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

For the past 12 years, Ontario condo managers, directors, unit owners and lawyers have bemoaned the unfortunate and ill-advised creation in the Condominium Act, 1998 of the owner-occupied reserved position on condo boards. That position, which is mandatory in condominiums where at least 15% of the units are “owner-occupied units,” is reserved for voting by the owners who occupy their units, and only the those owner-occupiers can vote to remove such a director.

The concept behind the reserved position was two-fold. First, to protect owner-occupiers where the declarant would otherwise control the board during the first year or two of the condo’s life. Second, the position would provide counterbalance in cases where the majority of unit owners are non-resident investors who might elect a board to serve their own interests (presumably to the exclusion of the owner-occupiers). While admirable, these concepts are not particularly compelling, for the following reasons:

1. Neither of these two scenarios is terribly likely;

2. Off-site owners generally don’t vote, let alone conspire to stack the board;

3. All condo directors have a duty to act in good faith and balance the interests of competing stakeholders and could always be held to account for being oppressive to any class of owners, including owner-occupiers; and

4. One position on a 3 or 5 member board does not a majority make!

In over ten years of working with hundreds of condo corporations, I have yet to see a single instance where the owner-occupied reserved position served any useful purpose. In fact, each of the condos I’ve worked with who fill that role would eliminate it in a heartbeat if they had their way.

Though it was intended to protect unit owners, the reserved position has arguably created more trouble than it has solved. In addition to the need to hold two separate elections in some years and other procedural messes that invariably arise to confuse and confound people attending their condo AGM, the creation of the owner-occupied reserved position gives rise to a few rare but very serious problems. These problems illustrate the poor conception and implementation of the reserved position and, we say, cement the fact that it must be eliminated.

First: There may be a dispute as to which owners are owners of “owner-occupied units,” which are defined in subsection 50(5) of the Act as:

a unit of an owner who is entitled to vote in respect of the unit at a meeting to elect or to remove a director where the unit is used for residential purposes and the owner has not leased the unit within the 60 days before notice is given for the meeting, as shown by the record that the corporation is required to maintain under subsection 83 (3).

The record referred to in subsection 83(3) is, of course, a register of the notices that the condo corporation receives from owners who have leased their units and that specifies the tenant’s name, the owner’s address for service and a copy of the lease or renewal or a summary of it. Despite the clear statutory obligation to file these notices upon leasing their units, owners seldom do and this provision is far more honoured in the breach than in the observance. The inevitable result of this and the 60-day requirement in ss. 50(5) above is that which owners are eligible to elect or remove a director to or from the owner-occupied position is difficult to administer, particularly where the manager or board know that a particular owner does not occupy their unit.

Related to this first problem is the distinct possibility that the number of owner-occupied units in any condominium can wildly fluctuate in even a short period of time. There might be 250 owner-occupied units today, but only 100 a month from now. The threshold for removing a director holding the owner-occupied reserved position may be constantly shifting, and there is no effective means to accurately determine the number of qualified electors at any given time, seeing as how clause 76(1)(o) requires a status certificate to contain:

a statement of the number of units for which the corporation has received notice under section 83 that the unit was leased during the fiscal year preceding the date of the status certificate;

This information is basically useless and the Act contains no other obligation for the corporation to advise any person as to the number of owner-occupied units. The safest course is to assume that, in the absence of a current section 83 notice, all units are owner-occupied units, but this is hardly an accurate measure.

Second: While subsection 46(3) specifies that a requisition for a meeting to remove directors must state whether any of the directors to be removed holds the owner-occupied reserved position, it does not specify that the requisite 15% of the owners signing the requisition must be eligible to vote for the removal of that owner-occupied director. It is therefore possible for 15% of the unit owners to properly requisition a meeting for the removal of the owner-occupied director, even if those owners do not own owner-occupied units and are therefore not entitled to vote for that director’s removal. Cue the head-shaking.

Third: If the sole item of business to be conducted in a requisitioned meeting is the removal of the director holding the owner-occupied position (where only owners of owner-occupied units have the right to vote), the board is obliged to give notice of the meeting to all of the unit owners, including those who do not reside in their units. While this is not necessarily a bizarre concept, it is certainly incongruous.

Fourth, and perhaps most telling: The minimum requirement for quorum at any condominium owners’ meeting is 25% of all of the units. In the weirdest case where even 100% of the owner-occupied units is less than 25% of all of the units, it would be impossible to reach quorum at a meeting where the sole business is removal of the director holding the owner-occupied position, unless a number of non-resident owners show up or file proxies to reach quorum, which is probably unlikely if those offsite owners cannot vote on the sole item of business at the meeting.

While these four problems are, admittedly, technical and seemingly trivial, there are actually condominium corporations grappling with these very issues in 2013 and whose owners are frustrated and confused with the process and with the fact that their condo corporation is spending money dealing with these issues. In a world where some unit owners feel compelled to make preposterous allegations and to challenge the most insignificant item that appears slightly out of order, the last thing a condo corporation needs is another potential ground for owners to challenge condo elections. The reserved position creates precisely the type of procedural hiccup that malcontents and conspiracy theorists can seize upon and hold up (incorrectly) as a sign that something’s rotten at their condo.

When the government of the day ignored the recommendations of the people and groups who work in condominiums daily and proceeded to implement the reserved position in the Condo Act 1998 without the help of those condo people, the creation of a substantial blunder was inevitable and, indeed, condo meetings for election and removal of directors from 2001 to this very day in 2013 remain unnecessarily complex, confusing and sometimes costly.

And for what? By any measure and after listening to any condo manager who has run an annual general meeting and has seen the confused look on people’s faces when explaining the need to hold the owner-occupied election, the problem is a live one that needs to be addressed in the only way that makes sense: The owner-occupied reserved position must be eliminated, period.

Those involved in the Condo Act Review process now underway and the lawmakers who ultimately consider the results of that process during the legislative deliberations to come must remember the lesson of the owner-occupied position, which can be summarized thusly:  

Don’t mandate a solution that we did not request to fix a perceived problem which does not actually exist, especially where that solution will cause more problems than it would ever solve.

While the Condo Act necessarily and unquestionably constitutes a delicate balancing of various competing interests and should provide the basis for a strong democracy, the interests of the unit owners as a collective must always come first when it comes to how condominium corporations govern themselves. The concept of recognizing separate classes of unit owners or allowing fewer than a majority of all the owners to remove directors has no place in Ontario’s condominiums.  

Creative solutions are required to address some of the serious persistent problems in condo-land, but the fundamental precepts of democracy and fairness cannot be overridden.   To this end, government must guard against the temptation to deliver an "answer" to a question that no one asked and be doubly sure not to create more problems than they solve with the next Condo Act.

Issues and Questions to Discuss

Everyone participating in the discussion is encouraged to read through the Report or the executive summary.

1. Governance

Each condominium is a corporation that is governed by a board of directors. The Condominium Act sets out general rules for all boards, and within those rules each board operates somewhat differently.

• Does the Report address issues you may have experienced in how your condominium is governed? If not, what additional issues should be considered?

• What do you think of the proposed solutions?

• What additional suggestions or comments do you have related to improving how condominiums are governed?

2.  Dispute Resolution

In Ontario, disputes around condominiums are generally resolved informally. When this is not possible, mediation and then binding arbitration by an independent third-party are used. Sometimes an arbitration decision can be appealed to the court.

• Does the report address issues you may have experienced in resolving condominium disputes? If not, what additional issues should be considered?

• What do you think of the proposed solutions?

• What additional suggestions or comments do you have related to improving how condominium disputes are resolved?

3. Financial Management

Condominium owners pay a monthly common expense fee to cover shared operating expenses and repairs. Part of this fee goes to the condominium’s reserve fund, which is saved for major repairs and replacement of common elements. Reserve fund studies are completed by qualified professionals, who recommend and prioritize changes to the board.

• Does the report address issues you may have experienced in how your condominium’s finances and reserve fund are managed? If not, what additional issues should be considered?

