Correcting Obvious Errors in By-laws

We have all seen mistakes in documents, newspapers or magazines – almost everywhere these days. We have probably mentally corrected these errors – replacing words that are missing, rearranging words that are out of place or even changing an affirmative statement to a negative statement where the intention is obvious.

Despite the best of intentions, similar errors can occur in condominium documents – no matter how often the document might be proof-read. But how should these errors be corrected? The Condominium Act, 1998 (the “Act”) allows an error or inconsistency that is apparent on the face of a declaration to be corrected by the Land Registrar. This correction is not effective until the amended declaration is registered.

What about obvious errors in condominium bylaws? Do such errors require the preparation of a new by-law and a meeting of the owners (to approve the by-law)?

In our view, clear or obvious errors in a by-law can be corrected without returning to the owners for another vote. A new by-law must of course be prepared and registered (in order to correct the error), but it’s our view that this can, and should, be done without a further vote of the owners.

Here’s our reasoning: A flawed or incorrect by-law does not reflect the true wishes of the owners (as already expressed by vote in favour of the by-law). So, our view is that a correcting by-law must be registered to reflect the vote that has already taken place.

What may qualify as an “obvious or clear error” will depend upon the particular circumstances.

Notice of Lien Must Be Accurate

In a recent decision, the Ontario Court of Appeal has made it very clear that a Notice of Lien must be accurate. Here’s my summary of the decision from Condo Cases Across Canada, which I author for publication by the Canadian Condominium Institute (CCI) National.

York Condominium Corporation No. 82 v. Bujold (Ontario Court of Appeal) April 3, 2013

Lien discharged because of insufficient notice of lien

The corporation registered a lien on September 25, 2007, covering arrears from June 1, 2007. The owner challenged the validity of the lien. The Court said that “the registration on September 25 meant that the liens that arose after June 25 were valid, namely, the liens relating to defaults on July 1, August 1, and September 1.” “Delayed registration does not invalidate all liens, just those that arose from defaults that occurred more than three months before the registration.”

The Court of Appeal accordingly said that the lien was “potentially valid” for any amounts owing after June 25, 2007. The Court said, however, that the corporation’s notice(s) of lien had to be accurate in that the notice(s) had to disclose the full amount secured by the lien to be registered. [Once registered, the lien secures all subsequent arrears. But the notice(s) must disclose the full amount secured by the lien as at the anticipated registration date.] In this case, the notice of lien was invalid. Therefore, for different reasons, the Court of Appeal upheld the lower Court’s order that the lien be discharged.

Insured Damage

When dealing with damage to a condominium property, whether to the common elements or to standard unit(s), the first question is: “Is this insured damage?” If the answer to this question is “yes”, special insurance principles apply.

By “insured damage”, I mean damage of a sort that is covered by the condominium corporation’s property insurance policy, if one ignores the deductible. [I use the term “deductible loss” to describe insured damage falling within the deductible.]

Sections 99 (1) and (2) of the Condominium Act list perils that must be covered by the corporation’s insurance. But the insurance policy can, and normally does, provide additional coverage.

If you conclude that damage is “insured damage”, the following principles apply:

  • An owner can never be held responsible for any insured damage that is covered by the corporation’s policy. This is because the corporation’s policy is for the corporation and for all owners.
  • Insured damage is still insured damage if the corporation decides not to make an insurance claim. But if the corporation decides not to make an insurance claim, the corporation must pay any amount that would have been paid by the insurer if a claim were made.
  • Responsibility for the deductible loss is determined under Section 105 of the Condominium Act (including any insurance deductibles by-law passed by the corporation).

Again, these principles only apply in the case of “insured damage”. In order to determine whether or not particular damage is “insured damage”, you could:

  • Ask the corporation’s insurer (even if no insurance claim is being submitted). [You could begin by asking the question to the broker. The broker may be able to answer, or the broker may ask the insurer, and the insurer may have an adjuster investigate and respond.]
  • Review the insurance policy or have the corporation’s legal counsel review the policy.

Consider a Ranking Proxy for Elections

Proxies for the election of condo board directors can sometimes be confusing. We often recommend using a "ranking proxy" that ranks the candidates in the signatory’s order of preference.

