Competition Bureau Investigation: How Should Corporations Respond?

It’s no secret that there has been a significant rise of condominium living in Canada, particularly in the Greater Toronto Area. It is estimated that three-quarters of all new homes purchased in the GTA are condominiums. The increase in number of these kinds of properties in Toronto, as well as throughout Ontario, has prompted much reform to the industry, including recent revisions to the Condominium Act, 1998.

Another development occurred in May this year, when the Competition Bureau ordered 141 condominium boards across the GTA to disclose records relating to renovation contracts. Competition Bureau spokesperson Marie-France Faucher told reporters that the bureau is looking into “allegations of bid-rigging and conspiracy in the supply of condominium refurbishment services in the Greater Toronto Area”. Both bid-rigging and conspiracy are criminal offences under the Competition Act. The investigation is interested in renovations going as far back as August 2006, for projects in common areas such as lobbies, parking garages and washrooms.

The investigation appears to be looking specifically at the suppliers of goods used in renovations and the companies that oversee the projects – such as interior designers and engineers – to ascertain whether there has been any evidence of collusion or price-fixing. The bureau has stressed that it is not the condo corporations themselves who are suspected of criminal activity; rather, they may have been victims of unfair competition.

The Competition Bureau has emphasized that the investigation is ongoing, and that they have not as yet found evidence of criminal activity by condominium boards. The investigation will likely take a number of years.

What does this mean for condominiums?

The request has left many condominium boards scrambling to get their files in order. While the investigation doesn’t specifically target condo corporations, boards are advised to respond to the request within the 90-day timeframe. And, at this stage, any costs associated with gathering the documents and responding to the Bureau will come out of the corporation’s pocket.

Moving forward, it may also be prudent for condominium corporations to adopt stricter guidelines in order to prevent the possibility of bid-rigging by competing suppliers, and to ensure the procurement process is transparent and fair.

Amendments to the Condominium Act will introduce new contract procurement requirements, which may tighten the bidding and tendering process (at least for some types of contracts). The relevant new section of the Act is Section 39.1, which states as follows:

A corporation shall not enter into a prescribed contract or transaction unless the procurement process and other contracts or arrangements that the corporation entered into in relation to the contract or transaction meet the prescribed requirements.

The “prescribed requirements” – in the form of Regulations under the amended Act – are currently in development.

If condominium corporations have any concerns with this issue, or with complying with the Competition Bureau’s request, feel free to contact us.

Tarion Program Review – Interim Progress Report Released

As you may recall from our previous posts on the subject, the Tarion Warranty Program is under review. The Honourable Justice Douglas Cunningham was appointed in 2015 by Ontario's Minister of Government and Consumer Services to review Tarion's process and warranty coverage.

Jim Davidson offered comments to Justice Cunningham, and has been honoured to participate as part of a “focus group” providing feedback to Justice Cunningham respecting Tarion.

Justice Cunningham has now released his Interim Progress Report, which outlines the key concerns that he is exploring. The report can be found here.

In the interim report, Justice Cunningham has listed his key questions as follows:

  • What model would best deliver consumer protection? Can Tarion effectively perform each of the roles of regulator, warranty provider, adjudicator and rule maker?
  • Is there a way to resolve warranty disputes more effectively and expeditiously?
  • How can Tarion best ensure that consumers are educated about the new home buying process and the warranty program?
  • What is the appropriate warranty/deposit coverage and duration?
  • How should Tarion regulate builders and vendors in order to drive quality in the home building sector and protection for consumers?
  • What should be the composition and skill sets of the Tarion Board of Directors, and how should members be selected to best meet Tarion’s mandate under the Ontario New Home Warranties Plan Act and its fiduciary obligations?
  • What additional measures, if any, could be implemented to improve accountability, transparency and oversight?

Justice Cunningham has indicated that these questions will be the focus of his ultimate report. He is currently inviting input from the general public, which may be submitted by email to: TarionReview@ontario.ca. Input must be submitted by October 14, 2016.

To read more about the review, see our previous blog post Tarion is Under Review.

And if you have further questions about the Tarion Warranty Program or the review process, contact our Condominium Law Group.

Hydro HST Rebate: Are You Eligible?

In the recent throne speech, the Ontario Liberal government has promised that it will rebate the provincial portion of the HST from electricity bills, which will reduce residential bills by 8 per cent. It is estimated that this will provide savings of about $130 annually for the typical Ontario household. The rebate will come into effect on January 1, 2017.

While commenters have been debating the motivation behind the cuts and how much of a difference it will really make, it’s worth asking: what does this mean for residents of condominiums?

