Helpful Recent Decision About Condominium “Changes”

When a condominium corporation makes a “change” – which essentially is something that goes beyond maintenance and/or repair – involvement of the owners may be required under Section 97 of the Condominium Act.

But the required involvement of the owners (in relation to a change) also depends upon the estimated cost of the change.

For instance, under Section 97 (2) (c) of the Act, if the estimated cost of a change, in any given month, is below a certain threshold, the Board has the mandate to proceed (without owner involvement).

On the other hand, under Section 97 (6) of the Act, if the estimated cost of a change is greater than 10% of the corporation’s annual budget, the change must be treated as “substantial” requiring a 2/3 vote of the owners.  If the estimated cost lies somewhere between the threshold in Section 97 (2) (c) and 10% of the annual budget, the Board can decide to treat the change as non-substantial (requiring notice to the owners, with an opportunity for owners to requisition a meeting to consider the proposed change by ordinary vote).

Here’s the point:  The estimated cost of a proposed change is a critical ingredient in determining if, and how, all owners must be involved in the decision to proceed with the change.

 That leaves the following question:  How does one calculate the estimated cost of a change?

In the Zordel case, the corporation had an existing agreement for bulk cable television service (for all units) – with the related cost added to the common expenses.   The Board decided to enter into a new agreement that provided BOTH bulk cable AND internet services.  The Board did not involve the ownership in this decision.

Certain owners objected.  They said that the new Agreement required owner involvement – that the Board couldn’t go ahead on its own.  And they said that – based on the cost of the new Agreement – there was a “substantial change” (requiring a 2/3 vote).

The Court said:

• Even though new technology was being introduced for the cable television service, there was no change to that service. The only change related to the new internet service.

• The cost (of the change) was therefore the cost for the new internet service. The cost of the cable television service did not figure into this calculation, because it was not part of the change.

• The cost was therefore below the threshold in Section 97 (2) (c). As such, there was no need for the Board to involve owners in the decision.

Further notes:  The threshold in Section 97 (2) (c) will change (increase) when amendments to that section come into force (expected sometime over the next two years).   But the amendments to that section will also introduce some additional criteria for the Board to consider (for that section to apply).  So, the law will change somewhat in these areas.  But that shouldn’t change the basic principle expressed in the Zordel case (namely, that the cost of a change is not the cost of the entire transaction…..but only the cost of that part of the transaction that constitutes a change).

We’re also expecting that the “cost” will be further defined in a future phase of new Regulations….but I would similarly expect that the principles in the Zordel case will be confirmed in those new Regulations. We’ll have to see.

Important Court Decision About Recovering Costs From Owners

In the Wexler case, the owner brought a claim against the condominium corporation in Small Claims Court for total damages of $2,525.14 for alleged harassment, for recovery of costs for clean-up of pigeon droppings (charged to the owner by the corporation), and for recovery of costs for legal advice obtained by the owner.  After a three-day trial, the owner’s claims were dismissed.  That left the question of responsibility for the costs (of the Court proceeding).

The Small Claims Court ordered the owner to pay the condominium corporation’s legal costs – in the amount of $20,000.  This was based, at least in part, on the “indemnification” provision in the condominium corporation’s declaration.  Because of that indemnification provision, and also because the Small Claims Court felt that the owner had unnecessarily prolonged the trial, the Court held that the owner should be obligated to pay more than the usual costs ordered in a Small Claims Court matter.  [The Rules of Court state that the losing party is (usually) obligated to pay a maximum of 15% of the amount claimed, as costs to the winning party.]  But again, the Small Claims Court said that the owner was obligated to pay higher than usual costs in this case.

The decision of the Small Claims Court included the following:

I recognize that the plaintiff was not prepared for trial and that she was disorganized; this directly contributed to unnecessarily prolonging the trial. As such, and because her action 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 unit owners should bear all the costs of this litigation when the condominium corporation is unnecessarily sued, I allow costs in the amount of $20,000, inclusive of HST and disbursements. 

 The owner appealed and was successful on appeal.  On appeal, the Divisional Court said that the indemnification provision, in the condominium corporation’s declaration, did not apply.   Based on the wording of the indemnification provision, the Divisional Court said that the provision “is not applicable as there has been no loss, costs, damage, injury or liability suffered or incurred with respect to the common elements and/or all other units caused by an act or omission by Ms. Wexler”.

