Now that the Standing Committee on Finance and Economic Affairs has concluded its public hearings and shifts to a line-by-line review of Bill 106 (of which Schedule 2 contains the proposed Condominium Management Services Act, 2015), we hasten to finish our review of the proposed CMSA.
As reported in a previous instalment, obtaining and holding a license is just the first hurdle for condo managers and management providers and is the first round of protection for condo corporations and unit owners. The CMSA creates a number of new obligations that go a long way to addressing some of the long-standing complaints about condo managers and many common problems. In this piece, we will summarize the major new obligations for licensees that this bill will create.
First: Section 56 entitles the regulator, after receiving a complaint about a licensee, to request information from a licensee about that complaint. The licensee receiving such a request must provide the information as soon as practicable. In deciding the complaint, the Registrar then has power to take a wide range of remedial steps, including issuing warnings, commencing proceedings to suspend or revoke the license or referring the case to the discipline committee.
Second: Licensees will be required to comply with a code of ethics to be established by regulation. They may face a discipline committee under section 57 to determine if there has been a breach of that code. If the committee finds that the code was breached, it may order individual condo manager licensees to take further educational courses and pay fines of up to $25,000 or pay costs of the proceedings to the regulator. In addition, and where a management firm is found to have breached the code of ethics, then its principal condominium manager may be ordered to take courses, or the firm may be required to fund educational courses for its employees. The discipline committee does not have the power to suspend or revoke a licence, but the registrar may. This interplay between the registrar and the discipline deserves attention in a separate piece.
Third: Section 53 clarifies that licensees must turn over condominium records to the corporation at the end of a management relationship and specifically prohibits holding condominium records hostage for unpaid management fees. This should eliminate or sharply reduce a common scenario. Further, the managers’ code of ethics to be established and the discipline decisions that interpret those provisions will invariably address the issue of whether or not electronic records fall within the type of records that must be produced. This is presently a murky area given that some electronic data is intended for use in proprietary software systems, but the current questionable practice of some firms in printing out and handing the condo corporation a stack of printed accounting reports is clearly inadequate and must be addressed definitively and enforced uniformly.
Fourth: Section 54 prohibits licensees from falsifying, furnishing or counselling others to falsify or furnish false or deceptive information about provision of their management services.
Fifth: Section 52 requires licensees to disclose to their clients (in a manner to be set by the regulator) their interests in a transaction or contract that their clients might or do enter into. This requirement is especially relevant as some management firms continue to adopt the American model of providing their clients with other services (e.g., landscaping, security, maintenance) through related companies. While there might be efficiencies and savings from such arrangements, there is also room for abuse and it appears that too many condo directors do not perform proper diligence in ensuring competitive pricing and effective oversight of service providers that are closely related to their management firm.
Sixth: A game-changer in the CMSA is section 55, which provides:
No counselling contraventions
- No licensee shall counsel, advise or knowingly assist a person to contravene this Act, the Condominium Act, 1998 or any other prescribed Act.
Thanks to this powerful provision, mild-mannered condo managers will have further reason to refuse unlawful instructions from the condo board or unit owners, among them being that they would be risking their licenses to obey those directives. Further, the perceived threat of a manager or management provider being replaced by a rogue board in favour of a manager who will carry out unlawful directives is essentially neutralized where the potential replacement manager has precisely the same legal obligations as the existing management. The significance of this section is hard to understate, and some observers note that this section actually transforms condo managers into the “condo police” that unit owners have been calling for. At a bare minimum, this section crystalizes condo managers’ obligation to do the right thing and to respect the applicable legal requirements.
Seventh: Section 48 requires licensees to have written contracts with their condominium clients and to follow those contracts. This provision actually protects condo corporations by requiring them to enter into a written contract that contains certain provisions that clarify key elements of the relationship, thereby eliminating certain common scenarios that arise from vague or non-existent contract provisions. Smart condo boards have historically asked their lawyers to review management agreements before signing, but too many sign lousy contracts or entirely forego the contract and make a handshake deal, which are decisions they will invariably regret when something goes wrong. This section creates the basis for a mandatory, minimal form of contract offering basic protections to condo corporations.
While these seven new requirements are seemingly impressive, what teeth does the CMSA include to help ensure that they are followed?
For starters, the registrar may commence proceedings to suspend, revoke or refuse to grant a new license or renewal of a license, especially in the case of repeat offenders.
In addition, the regulator may apply to Superior Court for compliance order under section 66, as follows:
- (1) If it appears to the director [of the regulatory body] that a person is not complying with this Act or the regulations or an order made under this Act, the director may apply to the Superior Court of Justice for an order directing that person to comply, and, upon the application, the court may make the order that the court thinks fit.
Next, the regular may institute a provincial offenses prosecution under section 67:
- (1) A person or entity [other than the regulator] is guilty of an offence if the person or entity,
(a) furnishes false information in any application under this Act or in any statement or return required under this Act;
(b) fails to comply with any order, direction or other requirement under this Act, other than an order made under section 57; or
(c) contravenes or fails to comply with any section of this Act or the regulations made under the Act, other than a code of ethics established under section 76.
The maximum penalty for convicted individuals is a fine of up to $50,000 and a 2-year jail term. Convicted firms are subject to fines of up to $250,000. And the court may, in combination with a conviction, order the offender to pay compensation or make restitution.
Considering that the only code of ethics and standards are presently voluntary, the substantial new obligations in the CMSA (that are mandatory and backed by potent enforcement tools) are a welcome development. They will undoubtedly provide a further level of protection to condo corporations and unit owners.
When our continuing saga on the CMSA continues, we explore who will administer and enforce all this stuff.