• What do you think of the proposed solutions?

• What additional suggestions or comments do you have related to improving financial management or management of a condominium’s reserve fund?

4. Consumer Protection

Buying a condominium can be complicated. Protections for buyers of new condominiums under the current Act include a 10-day “cooling off’ period and requiring deposits and money paid to the developer to be held in trust. Protections for resale buyers include a detailed status certificate so buyers know the unit and building’s history and financial condition. These protections are aimed at making the purchase of a condominium easier and more transparent.

• Does the report address issues you may have experienced in purchasing your condominium? If not, what additional issues should be considered? (Please specify whether you purchased new or resale).

• What do you think of the proposed solutions?

• What additional suggestions or comments do you have related to improving the purchasing process?

5. Condo Manager Qualifications

Condominiums are very diverse – some can be relatively small and simple to manage, while others are larger and more complex.  At the same time, some boards manage their condominiums directly, some hire outside managers. All condominium managers need certain general skills, while other skills only apply to certain condominiums.

• Does the Report address issues you may have experienced in how your condominium is managed? If not, what additional issues should be considered?

• What do you think of the proposed solutions?

• What additional suggestions or comments do you have related to improving how condominiums are managed?

6. Other Issues

You may have additional issues or concerns that have not been addressed in the Report. You can raise those concerns here along with potential solutions.

The full Discussion Guide contains useful background info and further details for preparing and submitting your comments. Check it out.

Are your issues and concerns covered in the report, or included in the six major categories the review has identified thus far? Have you got horror stories to share or little pet peeves about the Condo Act you’d like to see addressed?  Send your comments soon (by March 11) and stay tuned for news about Stage 2 of the ONCONDO review, slated to launch on March 21, 2013.

That panel convened for the first time this past weekend, on a wet, dreary Saturday in Toronto. They will meet for another three full days over the next month.

Part of the panel’s deliberations includes short visits by experts invited to speak and answer questions on selected issues within the five key focus areas, being:

• consumer protection for buyers
• condominium board governance
• dispute resolution
• condominium finances and reserve fund management
• expertise/accreditation of condominium managers

As luck would have it, I was one of three experts who met the residents’ panel to talk about  consumer protection for condo buyers. It was a short but enjoyable and memorable gig.

When asked by the session moderator (while introducing your humble scribe), about one-quarter of the panellists indicated that they knew of or had visited the Ontario Condo Law Blog. It is always nice to walk into a room of fans, but it was even more encouraging to watch the citizen panellists at work just before our group’s session, and to see them working together, opening their minds and gathering information, different viewpoints and sharing their experience and opinions.

Judging from their reactions, questions and comments to us visiting experts, the residents’ panel was clearly enthusiastic and highly-engaged. Hopefully the panellists found our input educational, but I found that hearing their ideas and thought processes was particularly enlightening.

Hats off to the citizens on this condo residents’ panel for volunteering their time to participate in this important process with such enthusiasm, and to listen and share their views. We are looking forward to seeing their conclusions as part of the “findings report” now planned for release in early 2013. Kudos also to the people from Public Policy Forum for putting together an impressive piece of public engagement work that was both fun and fascinating to witness and be part of.

There are lots of ways for Ontarians to participate in the Condo Act review process.  Get involved today.

Photo credit: @BryanLeblanc

It seems incredible that so few insurers provide coverage (even on an optional basis) to unit owners at condominiums with deductibles of $50,000 or more. A need clearly exists, yet only two insurers heed the call by providing a product to fill the void. (It is a shame that the Sun does not name these two insurers who offer the additional coverage levels that unit owners should run (not walk) to buy.)

The insurance industry’s response to this apparent crisis, created solely by the fact that so few insurers in B.C. offer adequate coverage for their clients, is mind-blowing. That response is summarized in the first paragraph of the Sun article, as follows:

Government must change the rules so the owner of an individual condo unit doesn’t have to pay the huge insurance deductible on the entire condo complex when something goes wrong in their individual unit, the Insurance Bureau of Canada says.

After scratching our heads for a few minutes, wondering whether this opening paragraph is a mistake and thinking that the journalist has surely botched the story, we are gobsmacked as the piece goes on to say:

“We’ve begun to speak to government officials at a variety of levels to say there’s a problem here,” said Lindsay Olson, vice-president of the Insurance Bureau of Canada for B.C., Alberta and Saskatchewan.

“This is becoming a real issue. There’s a shortfall, and I don’t know what a person can do ... if it’s a common expense it should be dealt with as such.”

She said it is important to read the strata council’s bylaws to see who can be held financially responsible for damage to common assets.

In the past, accidental damage to common assets was the liability of the entire strata unless a single owner had been negligent.

But recently, strata councils have been changing their bylaws so they can designate an individual responsible if the damage occurred in their unit, even if that person had not been negligent.

Such a change is allowed under provincial law. “It’s been tested in court and it’s been permitted. It’s been occurring over the last few years,” Olson said. Previously, deductibles for claims made by the strata were in the $10,000 range.

“Over the last number of years what we have seen happening is strata corporations having higher and higher deductibles on the building insurance policy,” Olson said. Often insurers insist on higher deductibles because of multiple claims, especially water damage, in a complex. Some strata corporations have opted for higher deductibles to lower their premiums.

Under the provincial Strata Property Act, the strata corporation is required to review their insurance policy annually and provide a summary to unit owners at the annual general meeting. According to the Insurance Brokers Association of B.C., it’s the unit owner’s responsibility to make sure their own insurance policy dovetails with their building’s policy and strata bylaws.

Let me get this straight: Rather than create and market the hell out of a product to bridge this gap and make a few bucks in the process, the insurance industry advocates changing the law so that owners cannot be held liable for costs arising from their own negligence? This makes no sense whatsoever.

Section 105 of Ontario’s Condominium Act, 1998 clarified the judge-made rule that condominium corporations in this province can pass by-laws to allow the condominium to recover the deductible amount of cost of repairs made necessary by an act or omission of a unit owner. The underlying concept is to allow condo unit owners to act as a collective and pass a by-law assigning financial liability for repair costs to persons responsible for the damage so as to create a strong disincentive for people to be careless. This makes good sense and British Columbia has obviously followed this lead in its condominium legislation, which provisions have reportedly been upheld by B.C. courts. The Insurance Bureau of Canada seems to have a problem with this concept, but why?

Given that they set the premiums and offer varying deductible amounts in insurance taken by condominium corporations, it is the insurers, better than anyone, who know that deductibles have historically only increased and will likely continue increasing. Why, then, are the coverage levels available to unit owners not increasing in lock step? And why are only two or three insurers offering coverage levels that the Vancouver market seems to need as the deductibles at condos there are skyrocketing? Why is the industry association advocating short-sighted, wrong-headed legislative revision rather than encouraging its members to sell additional coverage to fill an obvious void, and perhaps make a tidy profit?

When juries began awarding million-dollar verdicts to auto accident victims on a regular basis, did insurers and their industry association lobby government to implement statutory caps on personal injury awards? Perhaps. In fact, insurers may have initially stood by and left their policyholders swinging in the wind when it became obvious that the standard policy limits were starting to fall short of providing meaningful protection given the trend of higher jury awards. But they eventually began offering optional increased maximums, with the result that many motorists today carry more than the statutory minimum liability coverage because a slightly higher premium can buy coverage of a cool million, or two or even three. Similarly, what right-minded condo unit owner would want only $25,000 worth of coverage for a repair deductible scenario when the deductible amount in the policy of that owner’s condominium is $50,000 or more?

We here at Ontario Condo Blog are not conspiracy theorists, but we genuinely do not understand what the Insurance Bureau of Canada is advocating or why. That uncertainty could easily lead to wild speculation as to the financial viability of deductible coverage in unit owner policies, though the cost for $100,000 of such coverage in Vancouver is said to be only $20 to $100. One might ask whether insurers are losing their shirts on such policies and whether the insurers presently offering such coverage might, as a result, stop underwriting that line of business or raise the premiums into the stratosphere. We will watch for developments and, hopefully, find some clarity from the insurance industry as to why they propose to meddle with condo laws when they should instead be rolling out and selling better coverage to unit owners.

