not all owners/occupants insured their possessions - (via @calgaryherald) http://bit.ly/9lQ1KZ

Cigarette in balcony flower pot started blaze destroying 159-unit wooden condo bldg; 300 homeless - (via @Calgarysun) http://bit.ly/blILwN

No plans to rebuild yet, but unit owners at burned-out Calgary condo must still pay their mortgages (via CTV Calgary) - http://bit.ly/cTRIo7

Owners at fire-gutted Calgary condo to hear reports then vote on rebuilding; work will take a year (via @660News) - http://bit.ly/9HcYuj

The Millrise condo was built a year before Alberta’s Building Code was amended to require installation of sprinklers in the attics and balconies of similar buildings. The building was built to the standards in the 2008 Building Code. As such, it did not contain sprinklers in the attics and balconies which, according to Calgary’s Chief Building Official, would have made a big difference in extinguishing this fire before it could get out of hand. 

The news articles also revealed that many of the 300 owners and occupants lost their worldly possessions and many people didn’t have proper insurance. All of them lost their homes and now face the unusual situation of deciding whether to rebuild the condo or terminate the corporation, divvy up the insurance money and walk away.   Unless the owners are of the same mind, a court application is probable, which will add to the cost, delay and frustration.

In Ontario, a condominium corporation that suffers massive damage must follow the procedure set out in section 123 of the Condominium Act, 1998.    Thankfully, the section is not needed often since there have been few or no cases where it has come into play. Since it’s not a well-known section, here is the full text:

Termination upon substantial damage

123.  (1)  The registration of a notice under subsection (7) terminates the government of the property by this Act.

Definition

(2)  In this section,

“substantial damage” means damage for which the cost of repair is estimated to equal or exceed 25 per cent of the replacement cost of all the buildings and structures located on the property.

Estimates of damage

(3)  If damage occurs to a building or a structure located on the property that, in the opinion of the board, may constitute substantial damage, the board shall have at least two persons, who shall have no affiliation with the board and who, in the opinion of the board, are qualified, make estimates of the damage within 30 days after the occurrence of the damage.

Determination by board

(4)  The board shall determine whether, based on the estimates, there has been substantial damage.

Notice of determination

(5)  If the board determines that there has been substantial damage, it shall give notice of its determination to the owners.

Contents of notice

(6)  The notice shall specify that,

(a) the owners have the right, in accordance with section 46 and within 30 days of receiving the notice, to requisition a meeting of owners; and

(b) the board is required to register a notice terminating the government of the property by this Act if the condition described in subsection (7) is met.

Vote for termination

(7)  The board shall register a notice terminating the government of the property by this Act if the owners of at least 80 per cent of the units, at the date of the vote, vote in favour of termination.

Form of notice

(8)  The notice shall be in the form prescribed by the Minister and shall be signed by the authorized officers of the corporation.

Time of registration

(9)  The board shall register the notice within 30 days of a vote in favour of termination under subsection (7).

Repairs if no termination

(10)  If there is no vote in favour of termination under subsection (7), the corporation shall, within a reasonable time, repair the damage to the building or structure located on the property.

Note that the threshold for terminating a condominium is a tough one – the owners of 80% of all of the units must vote in favour of termination.   If that threshold is not met in a case where a condo suffers substantial damage, then the corporation must repair the damage “within a reasonable time.”    Owners could be out of their units for a long time.

Consider also whether there may be difficulty serving notice of the board’s determination under section 123(5) in a case where residents are forced to live away from the building.   How could you practically serve the requisite notice so as to get a high level of participation at a special meeting for a termination vote when the owners of a large condo are out of their home due to a fire or catastrophe?   In such a case, management would need to think quickly and devise a special register to collect owners’ contact details.

One of the major factors that would likely decide the vote about whether to terminate a condo corporation is whether there is sufficient insurance money to repair or rebuild the place.  If the insurance is inadequate, the unit owners would need to pay the shortfall to repair or replace the building. This would create an even greater burden on owners who would already be paying for temporary lodging and still paying their mortgages.  Most owners in this situation would probably prefer to terminate the condo and take their share of the corporation’s assets, as per section 129 of the Act.   Owners would likely be even more inclined to terminate if it would take several months to restore the building to move-in condition. At the Millrise condo in Calgary, it’s expected to take a year to complete the necessary work for condo residents to return home. A year!

Here are five lessons that we can take from the Millrise condo fire story:

1. Owners: Check whether you have properly insured yourself for the loss of use of your home and to repair/replace your unit improvements and personal possessions. We talked about this issue in detail in a previous blog entry here.

2. Boards: Get an updated insurance appraisal for your building, particularly if it’s been a while since the last update. Remember that the HST is going to increase the cost to replace your building after July 1, 2010, so this year is a perfect time to get an updated appraisal. 

3. Boards: Devise a disaster recovery plan so that the condo board and management can get back to work quickly after a catastrophe. Have off-site electronic backups of the critical information such as condo documents and drawings, contact lists, insurance policies and common expense collection ledgers. 

4. Smokers: Use your brains -- extinguish cigarettes completely and safely.   You would probably prefer to avoid the guilt of putting all your neighbours into the street like the guy in the news story.

5. Boards and Owners:   Make sure your fire prevention systems and measures are up to date and in compliance with the provincial and municipal codes. The Board should make sure that common elements are sufficiently protected and that such devices are routinely maintained and owners, if it is their responsibility, should ensure that their in suite alarms/extinguishers are properly maintained.  

Employers, such as property management companies, could be held vicariously liable for payment of fines or damages arising from an injury or accident deemed to have been caused by an employee’s inattention to driving while manipulating a hand-held device. It is recommended that employers issue the company’s no hand-held policy to employees prohibiting use of hand-held devices while employees drive a car, except in accordance with permitted hands-free technology such as Bluetooth. It is expected that if a driver involved in an accident was found to be using a hand-held device at the time of a collision, such unlawful use may more likely be deemed to be the cause of an accident and possibly result in a higher award of damages against such a driver and employer. Delivery of a no hand-held policy to employees should exempt employers from vicarious liability.

Studies indicate that drivers using cellphones are four times more likely to crash, while those texting messages may be the cause of approximately 20% of all collisions. Ontario has joined 50 other countries and several Canadian provinces which enforce rules against driving while using a hand-held device.

Drivers who need to gab while driving will still be entitled to use hands-free technology such as can be provided by various Bluetooth devices. Choose systems which allow vocal dialing or speed-dialing of your favorite numbers.

Firefighters, paramedics, police and drivers dialing 911 will be excepted from enforcement of that law. Regulations dealing with other exempted cell phone scenarios are also being enacted.