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

One overlooked but painful way in which the HST adversely affects condominium corporations is the fact that the maximum fee to issue a status certificate is fixed by law at $100 taxes included.

This fixed fee is set out in section 18(2) of O. Reg. 48/01 under the Condominium Act, 1998 which provides as follows:

The fee that a corporation may charge for providing a status certificate, including all material that is required to be included in it, shall not exceed $100, inclusive of all applicable taxes.

So how does this shake down in terms of dollars and cents?

A status certificate issued on June 30, 2010 that was subject to 5% GST would net the condo corporation $95.24.

That same certificate issued on or after July 1, 2010 that is now subject to 13% HST would net the condo corporation about $88.50, a difference of $6.74 from before July 1.

There’s no question that the cost of preparing a status certificate has not become less expensive, so it’s equally clear that condo corporations are obliged to suck up the difference. This can be painful for larger corporations that issue many dozen status certificates each year.

This regulation has not been amended to account for the introduction of the HST and its operation is unfair. A change is required immediately unless the Ministry of Finance wants to create another cockameme rebate program, this time to provide every condominium corporation in Ontario with a small rebate to make up a small fraction of the actual loss incurred on each and every status certificate issued.

My suggestion: In section 18(2) of O.Reg. 48/01 (above), replace the word "inclusive" with "exclusive." The change could be made in as little as 30 days if people in power put their minds to it. Seeing as how this amendment would actually increase tax revenue, it's astonishing why this has not already been done.

That aside, we’re almost two months into life after HST. How’s it working out for your condo corporation so far?

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With only a month before the dreaded HST kicks in, Warren Ragoonanan offers a more positive take on the looming new tax.

Let us know what you think.  Submit a comment using the form at the bottom of the page.

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The Harmonized Sales Tax, which comes into effect on July 1, 2010, may be a cause for concern for consumers, including condo corporations. The HST combines the 5% GST and the 8% PST into a single tax, which means that many consumer goods and services that were PST-exempt will now be subject to the higher 13% tax. 

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Like most people attending PM Expo Springfest at the Metro Toronto Convention Centre on April 28, I was a little surprised by the strong police presence both outside and inside the facility. It turns out that the extra security was for the Barrick Gold shareholders’ meeting taking place that morning in the conference hall next to ours.

Anyhow, there was an excellent turnout of over 1,500 property managers and condo directors, all of whom probably felt much safer knowing that this huge police detachment could probably protect us from any unhappy condo unit owners ready to riot over the carpet pattern chosen for the corridor refurbishment project in their buildings.

I was lucky to sit on an all-star panel sponsored by CCI-Toronto to talk about “What’s Right and What Needs Improvement in the World of Condos” from the perspectives of four different segments of the condo industry. Here’s a recap of some key takeaway points from the speakers:

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In a special update released this week, CCI-Toronto and ACMO announced that they have successfully lobbied the provincial government to amend the regulations under the Condo Act so that corporations registered before May 5, 2001 will have 15 years (not 10 years) from the date of their first reserve fund study to top-up their reserve funds.

[Update (March 7, 2010):  The regulation making this amendment is now published here.]

Condominium corporations existing as of May 1, 2001 were required to have their first official reserve fund study under the New Act within three years after that date. Generally speaking, that means that they must top up their reserve funds by the year 2016 or 2019.

CCI-Toronto and ACMO deserve kudos for securing this concession to help condo corporations offset the deleterious effects of the ever-looming HST.   We wish them well in their continued negotiations with government.

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Many condo boards and unit owners are concerned over the impact of the proposed Harmonized Sales Tax on their condominium corporations and their own pocket books.  They will be glad to know that  the Toronto Chapter of the Canadian Condominium Institute (which represents over 113,000 condo units in the GTA) has been valiantly advocating against the proposed tax.  

CCI-Toronto is taking their fight to the airwaves on TV tonight.   Hear the latest about what is being done.   According to their news release: 

 Tune in to Focus Ontario on Global Television on Saturday, November 21st at 6:30 p.m. to hear host Sean Mallen speak with guests Armand Conant - President, Canadian Condominium Institute - Toronto Chapter and Robert Hattin - Canadian Manufacturers and Exporters, on the issue of the Harmonized Sales Tax.

Mr. Conant, President of CCI Toronto, Co-Chair of the Joint CCI-T/ACMO Government Relations Committee and a lawyer with the firm Heenan Blaikie LLP will focus his comments on Saturday's show on CCI-T's opposition to the inequities the HST will create for condominium owners.

For details on Focus Ontario click here.