 I don’t disagree with the above reasoning of the Divisional Court.  But here’s my concern:

What will this mean for condominium corporations seeking to collect OTHER costs or OTHER expenses – quite apart from Court costs – and seeking to add those amounts to an owner’s common expenses when those costs or expenses have been caused by an act or omission of the owner or by an occupant of the owner’s unit?

 Many condominium declarations contain an indemnification provision similar to the provision considered by the Court in the Wexler case.  So, based on the Wexler decision, those provisions will only apply to losses, costs, damages, injuries, liability etc. suffered or incurred (and caused by an act or omission of the owner or an occupant of the unit) “with respect to the common elements and/or all other units”.

The problem is:  Some costs (caused by an owner or occupant) might not be covered.

And we know from other Court decisions (and from amendments to the Condominium Act) that these sorts of chargeback or indemnification provisions likely need to be in the declaration (in order to allow a condominium corporation to add such amounts to the owner’s common expenses).  [Such a provision in the by-laws or rules may not be sufficient.]

Here’s the bottom line:  Condominium corporations should consider amending their declarations to replace these imperfect, inadequate indemnification provisions – for the sake of all of the innocent owners in the condominium.

Examination of Records – Do Condominium Owners Need a Proper Reason?

The Courts have said that condominium owners may be required, in some cases, to provide a proper reason for their requests to see records of the corporation.  This is important in order to prevent unwarranted “fishing expeditions” and to otherwise prevent owners from requesting records for improper reasons (for instance, only for the purpose of pestering or bothering the Board).

For instance, in the recent case of Lahrkamp v. MTCC No. 932 (click here to read the decision: Reasons For Judgment of J. Prattas), the decision of the Toronto Small Claims Court included the following:

“In my view, the inevitable conclusion to be drawn from the plaintiff’s conduct and dealings related to his requests for access to records over the years was that the plaintiff was not genuinely interested in looking into certain specific aspects of the financial operations of the defendant but was either oblivious to the fact that he was wasting other people’s time and money or, more likely, that he took a certain delight in pestering the Board and others with his demands.”   

For some of the owner’s requests – for proxies and Board minutes – the Court established a protocol for the records to be made available to the owner, subject to the owner covering costs (set by the Court) for copying and redacting those records.

For other requests – for owners lists, General Ledgers, Accounts Receivable Ledgers, Bank Statements, Portfolio Valuation Summary Details and Transaction Summary Details – the Court rejected the owner’s requests, in some cases because the owner did not have a proper reason for the request.

This legal principle (the need for owners to have a proper reason for their requests to see records) is based upon Section 55 (3) of the Condominium Act, which currently says that owners can examine records of the corporation “for all purposes reasonably related to the purposes of this Act”.  (Requests for records are of course also subject to exceptions otherwise listed in Section 55.) 

Under the coming amendments to the Act, those words – “for all purposes reasonably related to the purposes of this Act” – will be removed from Section 55 (3).   However, there will be new regulations respecting access to Records.  The new regulations will include the following:

Examination of records

13.3 (1) The right to examine or obtain a copy of a record under subsection 55 (3) of the Act does not apply unless,

(a) an owner, a purchaser or a mortgagee of a unit requests to examine or obtain the copy and the request is solely related to that person’s interests as an owner, a purchaser or a mortgagee of a unit, as the case may be, having regard to the purposes of the Act; or

(b) a duly authorized agent of an owner, a purchaser or a mortgagee of a unit requests to examine or obtain the copy and the request is solely related to the interests of that owner, purchaser or mortgagee of a unit, as the case may be, having regard to the purposes of the Act.

(2) Despite subsection (1), a person entitled to examine or obtain copies of records under subsection 55 (3) of the Act is not required to provide the corporation with a statement of the purpose of the request.

So in summary, the new regulations (expected to come into force on November 1, 2017) say that an owner’s request to see records must be solely related to the owner’s interest as an owner…. having regard to the purposes of the Act  But the new regulations also say that the owner can’t be asked to state the purpose for the owner’s request.

It’s difficult to predict how the new regulations will be interpreted and applied by the Courts and/or the new Condominium Authority Tribunal, but here’s how it looks to me:

• Condominium corporations won’t be able to ask for a reason or explanation for an owner’s request for records.

• However, if it appears (based upon all of the surrounding circumstances) that the owner does not have a proper reason for a particular request, then I think that it may still be proper to refuse the request.