It is worth mentioning that insurers operating primarily in Ontario have not yet publicly indicated whether they intend to lobby for any particular changes as part of Ontario’s wholesale re-opening of the Condominium Act, which is now underway. The insurance industry’s submissions during this process might offer interesting insight into the true state of that industry and the marketplace, and might confirm whether we Canadians still deserve the dubious title of being among the “best-insured”.

Minister Best addressing the OBA on the status of the Condominium Act. yfrog.com/odc3tkfj

— ACMO News (@ACMOnews) February 9, 2012

. @ontarioconsumer minister @MargarettBest takes the stage at #institute2012. twitter.com/chrisjaglowitz…

— Chris Jaglowitz (@chrisjaglowitz) February 9, 2012

Best: Condo ownership and purchase stats way up.Est. 525k dwelling units in Ont. #institute2012

— Chris Jaglowitz (@chrisjaglowitz) February 9, 2012

Minister Best: condominiums in ontario have evolved since Act was written

— ACMO News (@ACMOnews) February 9, 2012

Best: Condos have evolved since Condo Act 1998.Time for review. Input recd from CCI and @ACMOnews and condo lawyers.

— Chris Jaglowitz (@chrisjaglowitz) February 9, 2012

.@margarettbest: Condo owners survey reveals problems with several aspects of condo operation and management. #institute2012

— Chris Jaglowitz (@chrisjaglowitz) February 9, 2012

Minister Best: "governments job is to assess the needs and respond..."

— ACMO News (@ACMOnews) February 9, 2012

Best: @ontarioconsumer responsible to ensure consumers are properly informed, treated, but must balance interests of builders.

— Chris Jaglowitz (@chrisjaglowitz) February 9, 2012

Best: Gov't seeks input from stakeholders like @OBAtoday, condo law bar to help update Condo Act. @ACMOnews too! #institute2012

— Chris Jaglowitz (@chrisjaglowitz) February 9, 2012

All stakeholders will be heard as the Government moves forward in reviewing the current Condominium Act says Minister Best

— ACMO News (@ACMOnews) February 9, 2012

Minister confirms review of Act is ongoing but stops short of providing timeline for drafting changes

— ACMO News (@ACMOnews) February 9, 2012

Addressed the Ontario Bar Association Institute -- re the evolution of condos in Ontario and our government's review of the Condominium Act.

— Margarett Best (@MargarettBest) February 9, 2012

With @deanmccabe and Armand Conant at OBA #Institute2012. twitter.com/chrisjaglowitz...

— Chris Jaglowitz (@chrisjaglowitz) February 9, 2012

As an example, subsection 33 (3) of the general regulation used to read as follows:

The notice that the board is required to send under subsection 94 (9) of the Act shall be in Form 15.

That subsection is revoked and replaced with the following:

The notice that the board is required to send under subsection 94 (9) of the Act shall be in the form that is entitled "Notice of Future Funding of the Reserve Fund" and dated September 1, 2011, as it appears on the Government of Ontario website.

After several minutes of searching, I was completely unable to find the new forms on the government website. Luckily, my colleague Warren Ragoonanan had somehow found the right page and sent me a link. It is here. Try not to lose it since you’ll be hard-pressed to find it yourself and the new forms are not yet searchable using the government’s online "central form repository."

The old forms can no longer be found in current versions of the regulations and will not be attached to regulations in the future. Thus, the only authoritative source for current forms will be online. All those forms are now deposited here:　

You’ll see that this new forms webpage refers to the "previous form numbers" but the numbers no longer appear on the forms themselves.   Those old form numbers no longer have any legal significance and will eventually fade from use, likely at about the same time that we stop referring to the Condo Act 1998 as the "new act".  Many of the old timers will, no doubt, continue to date themselves by referring to a "notice of lien to owner" as a "Form 14" for far longer than is fashionable.  

In addition to the fact that most of us woke up one morning and found that the old prescribed forms had vanished overnight, condominium professionals are likely perturbed by not knowing for sure whether the new forms are different from the old ones. For one thing, reference to the old form numbers has been removed from the titles of all the new forms. It is therefore conceivable that there are other changes, although a superficial glance suggests that the new forms are otherwise familiar.   Do your own quick check.

For full text of the amendments to the regs, see:

O. Reg. 442/11, which amends the “general” regulation known as O. Reg. 48/01.

O. Reg. 443/11, which amends the “description and registration” regulation known as O. Reg. 49/01.

For your convenience, a link to the new Condo Act forms webpage is now permanently available in the links section at the right-side of our blog’s main page.

In addition to being an effective marketing tool, a fun creative outlet and a great way of connecting with clients and prospective clients, blogging allows lawyers to provide a free but valuable information resource to people needing current, specialized information to make their lives easier. It also provides a proverbial soap box for demanding necessary changes. Providing these kinds of resources serves a purpose greater than simple law firm marketing. It helps lawyers fulfil their obligation to serve the public by promoting awareness of relevant legal news and issues, distributing useful, practical information, advocating sensible legislative change and enhancing access to justice.

At the Canadian Bar Association annual conference earlier this month in Halifax, Governor General David Johnston, a lawyer himself, reminded us that the legal profession has a “social contract” with society. In return for self-regulation and a monopoly over the practice of law, he said, “We are duty bound” to improve justice and serve the public good.

We completely agree.

After nearly three years of running this blog and hosting tens of thousands of unique visitors, it remains our great pleasure to publish content that we hope you think is informative, entertaining and educational. We will also continue to use this blog as a platform for positive change that benefits the condominium community. While we might periodically ruffle some feathers along the way, being clear and bold is often required to effectively make an important point and we will not shy away from calling things as we see them.

Of course, this work is made much more enjoyable and personally satisfying from the interaction with the people who read this blog. Sincere thanks to our readers, both regular and occasional, to people who share our work with friends or colleagues, and to all of you that submit comments, ideas and other feedback.

Like most legislation, the effect of the 1998 Act was generally positive but mixed, largely because it solved a lot of problems but left some unaddressed and created a few new ones. The Toronto Chapter of the Canadian Condominium Institute (CCI) and the Association of Condominium Managers (ACMO), which together played a tremendous role in developing the 1998 Act, have led the charge over the past ten years for additional changes to the Act. They have mounted a herculean effort and gathered input from all sections of the “condosphere” to prepare and propose legislative changes intended to simplify the lives of condo developers, unit owners and directors and help balance the competing interests of these stakeholders.

Those efforts, like the 1998 Act itself, have met with mixed results. While CCI and ACMO have attracted some significant attention from the sitting government in the last couple of years, the efforts to fix the problems in the 1998 Act during the first several years were largely ignored, apparently on the basis that the Act was relatively new and therefore a less pressing priority for government. In addition, the government that came to power in 2003 was completely unfamiliar with CCI and ACMO and their efforts in shaping the 1998 Act. This changed after a sustained and significant focused effort but has not yet led to any major revisions to the Act.

It is true, however, that there have been numerous small amendments to the Act over the past decade. Most were inconsequential or simply housekeeping in nature. We reported on all of the most recent ones here and here.

One major success achieved by CCI and ACMO was to secure a regulatory amendment that grants condos an additional five years to top up their reserve funds. While seemingly positive, the practical value of this change is small, since nothing in this portion of the Condo Act would ever cost taxpayers a dime and, further, this deadline would never be enforced by government anyhow. Truth be told, the amendment was given as a token gesture to help offset the major financial impact of the Harmonized Sales Tax on condominiums and unit owners. That said, the fact that government listened to CCI and ACMO, recognized that the Condo Act and regulations can be amended to help people and that they actually did something about it is, by itself, an important achievement.