While many condominium owners have individual hydro meters, some buildings administer electricity under a common-element or bulk-meter system. This means that one meter measures electricity use for the entire building, and Hydro One then bills the condominium corporation for the collective electricity use. The total is then split among the residents, usually built into the owners’ common expenses according to the size of each unit.

But if the condo corporation is effectively the account holder, will the tax rebate be sent to the corporation? Will the residents ever benefit from this new rebate?

Unfortunately, details from the government are sketchy, so it is difficult to answer this. They have said the rebate would be eligible to residential customers as well as “Multi-unit residential buildings”, which could include condominiums. However, at the end of the day, if the corporation is the account holder, will the rebate still be received by the corporation? Unfortunately, we don’t yet have an answer to this question.

It may be helpful to compare the rebate to another program aimed at reducing the cost of electricity: the Ontario Electricity Support Program (OESP). This program provides monthly credits to low-income electricity consumers, but they need to be the account holder. Therefore, condominium residents who live in a building with a bulk-meter system are not eligible. However, where hydro is individually metered, the residents are eligible for the program.

One option for a corporation to consider is converting to suite-metering, using sub meters. This removes the cost of the hydro from the common expenses so that the owner is billed directly, potentially making them eligible for the rebate. However, there may be costs involved for the corporation in doing this. To read more about bulk-metering and suite metering, take a look at our previous blog post.

It remains to be seen how condominium corporations deal with this new rebate. Hopefully the provincial government will do the right thing and find a solution that means condominium owners can benefit like all other residents in the province. Stay tuned.

If you have any further questions about the tax rebate, contact our Condominium Law Group.

Costs – When An Owner Sues The Condominium Corporation And Loses

There have been some recent cases where condominium owners have sued the condominium corporation in Small Claims Court – and lost. See for example the following: Wexler v. CCC 28 (currently under Appeal), Wu v. CCC 383 and Pearson v. Carleton Condominium Corporation No. 178.

When a condominium corporation successfully defends an owner’s claim, should the condominium corporation be entitled to a “special cost award”? Or should the usual cost principles apply? Note that the Courts have previously said that a condominium corporation may be entitled to full costs (under Section 85 of the Condominium Act) whenever a dispute relates to collection of common expenses. In this blog, I’m referring to disputes related to other matters.

For instance, in Small Claims Court, the successful party is generally entitled (at most) to be awarded costs equal to 15% of the amount of the claim. The winning party is only entitled to additional costs if the losing party has been guilty of misconduct that prolonged the litigation or otherwise added to the costs.

But should there be an exception in the condominium setting – where the court combatants are a condominium corporation and an owner? In such cases, should a successful condominium corporation be entitled to a “higher-than-normal cost award”?

From a review of the above decisions, the answer seems to be: maybe. But only if the particular condominium’s governing documents contain a clear provision allowing for such. And the usual indemnification provisions (contained in many declarations) may not be sufficient.

In the Wexler case, the Deputy Judge of the Small Claims Court stated that the condominium corporation was entitled to a higher-than-normal cost award:

“…because [the owner’s] claim was dismissed and because the condominium corporation has a Declaration, By-laws and Rules providing for full indemnity, and especially because it would be unfair that the [other] unit owners should bear all the costs of this litigation when the condominium corporation is unnecessarily sued.”

However, the owner (Ms Wexler) has been granted leave to appeal. And the Superior Court decision granting leave includes the following statement:

“It is my view that the decision referenced by the Applicant (Pearson (Litigation Guardian of) v. Carleton Condominium Corporation No. 178, 2012 ONSC 3300 (Canlii)) demonstrates a difference in principles chosen to guide discretion.”

Justice P.E. Roger goes on to say:

“Further, I find that there is good reason to doubt the correctness of the Deputy Judge’s decision and that the appeal raises matters of general importance.”

So, we still don’t have clear answers to the above questions.

But we’ll have another piece of the puzzle when the Wexler appeal is decided.

Have more questions about cost awards and litigation? Contact our Condominium Law Group today.

Defining “Repair”

A recent decision of the Ontario Superior Court, Middlesex Condominium Corp. No. 195 v Sunbelt, again highlights the importance of defining “repair”, and particularly distinguishing between “repair” and “maintenance”.

The MCC 195 case dealt with two issues:

  1. Responsibility for certain hydro charges; and
  2. Responsibility for window repairs.

In this blog post, I will focus on the second issue – window repairs. In the MCC 195 case, the windows of the commercial units needed replacement (due to a building defect), and the condominium corporation asserted that this was the responsibility of the commercial unit owners.

MCC 195’s declaration says that the commercial owners are obligated to repair and maintain their windows – even though the windows are part of the common elements. However, the Court held that these window repairs were the responsibility of the condominium corporation because the windows were not designated for the exclusive use of the commercial owners. The Court said:

“[Section 91 of the Condominium Act] does not grant a condominium corporation the authority to impose on a unit owner the obligation to repair common elements after damage, except for common elements designated for the exclusive use of an owner.”