Congratulations to the Newly Constituted Board of the CCI – Eastern Ontario Chapter

As many of our readers know, last night was the Annual General Meeting for the Canadian Condominium Institute – Eastern Ontario Chapter. We are pleased that Nancy Houle, partner with our firm, will have the opportunity to continue to service the condominium community as a member of the Board of the Canadian Condominium Institute – Eastern Ontario Chapter. 

With so many changes to the legislation governing condominiums happening in the coming months, the Canadian Condominium Institute is an instrumental player in engaging and educating the eastern Ontario condominium community. Congratulations to the newly constituted Board!

Obtaining a License for Condominium Management – an Overview

Mandatory licensing for condominium management is steadily approaching.  For details on this topic, see our previous blogs.  But in the meantime, we felt that an Overview might be useful.

Here’s a broad overview of the coming requirements:

Obtaining a License for Condominium Management – an Overview

I.   The first step is to consider the following question: Are you (or will you be) providing condominium management services?   In other words, will you need a license?  [Again, see our previous blogs on this topic.]

II.   Assuming you do need a license, you have until January 29, 2018 to make application. As of November 1, 2017, you will be able to make application (on line) at the website for the Condominium Management Regulatory Authority of Ontario. As part of the application process, you will of course be required to pay the applicable licensing fees.

III.   If you have less than two years of condominium management experience in the past five years (when you make application), you can only apply for a Limited License. You will then have five years to obtain your General Licence.

IV.   If you have more than two years of condominium management experience in the past five years (when you make application), there are two possibilities:

(a)   You can apply for your Transitional General Licence (but you will need to obtain a General License within three years of obtaining your Transitional General License).

(b)   You can apply for your General Licence, if you have fulfilled the necessary education and examination requirements. For now, this requirement is essentially the testing and examination requirements for an ACMO RCM designation.  Note that Managers with 10 years of experience may be able to fulfill these requirements through an abbreviated “refresher course and examination” process.  [For more detail, contact ACMO – the Association of Condominium Managers of Ontario.]

V.   NOTE: If you haven’t provided condominium management services during August, September or October of 2017, you may also only be able to make application for a Limited Licence.  [For more detail, see the CMRAO website.]

VI.   Condominium Management Providers will also be required to make application for their own licences and (as part of that process) to identify a principal condominium manager. They will also be required to pay additional licensing fees (quite separate and apart from the licensing fees payable by managers).

As of January 30, 2018, it will no longer be legal for a person or firm to provide condominium management services without a licence.

It’s coming soon!

Stay tuned to Condo Law News for more blogs about amendments to the Condominium Act and upcoming events .

 

The Condominium Authority is Up and Running!

We’re now into September (I can’t believe it!); and the province has announced that the Condominium Authority is now “in service”.

Some of the key purposes of the CAO will be as follows:

1.  An overall source of information for Ontario’s condominium community.

2.  On-line, mandatory training of condominium directors.

[There are already some “training modules” on the CAO website, but the website also includes the following note:

NOTE: Directors of condominium boards will be required to complete mandatory training at a later date in order to continue as a board member.  Completing the modules below will not count towards this requirement.  Stay tuned to our website for more information on CAO’s mandatory training program for directors.]

3.  Special Resources for condominium owners and residents (including template letters for certain dealings with condominium corporations and managers; how-to guides, information about changes to condominium law, and general information about condominium living).

4.  Help for condominium owners, residents and corporations in resolving certain issues between them, including on-line dispute resolution for certain types of disputes, through the Condominium Authority Tribunal.

Although the CAO is now up and running, it won’t really be “fully ready for business” until November 1st – which is when the first phase of the amendments (to the Condominium Act and Regulations) will come into force.   And even then, the CAO will only be dealing with matters covered by the first phase amendments.  For instance, it appears to me that the dispute resolution service – in the beginning – will only be dealing with disputes in relation to records (including owners’ requests for records).

So, there is still a ways to go before the CAO will be “in full swing”.

You can obtain much more information about the new Condominium Authority of Ontario (CAO) at the CAO website:  www.condoauthorityontario.ca.

Stay tuned to Condo Law News for more blogs about amendments to the Condominium Act and upcoming events .

Condominium Returns

We now have proposed Regulations from the Province, governing the upcoming requirements for condominium corporations to file returns with the new Condominium Authority, and also creating a new publicly-accessible database of information respecting all condominium corporations in the Province.

There will be four new types of returns for condominium corporations:

Initial Return – To be filed after registration of the Declaration and Description (applying only to corporations declared after the new Regulations come into force).