Much more is needed to be done in order to make meaningful change in our condo law and to give real relief to condominiums and unit owners. Unfortunately, the condo industry’s movement to persuade government to review and revise the 1998 Act will soon pause as Ontario moves towards a general election this fall. Then it lies with the voters to determine who sits in government. What will become interesting to watch is whether and to what extent condo-related issues factor into the election and what result might come from that.

While condo issues have never figured prominently in party platforms during provincial election campaigns, the 2010 Toronto mayoral race may be a sign of things to come in a few ways. First, the concept of “value to taxpayers” which won the election for Rob Ford and which rings especially loudly for condo unit owners could manifest itself as a province-wide mantra this fall in the provincial campaign. Second, organizations such as CCI-Toronto, who held a brilliant mayoral debate on condo issues, might schedule similar events to help bring condo issues to the forefront in the provincial campaign. These sorts of events would help remind condo dwellers to consider the good of their condominiums when making their choices at the polls, as they should, and get candidates and their parties to think seriously about these issues while on the hustings. This will increase the odds of meaningful things getting done after the election.

Another reason that condo issues can and should be a larger priority issue in the upcoming election is the sheer numbers. CCI estimates that over 6,700 residential condominium corporations exist in Ontario which collectively house more than 1.2 million people, including at least 800,000 voters. With thousands of new units coming online in the near term, this number of condo-dwelling voters will only increase over time. It follows, then, that issues confronting condo unit owners will likely influence their decisions come election time and will have a greater impact in our elections. Consider, for example, that the impact of the HST, rising energy prices and smart-metering is likely affecting the bottom line of every single condominium (and, as a result, their unit owners’ pocketbooks) in a material way. Politicians would be insane to ignore these sorts of issues that lie near and dear to the hearts of so many unit owners and voters.

One of those issues that might come to the forefront could be the much-needed revision to the Condo Act.

The current government’s willingness to seriously consider further amendments to the Act is unclear at this point but the opportunity to reveal its plans will certainly present itself during the upcoming election campaign. The opposition, on the other hand, has already publicly stated its intent to review the Condo Act if elected. At CCI’s Golden Horseshoe condo conference in April 2011, Niagara-area MPP and PC Leader Tim Hudak addressed a crowd of over 300 condo owners and directors. He promised changes to update the Condo Act “to reflect modern realities” and also to address the cost of energy, which is one of the largest budget items for almost any condominium.

Hudak was a last-minute addition to the conference agenda and appeared to score major points for the promises he made in what rang out clearly as an election campaign speech. While some balked at the blatant partisanship, the fact is that the sitting minister in charge of the Condo Act was invited to appear at this conference but did not attend or send a delegate in his stead. Such decisions, which seem to smack of indifference, will become increasingly costly to any politician or party, given the rising number of condominium owners and their potential to organize as a voting bloc. No politician or party can afford to alienate this growing constituency.  [Update: Minister Gerretsen has responded to that point with a letter to clarify the issue. His letter can be viewed here.]

With politicians’ recognition of the growing importance of the condo voters and with the skillful and persistent continuing efforts of CCI and ACMO, there is cause for hope that our Condominium Act will be much more mature by the time it turns 20.

The transitional details are simple enough. Section 32 of the new Public Inquiries Act, 2009 provides that inquiries commenced under the prior Act will continue to be governed by that prior Act. Inquiries commenced (or condominium inspectors appointed) on or after June 1, 2011 will be subject to the Public Inquiries Act, 2009.

The appointment of a condominium inspector is rare, but we know that one is currently working at MTCC 710 in Toronto. This was a problem condo we reported about in April 2010, when an application to appoint an administrator was pending and later granted by the Superior Court under section 131 of the Condo Act. That administrator subsequently applied for and was given an appointment as an inspector under section 130 of the Condo Act in an unreported decision dated January 5, 2011. One would presume that the administrator required the powers of an inspector to investigate possible irregularities in the finances or records of that condominium or gather information needed to properly administer that condo's affairs.

Because of the extraordinary high cost of appointing someone as an administrator or inspector and then the cost of that person fulfilling their mandate, appointments under sections 130 and 131 are best reserved for the most dire situations as a final option or where the amounts at issue are extremely large. Even where the need is great or the cost is justified, the sad fact is that these appointments are no more than a reactive measure to try and fix a situation that has gone horribly wrong and which has probably arisen because adequate preventative measures and vigilant oversight by owners and auditors did not exist or have failed.

If an inspector has been or is sought to be appointed at your condominium, your condo is quite probably in serious trouble and you should closely monitor the situation, band together with a group of concerned neighbours and get legal advice.

If you are a prospective purchaser and notice in the condominium status certificate that an inspector has been appointed over the corporation under section 130 or that such an application is pending in court, you may wish to seriously consider your purchase before the deal becomes firm. Run, don’t walk, to your lawyer’s office.

If passed, Bill 138 would:

• authorize the Association to set qualification requirements to be admitted as a member;
• prohibit any person who is not a member of the Association to use its designations, including “Registered Human Resources Professional” and impose fines for unauthorized use;
• permit the Association to grant, refuse or restrict the ability of a firm to practice in the field of human resources;
• require members to be investigated immediately upon becoming bankrupt or incapacitated;
• establish procedures for dealing with complaints against the Association’s members and firms and establish a disciplinary process;
• allow the appointment of investigators and inspectors to conduct investigations and inspections under the Act;
• permit the Association to obtain a court order for custody of a members property in certain circumstances.

The current status and full text of the bill can be viewed on the legislature’s website.  See also Hicks Morley’s HR Legislative Update blog for useful expert commentary.

While the concept of regulating HR people might not generate much excitement for our blog’s loyal readers, it presents an interesting opportunity to help kickstart the movement to regulate the condo management industry. At first glance, Bill 138 appears to provide a reasonable model for converting almost any industry association into a self-regulating body. Its provisions would likely work well for the condo management industry while providing meaningful protection to the public, which should be the ultimate factor in considering the regulation of any industry.

Instituting proper regulation of the condo management industry is long overdue and the public interest demands it. Despite the good work of organizations like ACMO in raising the bar for managers and helping condo boards identify suitably qualified firms and individual practitioners, the daily news in every province and state contains stories of incompetence, misfeasance and outright theft committed by property managers. In places like Ontario where no government regulation exists, homeowners victimized by a manager are left to rely on the criminal justice system to punish the offender and must fend for themselves in civil court to recoup their losses. This government inaction costs Ontario condo unit owners countless millions of dollars each year and, even worse, allows untrained or corrupt property managers to victimize an endless stream of condominium corporations and their owners with impunity. This is a travesty that the industry, led by ACMO, seeks to address.

It is strikingly odd that human resources professionals, whose impact on the general public is relatively minimal, have made such advanced progress towards government-sanctioned self-regulation compared to condominium managers. The condo management profession is arguably a far superior candidate for self-regulation (or any form of government regulation), given that managers are entrusted with administering assets worth billions of dollars belonging to millions of Ontario home owners. The daily work of condo managers hits much closer to home, quite literally, than almost any other profession and it seems astonishing that their industry does not receive proportionate attention by the government when compared to human resources professionals as evidenced by Bill 138. While the analogy is overly simplistic, it defies logic for a person or firm that keeps track of employee sick days to be more tightly regulated than the person or firm that manages the multi-million dollar reserve funds of several condo corporations. This point (or, hopefully, a better one) needs to be made to government now, using big bright letters.

Bill 138 was introduced as a private members bill by a liberal MPP in November 2010, passed second reading on March 3, 2011 and was referred to committee. It is unclear whether the bill will become law before the current legislative session is terminated for the general election this fall. If the bill dies on the order paper, it is even less clear if the bill will be revived after the election.

Regardless of whether Bill 138 passes or sputters out and dies like most private members’ bills, its framework and laudable goal to increase professionalism can and should be salvaged, improved and customized to suit the needs of other organizations, such as ACMO in the case of the condominium managers. The managers and their clients, being the millions of condo unit owners in this province, should take advantage of whatever opportunity might arise to make their voices heard and get the government’s attention.  Work needs to begin soon on the Registered Condominium Managers Act, 2011.