Here’s the bottom line:

  • Under the current Condominium Act, a condominium declaration can say that owners must maintain any part of the common elements.
  • However, under the current Condominium Act, a condominium declaration can only say that owners must repair their exclusive-use common elements. The MCC 195 case also tells us that this applies only to specifically designated exclusive-use common elements.

Thankfully, this issue is eliminated by the amendments to the Condominium Act, which are expected to come into force sometime in 2017. Under the amendments, Section 91 will allow a declaration to say that owners must maintain or repair any part of the common elements. So, that’s a good thing.

However, there’s another important – and possibly problematic – change contained in the amendments to the Act. The meaning of “repair” will change. Some work that is currently “maintenance” will become “repair” when the amendments come into force.

Currently, Section 90 of the Act says that the obligation to maintain “includes the obligation to repair after normal wear and tear”. In my view, this makes good sense. When something fails at the end of its normal life (i.e. after normal wear and tear), the required work sounds to me like “maintenance”. However, this is eliminated by the amendments to the Act, which introduce the following new definition of repair:

“’repair’ means to repair or replace after normal wear and tear, damage or failure.”

So, when the amendments to the Act come into force, what is now “maintenance” may soon be “repair”!

In most cases, this change in the meaning of the terms “maintenance” and “repair” won’t have any ramifications. But this change will matter in cases where responsibilities to maintain and repair a particular feature of the property are “split” or “divided” between the corporation and the owners. In those cases, the responsibilities may be about to change!

Need further clarification? Get in touch with our Condominium Law Group today.

Court of Appeal Confirms Boards are Entitled to Deference

The Court of Appeal recently overturned a decision of the Superior Court, in which the Judge found a Board had acted oppressively by refusing a unit owner’s request (made under section 98 of the Condominium Act) to modify the common elements of the condominium.

The July 2016 decision of 3716724 Canada Inc. v. Carleton Condominium Corporation No. 375 concerns a mixed-use condominium located in the Byward Market area of Ottawa. The unit owner is the owner of commercial parking units within the condominium’s garage. Those parking units were being used for monthly parking. The unit owner requested the Board’s consent to make certain common element modifications in order to convert the garage from monthly use to a 24/7 “pay and display” parking operation. The Board advised the unit owner that it was only prepared to consent on the condition that the unit owner hire a full-time security guard. The unit owner refused, and instead brought an Application in Superior Court seeking a Court Order allowing the requested common element modifications.

The Application Judge granted the requested relief, on the basis that the Board had acted oppressively by requiring the security guard, which the Court said would be “prohibitively expensive”.

In reversing the Application Judge’s decision, the Court of Appeal confirmed that the “business judgment” rule is applicable in the condominium context. Put simply, elected boards of directors are in the best position to make certain decisions affecting their condominiums. In this case, having found that the Board acted reasonably, honestly, and in good faith, the Appeal Court said that the Board’s decision in relation to the unit owner’s request to modify the common elements was entitled to deference.  

The Court of Appeal also provides some helpful commentary that offers guidance on the circumstances under which it is appropriate for a court to interfere with the decision of a condominium board. Here’s the relevant extract from the Appeal Court’s decision:

Therefore, to summarize, the first question for a court reviewing a condominium board’s decision is whether the directors acted honestly and in good faith and exercised the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. If they did, then the board’s balancing of the interests of a complainant under s. 135 of the Act against competing concerns should be accorded deference. The question in such circumstances is not whether a reviewing court would have reached the same decision as the board. Rather, it is whether the board reached a decision that was within a range of reasonable choices. If it did, then it cannot be said to have unfairly disregarded the interests of a complainant.

To read more about this decision, take a look at articles recently published in the Ottawa Citizen, the Ottawa Sun and Lawyers Weekly, all featuring interviews with our very own Christy Allen!

If you have a question about the modification of common elements in your condominium, contact our Condominium Law Group.

September Event: ACMO Regional Peterborough Conference

The ACMO Regional Peterborough Conference is taking place on Friday, September 16, 2016, and our very own Melinda Andrews will be speaking on the legal panel in the afternoon!

Join the exhibitors and presenters for a one-day conference that will include experts from various law firms, management companies and service areas in the condo industry.

Topics include:

  • Accessibility for Ontarians with Disabilities Act – What You Need To Know
  • Insurance
  • Year Round Ground Maintenance 101
  • Engineering Panel
  • Legal Panel

The conference is taking place at the Best Western Plus Otonabee Inn on 84 Landsdowne Street, Peterborough.

Don’t delay, register now!  For more information, including the agenda and registration, please click here.