Proxies can be tricky to manage for the following reasons:

  • Section 52 (5) of the Condominium Act says that the proxy form must indicate the candidate(s) for whom the signatory is voting. In other words; the signatory’s election choices must be made at the time the proxy is signed.
  • There may be more than one election, with different participating voters, at the meeting. For example, there may be one election, pursuant to Section 51 (6) of the Condominium Act, in which only the owners who occupy their units can vote, and there may be another election at the same meeting, in which all owners can vote.
  • The candidates may not be the same in each election.
  • One or more candidates may “drop out of an election.” For example, a candidate may simply decide to withdraw his or her candidacy (after proxies have been signed), or a candidate may be elected (in one election) and then, of course, will not be a candidate in any subsequent election.

Using a “ranking proxy” may help avoid some of this confusion. If a chosen candidate is no longer running in an election, the scrutineer simply skips to the next chosen candidate in order, and the same ranking instruction can also apply to each election at the meeting. Of course, adjustments to the proxy form would be required if the signatory’s order of preference is different for each election at the meeting.

Reminder: Register now for the Canadian Condominium Institute (CCI) Seminar, to be held on May 23, 2013!

The Canadian Condominium Institute (CCI) Ottawa Chapter Seminar, "How to Run an Effective Meeting" will be taking place at the Nepean Sportsplex on Thursday May 23, 2013 at 7:00pm. Nancy Houle of Nelligan O’Brien Payne LLP will be one of the speakers.

This session will cover practical skills that can assist in running a smooth meeting, including topics such as:

  • Proper notice
  • Registration and use of proxies
  • Rules of order, and
  • Dealing with contentious issues, etc.

For more details or to register for the seminar, visit the CCI Ottawa website by clicking here.

Election Acclamations

I wrote an article about election acclamations, which was published in the Spring 2013 issue of the Association of Condominium Managers of Ontario (ACMO) Condominium Manager (CM) Magazine. I thought our readers would find the article interesting so I have posted it below with CM Magazine’s permission.

Election Acclamations: Proceed with Care

Condominium Manager Magazine, Spring 2013

By James Davidson, LLB, ACCI, FCCI

Condominium directors are often elected “by acclamation.” This typically occurs when the number of candidates does not exceed the number of vacancies.

But are such acclamations legally correct? Do the candidates “automatically” arrive on the board if the number of candidates does not exceed the number of vacancies?

In my view, in strict technical terms a vote of the owners is required in order to elect candidates onto a condominium’s board of directors. This comes from Section 53 of the Condominium Act which states as follows:

“Unless otherwise provided in this Act, all questions proposed for the consideration of the owners at a meeting of owners shall be determined by a majority of the votes cast by owners present at the meeting in person or by proxy if there is a quorum at the meeting.”

In my view, this means that a candidate can only be elected to the board based upon a vote at the meeting. And a majority of the votes must be in favour of the person’s election to the board.

In most cases, there is no controversy; and acclamations are probably fine. But sometimes this is not the case. Among the many AGMs that I have attended over the years, I have attended two AGMs where there was only one candidate for one vacancy, and the candidate was not elected to the board. In each case, owners were asked to vote on the question of the candidate’s election to the board. And in those two cases, a majority of the votes cast was against the candidate’s election. So in other words, a majority of the votes cast was not in favour of the candidates’ election to the board.

Whenever I’m involved in an AGM election, I recommend the following procedures:

  • Step 1: Complete nominations of candidates;
  • Step 2: Have the candidates make brief presentations (if desired);
  • Step 3: Proceed to the election. [If the number of candidates does not exceed the number of vacancies to be filled by election, call for a motion from the floor, a seconder, and then a show of hands vote, on the following business: Election of the following candidates to the board of directors for the following terms: “Mary to be elected to the term expiring in the year X and John to be elected to the term expiring in year Y”].

Note that, as part of this process, it is important to identify which candidates will be elected to which terms, if the vacancies are for different remaining terms. If the candidates cannot agree on this, it may be necessary to structure a ballot vote to determine which candidate will take which term. In my view, this is something to be decided at the meeting of owners, not by board resolution (at the next board meeting).

In most cases, the above “show of hands” election (when the number of candidates does not exceed the number of vacancies) is a 15-second “rubber stamping” of the candidates as elected directors (including their terms).

But every once in a while, you may run into the rare case where a candidate is not elected to the board, even where there are no other candidates in opposition.