In today’s story on the announcement of the proposed changes, the National Post reports that the government has “no plans to target condominium purchases,” which likely comes as a relief to condo realtors and developers. Not surprisingly, much of the condo industry’s early reaction to the prospect of amending the debt ratio calculation to target condo purchases was unfavourable, citing the negative impact on first-time purchasers’ ability to own a home.

While real estate agents and developers would mount a fierce opposition to any measure that targets the purchase of condominium units, it is pretty hard to argue with the logic of changing the lending formula to include 100% of the condo common expenses when you consider that:

1. How did it ever come to pass that only 50% of common expenses are factored into this equation to begin with? This makes about as much sense as determining financial ability by assuming that prospective borrowers’ income is 150% of their actual income.

2. Common expense fees at new condo developments typically increase quite significantly after the first or second year. In addition, common expenses typically do not decrease from year to year and, thanks to ever-increasing utility costs and the imposition of HST, they probably never will. If purchasers cannot safely carry their mortgage debt based on 100% of common expenses at the pre-sale stage, how can they possibly be expected to manage when common expenses have increased by, say, 30% or more by the third year?

3. Unlike vehicle maintenance or child support, it is not possible to skip paying condo common expenses and get away with it. The fact is that failing to pay common expenses gives rise to a catastrophe as great or greater than skipping mortgage payments. Any condo owner who thinks that paying common expenses is less important than paying their mortgage learns the folly of that assumption in very short order, and it is a costly lesson.

4. Regulators in the U.S. introduced stricter lending criteria for condominiums two years ago. In stark contrast to our system, the American model actually provides that each particular condominium development must be individually qualified for lending, in addition to the prospective purchaser/borrower. See this short summary in the New York Times.

5. The fact that our bubble has not yet burst does not mean that we can continue to tempt fate with impunity. Some argue that now, more than ever, purchasers need to be saved from themselves, lest we face the kind of meltdown that destroyed the American housing market. The government’s statement on the need for such changes and its implementation of a second round of changes to lending rules seems to underline this fact.

According to the Canadian Mortgage Trends blog, striking a balance between imposing some common sense into lending practices and avoiding harmful over-regulation of the market is not easy. There are plenty of factors to consider and that debate will undoubtedly continue for some time, but whether or not government will specifically address the apparent flaw in calculating borrowers’ eligibility for condominium purchases is far from clear.

We can safely assume, however, that the lending qualification formula that has historically considered only 50% of actual common expenses has probably contributed to a significant number of unit owners being over-leveraged. Many such individuals are now in arrears of paying their common expenses and are consequently subject to a condominium lien registered against their unit. Such liens have priority over a bank mortgage and are enforced in the same manner as a bank mortgage, as per sections 85-86 of the Condo Act. The result is that over-leveraged owners may lose their homes, be stuck paying large legal costs to both their condo and their bank, and suffer devastating harm to their credit.

Given the steep downside facing over-leveraged condo unit owners and considering the increasing prominence of condo units as a percentage of all properties sold, tightening the lending rules for condo purchases specifically may offer much-needed protection to prospective purchasers and greater stability to the entire marketplace. The government should seriously consider a move in this direction.

Fair Taxation for Condominiums

Condominium units, by their density, use proportionately less City services — lighting, sewers, etc. — than do a comparable number of single-family homes, and their ecological footprint is also smaller. In addition, some condominiums pay to maintain their own sewers, streetlights, etc., and provide such services as garbage pick-up. Yet, they are taxed at the same rate as single-family homes. This is a significant inequity. Much is being done across the Province to urge the Government to deal with this inequity. Come out to hear from condo leaders from various municipalities and learn what you can do to assist in the effort to  eliminate this tax inequity!

CCI presents this evening session with featured guest speakers, Armand Conant, CCI Toronto Chapter President, Al Siaroff, CCI Golden Horseshoe Chapter Board Member, Ed Schollen, Markham Association of Townhome Condominium Owners, and moderated by Bob Girard, Chair, CCI Toronto Special Projects Committee.

A not-to-be-missed session, which will take place immediately prior to CCI Toronto’s Annual General Meeting. Attendance is complimentary, however, pre-registration is required. This session is open to CCI Toronto members only.

 To help get your creative juices flowing, here’s a sneak peek of the major survey questions:

1. Do you feel you knew enough about condominium ownership prior to purchasing your unit?
2. What information would have been helpful prior to purchasing your condominium?
3. Do you have a clear understanding of how your board makes decisions? If not, what would help?
4. Do you feel that you have input into decisions made by your condominium’s board? What has your experience been?
5. If you have taken a concern to your board, what was it and how did the board respond?
6. What has your experience been with repairs and maintenance?
7. Do you have enough information about your condominium’s reserve fund? Are you satisfied with your condominium’s reserve fund planning?
8. Have you had problems with your condominium board? What were the challenges?
9. Have you pursued mediation or arbitration to resolve a dispute with your board? If so, what was your experience?
10. What would improve your ability to resolve disputes with your board?
11. Are there other experiences with condominium ownership that you would like to tell us about?
12. Are there other topics related to condominium ownership that you would like to learn more about?

New Customer Service Standard

The first change at Tarion is the creation of a customer service standard governing warranty claims for construction deficiencies in common elements of condominium corporations whose declarations and descriptions are registered on or after July 1, 2010. The particulars of the new customer service standard are set out in Ontario Regulation 274/10, which significantly amends Ontario Regulation 892, being the blueprint for the administration of the Tarion warranty plan program. No changes are made to the Condominium Act, 1998, of which section 44(10) provides that the filing of a performance audit constitutes a warranty claim for the items contained in that audit report.

A customer service standard for freehold homes and condo units has been in place since 2003 and reportedly works well, so a comparable standard for deficiencies in condominium common elements has been created. This standard provides timelines and processes for making and assessing warranty claims by condominium corporations in respect of their common elements. Until now, many warranty claims languished for several years for lack of clear timelines or processes, and condominium corporations could request inspections and re-inspections of unresolved warranty items several years past what developers considered to be a reasonable cut-off period. The new customer service standard creates fixed deadlines for work to be completed by the developer and for conciliation to be requested by the condo corporation.

For first-year warranty claim items, the vendor (developer) must complete repairs within the first 30 months after registration of the condo declaration. Repairs of second-year warranty items must also be completed by the same deadline as first-year items. If the work is not completed by that 30 month deadline, conciliation must be requested by the condo by the end of the 32nd month following registration, failing which (or if conciliation is started and cancelled), the warranty claim is considered to have been withdrawn.

Other features of the new customer service standard include the following:

• If the vendor does not perform work specified in the conciliation report within 90 days after delivery of the report, then Tarion pays for the work out of the guarantee fund.

• Tarion itself also has the power to conduct a conciliation at any time if it appears that either the condominium corporation or the vendor are not acting reasonably to resolve their issues related to first or second year warranty claims.

• The process for making and dealing with warranty claims for major structural defects (“MSDs”) is largely unchanged but is made somewhat simpler in terms of procedure.

• A new $1,000 fee will be payable by condominium corporations for a conciliation of a dispute, whether for a first year, second year or MSD claim. No fee was previously charged. Developers are required to pay a conciliation fee of $3,000, up from the previous fee of $1,000.

The creation of a deadline by which time repairs must be completed is a positive feature in the new standard. However, the deadline period of 30 months (2.5 years) after the registration of the declaration is far too long to be meaningful in most situations. Conversely, the short 60 day window within which condominium corporations must request a conciliation after the repair deadline expires is disproportionately short, especially considering that the condominium’s warranty claim is deemed to be abandoned thereafter. Many condominium corporations will unwittingly allow their warranty clams to be extinguished by this harsh “deemed abandonment” provision, particularly if they are not working closely with a lawyer.