Turnover Return – To be filed after the turnover meeting is held (applying only to corporations that hold a turnover meeting after the new Regulations come into force).

Transitional Return – To be filed by all existing corporations after the new Regulations come into force.

Annual Returns – To be filed annually by all corporations.

The attached chart provides a “snapshot” of the information to be contained in each type of return. Click here to access the detailed Chart of Condominium Returns

Condominium corporations will also be required to file “Notices of Change” – within 30 days – following a change to certain information in the corporation’s returns.

The returns will have to be filed electronically.  However, the Registrar can accept another filing method if the Registrar is satisfied that electronic filing would cause undue hardship to the corporation.

The Registrar will maintain a public database (accessible on line) containing all of the information in the returns and Notices of Change, as well as certain additional information noted in the Regulations.

Persons have until August 22, 2017 to provide feedback to the Province, on the proposed Regulations, if they wish to do so.  To provide comment, go to the Ministry’s webpage respecting these proposed new Regulations.

CAO and CAT Proposed Fees

We now have the proposed fee (payable by all Ontario condominium owners) for the new Condominium Authority of Ontario (CAO).  We also have proposed user fees in relation to the new Condominium Authority Tribunal (CAT).

Here are the proposed Fees, recently posted on the CAO website (http://www.condoauthorityontario.ca):

Proposed “All Ontario Condominium Owner Fees” to fund the CAO

Monthly Fee Per Voting Unit (or per voter in a common elements condominium) $1 per month / $12 per year

Proposed User Fees respecting the CAT

Filing Fee For access to CAT’s unassisted on-line dispute resolution system $25
Assisted Resolution Fee For assistance from a dedicated mediator $50
Tribunal Decision Fee For a decision from a dedicated adjudicator $125

If you wish, you can offer comment – until July 18, 2017 – on the CAO website.

Stay tuned to Condo Law News for more blogs about amendments to the Condominium Act and upcoming events .

Municipal Regulation of Short-term Rentals

The City of Toronto is taking steps to regulate short-term rentals.  Other municipalities may not be far behind.

Short-term rentals are a growing concern in many residential communities, including residential condominiums.

The City of Toronto is proposing new regulations to control short-term rentals.  Among other things, the new regulations would

  • introduce a new land use called “short term rental”;
  • permit short-term rentals only in a host’s primary residence;
  • require licensing of companies (like Airbnb) that facilitate short-term rentals, with related licensing fees;
  • require registration of short-term rental hosts and premises, with related registration fees;
  • impose specific safety requirements for short-term rentals;
  • perhaps also introduce new taxes on short-term rentals.

It stands to reason that other municipalities may follow suit.

However, these new municipal regulations don’t change the separate rights of condominium corporations – including rights to enforce existing provisions in the corporations’ declarations or rules (prohibiting or controlling short-term rentals in the condominium) or rights to amend their declarations or pass new rules (again, prohibiting or controlling short-term rentals in the condominium).

In other words:   Although municipalities may be taking steps to regulate short-term rentals, condominium corporations will still have their own separate rights to regulate or prohibit short-term rentals in their specific communities.  Condominium corporations concerned about short-term rentals should review existing provisions in their declarations and/or rules, and may wish to consider declaration amendments and/or new rules, to regulate or prohibit short-term rentals in their condominiums.

Stay tuned to Condo Law News for more blogs about amendments to the Condominium Act and upcoming events .

HAPPY CANADA DAY!

We want to wish all of our clients, friends and loyal readers a Happy Canada Day!!   It will of course be a special celebration of the 150th anniversary of our marvelous nation.  We want to wish everyone joyous and safe celebrations.

And, we offer our usual reminder about the National Flag.

Our National Flag of Canada Act says (among other things) that persons in control of a condominium building (meaning condominium corporations and managers) are “encouraged” to allow the displaying of Canada’s national flag (ie. by residents of the condominium).

But of course, this does not create any entitlement to display the flag, and this also does not prevent the enforcement of the condominium’s governing documents.  So, for instance, if the condominium’s Rules prevent the displaying of flags, the condominium corporation would have the obligation to enforce those Rules – subject to any special or unusual circumstances (such as Human Rights) that might exist in a given case.

But in our view a condominium corporation could also consider a Rule to allow for the displaying of the flag (with any desired restrictions as to times, sizes, locations, etc.), as long as this is permitted by the Declaration.

Again, our best wishes to you all on this year’s special Canada Day!

Stay tuned to Condo Law News for more blogs about amendments to the Condominium Act and upcoming events .