Thank You For Taking Part In The Quiz!

The Great Eastern Ontario Condo Quiz is Over!

*For full contest rules, including a description of the prize, please click here

Thank you to those who participated in The Great Eastern Ontario Condo Quiz. We will be drawing a lucky winner from the successful ballots we received over the past four weeks on Friday, November 1st. The winner will be announced in a blog post on Thursday, November 7th. We will also be contacting the winner individually.

Good luck to everyone who entered!

NO PURCHASE NECESSARY TO ENTER OR WIN. Open only to legal residents of Ontario who are of legal age of majority and at least nineteen (19) years of age at the time of entry. Not open to employees or immediate family members of employees of Nelligan O’Brien Payne LLP or its affiliated entities. Contest closes at 11:59 p.m. ET on October 31st. One (1) prize available to be won consisting of $500.00 CAD in legal services from the Condominium Law Group at Nelligan O’Brien Payne LLP, and a Nelligan O’Brien Payne merchandise prize package. Draw will be conducted on or about November 1, 2013, and winner will be announced on November 7, 2013. Odds of winning depend on the total number of eligible entries received for the drawing at issue. Mathematical skill testing question must be answered correctly to win. For full rules, please click here.

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Event Reminder: Condo Conundrums Session 2013

November 28th
1:30 PM – 3:30 PM
The Hellenic Community of Ottawa (1315 Prince of Wales Drive)

Don’t miss your chance to join eight of our condo law experts for an entertaining and informative afternoon. Mingle from table to table, each hosted by one of our condo law lawyers, for a lively discussion of current issues of interest in the condominium community, and find the answers to your questions! This event is free.

To register: please contact Kristen Cinnamon by email or at 613-231-8271.

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New Accounting Standards Apply to Condominium Corporations

In 2006, the Canadian Accounting Standards Board (“AcSB”) announced that public companies in Canada would be required to adopt International Financial Reporting Standards (“IFRS”) beginning January 1, 2011. The AcSB undertook a separate project to review the needs of not-for-profit organizations and as a result created the Canadian Accounting Standards for Not-for-Profit Organizations (the “ASNFPO”).

While not-for-profit organizations had the option to adopt the ASNFPO early, the ASNFPO came into effect as of January 1, 2012.

A question has been raised about whether or not the ASNFPO apply to condominium corporations in Ontario.

In my last post I explained that the corporate legislation that governs not-for-profit corporations in Ontario does not apply to condominium corporations in Ontario. However, it is not corporate law that determines which accounting standards apply to condominium corporations; it is tax law that applies.

Section 4400 of the CICA handbook, which relates to financial statement presentation by not-for-profit organizations defines not-for-profit organizations as:

…entities, normally without transferable ownership interests, organized and operated exclusively for social, educational, professional, religious, health, charitable or any other not-for-profit purpose. A not-for-profit organization’s members, contributors and other resource providers do not, in such capacity, receive any financial return directly from the organization.

The Income Tax Act (the “ITA”) defines non-profit organizations in paragraph 149.(1)(l), which definition includes many of the components set out in Section 4400. The conditions an organization must meet in order to qualify for exemption under paragraph 149.(1)(l) of the ITA are summarized in Interpretation Bulletin 496R published by Canada Revenue Agency (“CRA”).

Interpretation Bulletin 304R2, effective June 2, 2000, discusses various tax matters in respect of condominium corporations. At paragraph 4 of the bulletin, CRA states that:

…[a] residential condominium corporation that qualifies as a non-profit organization under paragraph 149(1)(l) is exempt from Part I tax on its taxable income… Although it is a question of fact whether a particular condominium corporation qualifies for an exemption under paragraph 149(1)(l), most residential condominium corporations qualify as non-profit organizations within the meaning of this paragraph.

As a result, the accounting standards that apply to a particular condominium corporation will be determined by the corporation’s tax status, not by its corporate status. Since most residential condominium corporations in Ontario qualify as non-profit organizations under paragraph 149.(1)(l) of the ITA, the ASNFPO will apply to condominium corporations, unless a particular corporation elects to adopt IFRS.

For more information about the new accounting standards, we encourage you to contact your accounting and tax advisors.

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Does the New Ontario Not-For-Profit Legislation Apply to Condominium Corporations?

In October 2010 the Ontario government introduced new corporate legislation to govern not-for-profit corporations in Ontario called the Not-for-profit Corporations Act, 2010 (the “ONCA”). While the ONCA is not yet in force, we are often asked what types of corporations the ONCA will apply to. For the purposes of this post, the question is: will the ONCA apply to condominium corporations in Ontario?

The short answer is no. The ONCA will replace the Corporations Act (Ontario) and the corporations that the Corporations Act currently governs. Condominium corporations in Ontario are incorporated under and governed by the Condominium Act, 1998.

Subsection 5(3) of the Condominium Act, 1998 says specifically that the Corporations Act does not apply to condominium corporations. As a result, because the ONCA will replace the Corporations Act, the ONCA will not apply to condominium corporations.

On June 5, 2013, a bill was introduced into the Ontario legislature called the Companies Statute Law Amendment Act, 2013 (“Bill 85”). One of the purposes of Bill 85 is to make consequential amendments to Ontario legislation that includes mention of the Corporations Act. When Bill 85 receives royal assent, the pieces of Ontario legislation that are included in Bill 85 will be amended as set out in Bill 85. The Condominium Act, 1998 will be affected by Bill 85, but only to substitute reference of the ONCA in subsection 5(3) of the Condominium Act, 1998 with the current reference to the Corporations Act. Specifically, Bill 85, as currently drafted, reads as follows:

Subsection 5(3) of the Condominium Act, 1998 is amended by striking out “The Corporations Act” at the beginning and substituting “The Not-for-Profit Corporations Act, 2010”.

Condominium corporations in Ontario are governed by the Condominium Act, 1998; the corporate legislation that governs not-for-profit corporations in Ontario does not apply to condominium corporations in Ontario.

Click here for more information on issues related to Not-for-profit law.

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By-law Establishes Procedure for Removal of Director

According to Section 33 of the Condominium Act, a Director can be removed from the Board (before expiration of the Director’s term) by vote of the owners (with the owners of more than 50 percent of all units voting in favour of removal).

But can a condominium corporation pass a by-law to create another procedure for removal of a Director? According to the recent Court decision in the case of Gordon v. York Region Condominium Corporation No. 818, the answer is “yes”.

York Region Condominium Corporation No. 818 passed a by-law stating that a Director ceases to be qualified to be on the Board (and is deemed to have resigned) in certain circumstances. One of the circumstances is as follows: the Director violates the Directors’ code of ethics on three occasions during the Director’s term, and this is confirmed by the Board following an ethics review.

The Court said that this by-law is valid and enforceable, and is not inconsistent with Section 33 of the Act, because it simply provides an additional procedure by which a Director may be removed.

The Court said, however, that the contemplated ethics review process must satisfy “some minimal standard of procedural fairness and the basic principles of natural justice”, because in conducting such a review, the Board is essentially carrying out a quasi-judicial decision-making function, involving consideration of evidence and analysis of possible breaches of the code of ethics.

In this case, the Court concluded that the Board had not followed proper procedure in conducting the ethics review that culminated in the removal of one of the Directors. But the Court declined to undertake such a review (ie. to finally decide the matter). Instead, the Court directed the Board to conduct a fresh ethics review (using proper procedure), whereupon the Director in question might or might not be reinstated to the Board. The Court said: “I do not believe that this court should usurp the powers of the Board entrusted to it by the members of the corporation to conduct a proper ethics review of its own”.

The case is under appeal.

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