New Monetary Cap

The second change to Tarion is the creation of a monetary maximum of $50 million that can be paid out by the Tarion guarantee fund for any one condominium project, where unit sales begin on or after July 1, 2010.

The nuts and bolts of the new cap are contained in Ontario Regulation 275/10, which adds a new subsection 6(12) to Regulation 892, being the document that sets out the administration of the Tarion warranty plan.

The stated purpose of this new cap is, of course, to reduce the likelihood of the Tarion guarantee fund being wiped out by a single bad project or a number of smaller condo projects that suffer catastrophic failure as a result of poor construction. In reality, the cap is designed to help stabilize the enrollment fees paid by developers.

For condos where unit sales began before July 1, 2010, the maximum recovery under the Tarion warranty for a condominium development is $300,000 per unit for construction deficiencies to the units plus the lesser of $50,000 per unit and $2.5 million in total for deficiencies in the construction of the common elements, with no overall limit. For example, a 300-unit condominium complex could potentially give rise to a covered liability of $92.5 million, as follows:

$90 million for deficiencies to the units (being 300 units x $300,000)

plus: $2.5 million for deficiencies to the common elements (being the lesser of $50,000 per unit ($50,000 x 300 = $15 million) and $2.5 million)

gives: $92.5 million

With the new amendments now in force, the cap for any one condominium project (where unit sales began on or after July 1, 2010) is $50 million in total for construction deficiencies in the units and the common elements. The practical result is that condominiums whose first unit was sold prior to July 1, 2010 and new condominiums with fewer than 160 units will not be affected by this new monetary cap in any significant way. New condominiums with more than 160 units, however, are at risk of not making a full monetary recovery from Tarion, and those with many more than 160 units are at risk of a much greater potential shortfall in absolute dollars.

While it would be an exceedingly rare case to see any condominium development require a payment from the guarantee fund anywhere close to $50 million, this monetary cap needs to be kept in mind and considered when devising the overall strategy in pursuing any claim for construction deficiencies at a large condominium.

Get Legal Advice

Boards and property managers at new condominiums that are subject to these new features of the Tarion warranty plan (i.e., declarations registered after July 1, 2010 or where unit sales begin after that date) should get legal advice at an early stage to assess their corporation’s legal position. While many aspects of the new customer service standard might help speed claims along and appear to simplify the process, the administration of warranty claims has become potentially more risky since claims can be lost simply by missing deadlines. Condominium corporations embarking on the Tarion warranty claims process are well-advised to get help from their lawyer. We’ll write more on this point in our next entry, where we will focus more closely on why many condo corporations choose not to seek counsel and why this is a bad idea.

A legislative history is also available and can be accessed from the alphabetical list of current consolidated law.  The e-Laws site also hosts repealed statutes and allows you to view the wording of a specific statute at a specific point in time, which is very handy if you need to know the state of the law as of a certain date.  Detailed help and FAQs are available throughout the site.

As a special feature, we're offering a weekend giveaway that tests your knowledge about our Condo Act and helps you get to know e-Laws a little better.

The Giveaway:

The first condo unit owner, director or property manager to post a comment correctly identifying the number of times the Condominium Act, 1998 has been amended wins a $25 Esso gift certificate.

Terms:

1. Comments must be posted on this site in response to this entry.
2. You don't have to give your last name.
3. Valid email address must be provided (it won't be displayed).
4. Ontario residents only.
5. Prize awarded in sole and absolute discretion of the author.

Good luck!

Definition

(5) In subsections (6) and (7),

“eligible security” means a bond, debenture, guaranteed investment certificate, deposit receipt, deposit note, certificate of deposit, term deposit or other similar instrument that,

(a) is issued or guaranteed by the government of Canada or the government of any province of Canada,

(b) is issued by an institution located in Ontario insured by the Canada Deposit Insurance Corporation or the Deposit Insurance Corporation of Ontario, or

(c) is a security of a prescribed class.

In practical terms, this amendment allows condominium corporations to purchase investments issued by credit unions or caisses populaires that are located in Ontario and are insured by DICO. This effectively destroys the monopoly enjoyed until now by CDIC-insured banks and trust companies and provides greater choice of investment products and providers.   

A list of CDIC-insured institutions is here.  A list of DICO-insured institutions is here.

Condominium corporations that are unhappy with the investment choices offered by their banks now have more flexibility as to where to purchase investments.  This provides considerably more leverage when negotiating rates and terms.  Choice is good.

Qualifications of Directors

Clause 29 (1) (c) of the Condominium Act, 1998 is amended by striking out "a mentally incompetent person" and replacing that with "incapable of managing property within the meaning of the Substitute Decisions Act, 1992".

Clause 29 (2) (a) is amended by striking out "a mentally incompetent person" and replacing that with "incapable of managing property within the meaning of the Substitute Decisions Act, 1992".

The words “mentally incompetent” are being phased out of all Ontario legislation in favour of the more precise definition provided in section 6 of the Substitute Decisions Act, 1992, as follows:

Incapacity to manage property

6. A person is incapable of managing property if the person is not able to understand information that is relevant to making a decision in the management of his or her property, or is not able to appreciate the reasonably foreseeable consequences of a decision or lack of decision.

The Substitute Decisions Act also provides for a court to order a person to be assessed and for a guardian to be appointed to administer an incapable person's property. 

Powers of an Inspector

With the repeal and replacement of the Public Inquiries Act, subsection 130 (3) of the Condominium Act, 1998 is repealed and replaced.   Here's the original s. 130(3):

Powers of inspector

(3) The inspector shall have the powers of a commission under Part II of the Public Inquiries Act that the order states and when the inspector exercises those powers, that Part applies to the inspector’s investigation or audit as if it were an inquiry under that Act.

And here is the new one, to come into force on a day to be proclaimed:

Application of Public Inquiries Act, 2009

(3) Those provisions of section 33 of the Public Inquiries Act, 2009 that the order states apply to the inspector's investigation or audit.

While this new wording may appear to reduce the clarity of the earlier wording as to an inspector’s powers, the new wording still allows a court to pick and choose the powers granted to an inspector and also the protections afforded to witnesses that give evidence during the course of the inspector’s investigation or audit.

As always, great care must be exercised in drafting the court order appointing an inspector.  A poorly-drafted order may leave the inspector with insufficient power to complete the assigned duty and witnesses lacking the maximum protection from reprisal by employers or others for making representations or giving evidence in an inquiry.

Creation of Common Elements Condo Corporations

For the creation of common elements condominium corporations, the following minor amendment clarifies the reference to the now-repealed Certification of Titles Act:

Subclause 139 (1) (a) (iii) of the Condominium Act, 1998 is amended by adding "as that Act read immediately before subsection 2 (1) of Schedule 17 to the Good Government Act, 2009 came into force" after "the Certification of Titles Act".

This amendment, which is now effective, has no bearing on existing common elements condominiums.

Reference in other statutes

Both the Land Titles Act and the Registry Act are amended by striking out "the Condominium Act" wherever it appears and substituting "the Condominium Act, 1998 or a predecessor of that Act".   Other minor modifications are made as to the powers of the Director of Titles and in respect of registering a condominium declaration on title to certain lands.

Check it out

Most of the amendments described above came into force on December 15, 2009 when the bill received Royal Assent.   The changes related to the Public Inquiries Act will come into force on a day to be proclaimed.

The most current version of the Condo Act and any Ontario statute can always found on the government's e-Laws website.    Because of the vast number of statutes amended by Bill 212, however, it will likely take a few more days until all statutes are updated.  

For more details on Bill 212, see the legislative notes and complete bill here and see the government's news release here.

It is difficult to predict the effects of the increased monetary limit in small claims proceedings, but there is a strong possibility that a greater number of litigants will bring claims. Condominium boards and managers should therefore be prepared for an increase in the number of claims made by unit owners, service providers and other condo stakeholders and know how to deal with them effectively. 