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The Toronto Sun reports that the impact of the proposed HST on condominium corporations and their unit owners is turning into a political football in the September 17 provincial by-election in the Toronto riding of St. Paul’s.

The opposition parties have condemned the proposed new tax because it will cause condominium fees to increase.

Finance Minister Dwight Duncan says he does not expect to see a substantial increase in condo fees, which flies in the face of the predictions made by the condominium management industry that fees will rise on average by 6 to 8%. These predictions were reported in recent months in the Toronto Star here and in the Globe and Mail here.

Notwithstanding the large number of services that the HST will affect, Finance Minister Duncan says:

"I have a condominium in Windsor and my condominium fees will likely not be affected because the services we buy are very competitively delivered."

Let me guess: His condo corporation is locking-in and pre-paying the next ten years' worth of fees for legal, accounting, engineering, property management, landscaping, contracting, housekeeping and any other service not currently subject to PST.   Alternatively, perhaps this corporation has chosen to discontinue some or most of those services.

Shame on you, Minister Duncan. Rather than try to convince us that the HST is not going to have a big effect on our pocketbooks (which is decidedly untrue), you would do better to convince us that this tax is necessary and will benefit all of us in the long term.

Meanwhile, we wait to see what the voters of St. Paul's decide.

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The Toronto Star reports that an ACMO luncheon panel to be held in September on the topic of the HST will feature a very brave parliamentary assistant to the minister of revenue.   The article also outlines ACMO and CCI's estimation of the impact the new tax will have on condo corporations and unit owners, which information has been submitted to the Ontario government.  (See ACMO's submission here.)

Update (Sept 27/09):   National Post reports on the above-mentioned ACMO luncheon here.

Unfortunately, it appears that arguments being made by the condo industry associations in support of exemptions or reductions of the HST  are falling on deaf ears, as are the pleas of every other industry association, social group and watchdog.   By all accounts the government has very clearly made up its mind on the HST and is now firmly focused on "selling" the tax to anyone who will listen.   The time for submissions and petitions has therefore passed -- Consumers and their condo corporations will be paying HST starting next July.   It now falls to condo boards to prepare themselves and their unit owners to deal with the coming new reality.

We wrote about the HST back in March when it appeared imminent that the province would introduce this new tax to help offset massive multi-year deficits.    We suggested back then that condo corporations begin budgeting for HST and establish a program of reducing expenses and increasing contributions to the common expenses and reserve funds.    See that piece here. 

With only ten months until the HST becomes effective, there is no time to lose.

What steps are you taking at your condo corporations?   

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Imagine waking up one morning to find that all of the goods and services you needed to buy cost 8% more than they did the day before.   That day may come soon.

In January 2009, Premier McGuinty said that the Ontario government would "take a long, hard look" at harmonizing the 8% Provincial Sales Tax with the 5% federal GST. 

Those comments were made in response to a report by the Ontario Chamber of Commerce stating that implementing an HST and abolishing the loophole-filled retail sales tax system would boost Ontario's global competitiveness and reduce financial and paperwork burdens on Ontario businesses.   It would also increase tax revenues, which would surely come as a relief to the finance minister who warns us this month about an $18-billion deficit for this year and next.

Both the Globe and Mail and the Toronto Star have written editorials this week in favour of Ontario adopting an HST, but not everyone thinks it's a good idea.   Toronto real estate lawyer and columnist Bob Aaron suggests that the already-battered real estate market will be further impacted by HST on legal fees and realtors' commissions and that it will become harder for honest contractors to compete with the growing underground economy.

There is no question that a boost to our businesses and our global competitiveness would be a positive and welcome development, but let's not kid ourselves -- the cost of that benefit will be dearly paid by consumers at a time when most people are already struggling.   In addition to paying more for their own daily necessities and services for their own families, consumers will be shouldering the higher costs for goods and services sold to their condo corporations.

An HST will have a significant impact on condo budgets.   Landscaping, renovation, accounting and legal services that are presently subject only to 5% GST will become subject to 13% HST.   Even if prices were to remain the same or decrease very slightly, the overall out-of-pocket cost for such goods and services will actually increase with the introduction of an HST.    

If your condo corporation is barely squeaking out balanced budgets today, it may be time to take a long, hard look at further reducing expenses wherever possible and implementing a gradual increase in common expense fees to help build an operating reserve.   Having a cushion in place to absorb higher costs is essential to avoiding scenarios where special assessment is the only remaining option.   A gradual increase in common expenses is a far preferable and affordable option than sudden, large lump sum assessments.

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