Because a defence must typically be filed within 20 days of being served with a claim, the manager should notify the corporation’s lawyers as soon as possible after being served with a claim, and have ready all information and documents relevant to the case. In cases covered by an insurance policy, written notice of claims should be given to the corporation’s insurer, and all claims should be disclosed on status certificates and referred to in the annual audit inquiry letters to the corporation’s lawyers.

Condominium corporations can also take advantage of the increased small claims limit to commence their own claims to recover money owing by unit owners and third parties. As always, they should get legal advice to help weigh the benefits and costs of legal proceedings in small claims court as compared to other available options. Often a stern letter seeking compliance or registering a lien against a unit owner is sufficient to obtain your objective.  Get legal advice before posting chargebacks, however, so as to minimize the chance of a claim for a wrongful lien -- These types of claims are becoming increasingly common.

It is also important to remember that lawsuits must be commenced within 2 years of the date the debt became payable or the date that damage occurred, after which time the right to sue is forever lost. As we described in an October 2008 entry (see here), what used to be a 6-year limitation period was reduced to 2 years in 2004.  

• confirmation that the costs of services provided to unit owners by the association will enjoy the benefit of the association’s statutory lien;
• considerable discretion for an association to decide whether or not to strictly enforce its rules and governing documents;
• new provisions dealing with termination or restructuring of a project in the face of a natural disaster;
• creation of a ‘cooling off’ period before an association commences construction litigation against a developer;
• increased mandatory insurance, and other topics.

In terms of owner/association issues, UCOIA 3.0 introduces as a major new feature a stand-alone bill of rights for owners, known as the Uniform Common Interest Owners Bill of Rights Act ("UCIOBORA"). Some of the highlights of this bill of rights include:

• Powers and duties of a unit owners association and their executive boards.
• Treatment of association bylaws, rulemaking, operation and governance, notice methods, meeting and voting procedures,together with governing provisions for the adoption of budgets and special assessments.
• Authority to discipline unit owners for failure to pay assessments.
• Flexibility for Boards to decide whether to enforce the letter of each provision of its declaration, bylaws, or rules, ordecline to enforce or compromise on such.
• Guidance for record keeping.
• Procedures for the removal of officers and directors, and protections for declarant-appointed directors.

Whether any state enacts law incorporating any or all of the features of this new bill of rights remains to be seen.

Feel free to post a comment and share your thoughts on this important milestone or if you discover any helpful lessons in the American model laws that can help improve our own condo law.

Each condominium unit is still assessed as a single-family residential unit for the purposes of the municipal tax bill.

This is the case because the Assessment Act of Ontario (the legislation which specifically covers the way properties are assessed in Ontario for municipal and school taxation purposes) does not identify condominiums as a specific category of assessment. Thus a condominium-specific tax rate cannot be created by the local municipality, since the municipality can only do those things granted to it by provincial legislation. Since the Assessment Act of Ontario does not permit a distinct category of assessment for condominiums, the municipality does not have the authority to create a specific tax rate for condominiums, even if they wished to do so.

Thus the Assessment Act of Ontario must be amended to permit a category of assessment for condominiums and therefore permitting the municipality, if they chose to do so, to create a condominium-specific tax rate. 

However, we must be aware that although the municipality would have the ability to establish a condominium-specific tax rate with this amendment, they would probably not be mandated to do so by this change.

Our condominium Board of Directors recognized this deficiency in legislation some time ago. They felt, that if this change is ever to occur, it will not happen on its own. The Ontario-wide condominium community must ask for it, in fact must lobby for it.

Our Condo Board of Directors felt so strongly about this issue, that they felt something had to be done and were ready to take action. They also felt that their action had to be shared with other condominium Boards of Directors in Ontario.  

We undertook the following five-part plan:

1)    We submitted a letter to our local municipality (the Town of Markham) asking Council to pass a motion requesting the Province of Ontario to amend the Assessment Act of Ontario to create a specific category of assessment for condominiums. Once this motion was passed, we asked them to send their motion to the Association of Municipalities of Ontario (the municipal lobby group) requesting them in turn to support this motion and so notify the Government of Ontario of this legislative requirement.

2)    We sent a letter to our local MPP requesting him to support our action to amend the Assessment Act of Ontario and to so petition the Minister of Finance (whose Ministry is responsible for the Act.) to make this amendment.

3)    We met with the principals of our property management company, Del Property Management Company and asked them to place this issue before the Boards of Directors for each condominium they manage.

4)    We sent copies of all the correspondence we had taken to the Toronto Chapter of the Canadian Condominium Institute and asked them to use their offices to lobby the Government of Ontario accordingly.

Although our condo corporation initiated this action, we feel that success can only be achieved if the many other condo corporations in Ontario undertake to do something similar, if not the same thing that we did. Only with our collective many voices, representing this sizeable voter bloc in Ontario, can we hope to be successful in our endeavors.

What has happened since we began this initiative in February, 2008:

1)    We met with our MPP, Michael Chan, and presented him with a letter requesting his support for our action. He wrote a letter to Dwight Duncan, Minister of Finance, on our behalf and asked the Minister to respond to our petition. Recently, we received a letter from the Minister, the Hon. Dwight Duncan, acknowledging receipt of our letter. Although he did not unilaterally accept our petition, he did not outright reject it either.

2)    The Town of Markham, after receiving our letter, referred it to their ad-hoc Condominium Working Group, made up of Councilors and municipal staff to discuss this issue and others around the explosive growth of condominiums in Markham. We requested recognition and appointment to this committee. On June 24, 2008, the Council of the Town of Markham appointed a representative from our condo corporation to this committee. We are now at the table.

3)    The Canadian Condominium Institute – Toronto Chapter has adopted this issue as one of its priorities and, in conjunction with the Association of Condominium Managers of Ontario (ACMO), hired a lobbyist to champion these issues before the Government of Ontario.

4)    Del Property Management reacted positively to our initiative. They agreed to take our initiative and put the information in 2 in-house Del newsletters. The first would go in their “Del-o-gram” which primarily goes to Boards of Directors and Property Managers suggesting that this topic be on a future agenda of the Boards of Directors of each condominium they manage. The second would be to reprint this article in “Condominium Life” magazine which generally reaches all condominium owners in the various properties they manage.

Success in this endeavour cannot be accomplished overnight. Nor did we expect that it would. However, we are in this effort for the long haul.

At this moment, we believe that we are only one of a very few condominium corporations to undertake this initiative. But to be successful, we believe that all condo corporations in Ontario need to undertake an effort similar to ours. 

Finally, remember that condo living is now a way of life for an ever-increasing number of people in Ontario. We have now become a very sizable voting bloc among the electorate of Ontario and because of this; we should start using this influence.

Therefore -- The board of directors of our condominium urges all the other condominium board of directors in Ontario to lobby their municipal council and MPP for this change. 

Together we can be successful.

Ernest (Ernie) Nyitrai
Member, Board of Directors
YRCC 636
25 Austin Drive
Markham, ON  L3R 8H4
(905) 477-1511
enyitr618@rogers.com

Recommendation #1: Exempt developer-made agreements and loans from statutory rescission

The first part of the submission calls for the amendment of section 112 of the Condo Act to disallow a post-turnover condominium board from using that section to terminate agreements, easements or leases related to the financing, development, supply and installation of green energy systems.

It is easy to understand that third-party suppliers and lenders would be hesitant to finance, supply or install green energy systems to a new building when there is risk that the post-turnover board will terminate the arrangement. The problem, however, is that the wording proposed by TAF is far too broad and open to significant abuse by developers. The amendment to section 112 that is proposed in item #1(a) on page 3 of the submission is that:

a loan to a condominium corporation which has been fully advanced to the corporation (or to whomsoever it may direct) is not within the purview of subsection (1) [and therefore the loan cannot be terminated or rescinded by the post-turnover condominium corporation]

This clause does not limit or restrict the type of loans that are exempt from termination or rescission under section 112 to those made for the supply/installation of green energy projects. If accepted, this proposal could result in post-turnover condominium corporations starting life with a significant debt but with no ability to terminate or rescind arrangements that were made by the corporation while under the developer’s control. Such loans could be made for any purpose, including the purchase of developer-owned units or assets (including green energy equipment), and could contain improvident terms and unfavourable interest rates.

The most likely outcome of this proposal, if accepted, is developers downloading to new condo corporations the cost of energy-efficient equipment, which may or may not be “green energy projects” as defined in the GEA. This outcome seems to be contemplated by the proposed amendment to section 112 set out in item #1(b) on page 3 of the submission, which provides that:

any agreement, easement or lease involving the development of a green energy system for a condominium corporation (including the provision of any equipment, labour, materials, supplies and/or services in connection therewith) that is entered into by or on behalf of the condominium corporation with one or more third parties (e.g., geothermal, solar photovoltaic, wind turbine or other types of systems, where the third party will have to invest significant funds prior to registration in order to ensure that the system is installed, operative, and functioning properly when people move in) is not within the purview of subsection (1) [and therefore such an agreement, easement or lease cannot be terminated or rescinded by the post-turnover condominium corporation]

While this amendment is nicely couched in the environmental lingo, its underlying purpose is clear – to permit developers to download the cost of equipment or require the condo corporation to purchase that equipment from the developer. The justification for the amendment, however, is flawed. If a developer provides a building component, such as an elevator or a greenhouse as part of a building, what agreement might there be for a post-turnover board to terminate or rescind? How about an equipment/asset purchase or finance agreement? How about an agreement for division of the profits from electricity sales? If the developer wants to provide a fancy green power project as part of its project, it can do that, but it ought to be bearing the cost and passing it along as part of the purchase price.

Moreover, just because a green energy project is green doesn’t necessarily make it desirable, wise or prudent, or worthy of stripping condo corporations of the statutory right to rescind agreements that they entered into while under the control of their developer. The legislature would be doing a great disservice to unit owners by giving effect to this recommendation and watering down the consumer protection afforded by the Condo Act.

Recommendation #2: Give creditors access to special condo remedies

The second part of TAF’s submission (item #2 on page 3) is considerably more problematic. It calls for amendments to Part IX of the Condo Act that would entitle “creditors” to apply to the Superior Court of Justice for remedies under sections 130 (appoint inspector), 131 (appoint administrator) and 134 (obtain compliance order), presumably to help enforce creditors’ rights over loans in default. There are several serious problems with this proposal:

First:  The proposed wording will include all creditors, rather than just lenders for green energy projects. Any lender, as well as trade creditors, unsecured creditors, judgment creditors, etc., would be included by this wording and would be given the same standing and rights as unit owners and mortgagees to obtain special condominium remedies to wrestle control away from the democratically-elected board of directors. Granting these special rights to this group is both unprecedented and unjustified and could open the floodgates to a whole host of evils.

Second:  Whether intentional or not, TAF’s proposal seems to exempt creditors from the mandatory requirement to submit a disagreement to the mediation and arbitration mechanism under section 132 of the Condo Act, which applies to agreements between condo corporations and their unit owners, sister condo corporations, managers and declarants/developers. Seeing as how the legislature has made mediation and arbitration mandatory in a wide variety of circumstances, giving “creditors” the ability to side-step mediation/arbitration and to fast-track their cases into court is inequitable.

Third:  Giving creditors the right to seek the appointment of inspectors, administrators or to obtain compliance orders is unnecessary overkill. At present, private and public lenders alike routinely advance loans to condominium corporations for sums from $100,000 to multiple millions of dollars to finance major repair and replacement of common elements and other projects. All of those creditors have contractual protections that provide the lender with security and rights, and creditors always have the right to go to court for a suitable remedy or an order for the payment of money.

Fourth:  On obtaining a money judgment, a creditor can examine a representative of a judgment debtor condo corporation in aid of execution. In addition, section 23(6) of the Condo Act states that a judgment for the payment of money against the corporation is a judgment against each owner. In other words, even if the condo corporation becomes insolvent, an aggrieved creditor can pick the pockets of each of the unit owners. Creditors and lenders, regardless of the purpose of their loans, do not require the ability to appoint administrators, inspectors or obtain compliance order to collect a money debt against a condo corporation. This proposal simply allows unfriendly creditors to (ab)use these special remedies as a sledgehammer against a condo corporation. Why give a front door key to the barbarians at the gates?

Fifth:  It is hardly plain or obvious that giving creditors access to these remedies is reasonably required to encourage lenders to finance green energy projects, given that there is already a booming finance market for condominium corporations and their special projects. TAF’s submission offers nothing other than a bald statement that the current wording of sections 130, 131 and 134 are “barriers in the Condo Act that deter or restrict the supply of financing for green energy projects to new or existing condominium projects.” That is a gross overstatement and is misleading.

Because of the many evils that would be created in exchange for no appreciable benefit to lenders, the legislature would be wise to reject item #2 in the TAF submission. The fact that TAF and the condo developers would put forth this recommendation is highly surprising, and needlessly (and fatally) taints what might otherwise have been a fairly reasonable and positive submission.

The role of TAF

The fact that this developer-slanted pitch was made under TAF’s letterhead bears some comment. As an agency of the City of Toronto, it is surprising that TAF is championing the developer’s side to such a great extent and appears to have given little or no thought to the consequences to post-turnover condominium corporations and their unit owners. The fact that there appears to have been no consultation with the rest of the condominium industry (i.e., ACMO and CCI) further gives the strong impression that TAF’s focus and priorities are less than ideally balanced. In order to maintain its credibility with the rest of the condominium industry and the public, TAF must be careful to be attentive to the needs of the other players in the field, namely the unit owners, and to be more inclusive. We will be watching.

Don’t miss the forest for the trees!

Both TAF and the Ontario Government must remember that, in this quest to become greener, it is paramount that we do not weaken effective consumer protection (such as the Condo Act) and create problems that did not previously exist. Being green is important, but defending consumer protection is more important. The condominium marketplace is complicated enough for consumers without further tipping the balance in favour of developers. While legislative change may be necessary to help allow for greener development, the potential negative impacts on consumer protection must be closely examined, considered and discussed by all stakeholders before changes are legislated.

Update (May 8, 2009):   Harry Herskowitz, who was involved in preparing TAF's submission, responded to most of these issues.  His response is posted on the Saxe Envirolaw blog.   Check it out here.

While these codes are highly technical and are largely unintelligible to most of us, there is probably still room for improvement.  The more technically-inclined condominium unit owners, board members, managers and building professionals, as well as their related associations across Canada, might have a number of helpful comments or be able to provide other input to help revise these national codes for everyone's benefit. 

Here’s how you can participate:

1. Request a change to the codes:
2. Review the proposed changes;
3. Submit your comments/suggestions as part of the public consultation process;
4. Attend and observe the proceedings;
5. Volunteer for membership on one of the standing committees.

Comments on the proposed changes for 2008 are now closed but another public review on proposed technical changes to the 2005 National Model Codes will be held in 2009. Stay tuned to the CCBFC’s website for updates on the review process for 2009 and express your interest before February 2009 to sit on one of the standing committees.

At the beginning of this decade, when the small claims court monetary limit had last increased (from $6,000 up to $10,000), the enabling regulation was made on November 22, 2000 and became effective on April 2, 2001, less than five months later.  In the absence of an explanation, there appears to be little reason behind the 12.5 month lead-up to implementing the increases announced this week. 

There is no doubt that some of the more complicated reforms will require time for the bar, bench and the courts to prepare, but the monetary increases could and should have been enacted separately from the other initiatives and made effective much sooner to maximize the benefit and to help relieve some of the burden on the courts and litigants now, or at least during 2009.

It may be true that these reforms will actually lead to lawsuits being resolved faster and more affordably as promised in this week’s news release, but we will be waiting until 2010 to find out for sure. They say that justice delayed is justice denied. The same might be partly true of justice reforms.