Survey for ACMO CCI-EO Conference

The ACMO/CCI-EO organizing committee is already hard at work putting together the  ACMO/CCI-EO 6th Annual Spring Conference.

In preparation for this event, the organizing committee would be grateful if our readers could please take 1 minute to complete this survey.  The survey will help the committee tailor the event to best meet your needs.

As many of our readers know, the Annual Spring Conference brings together industry experts, managers, and directors around condo-centric topics. It is an amazing opportunity to learn but also to network with one another.  With all of the changes to the Condominium Act and with the new mandatory licensing of managers, this year’s conference is going to be a big one!

If you feel inclined,  please forward this survey to your colleagues, managers, directors, or condominium owners. We hope to see them all at the conference.

You can email any questions you may have to info@cci-easternontario.ca.

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.

Catch Our Lawyers at the ACMO/CCI-T Condominium Conference in Toronto!

November 10 marks the start of the two day ACMO/CCI-T Condominium Conference, happening at the Toronto Congress Centre.

If you are at the conference, be sure to catch Jim Davidson and Nancy Houle, who will both be speaking at the Conference:

  • Nancy Houle will be a panel member during session 3C, “A Professional Too Expensive?  Try an Amateur!” at 4:00 pm on Friday afternoon
  • Jim Davidson will be a panel member during the Closing Session “Case Law Update” at 1:30 pm on Saturday afternoon

The New Condominium Authority Tribunal Rules Are Out!

Here are some of the highlights of the new CAT Rules:

For every dispute, a five-step process is contemplated:

I. The Process

Step 1:  Filing [CAT Fee:  $25.00]

Step 2:  Joining (ie. where the Respondent joins the case) [No CAT Fee]

Step 3:  Negotiation (an on-line dialogue between the parties, all within CAT’s on-line system) [No CAT Fee]

Step 4:  Mediation (where a mediator joins the dialogue, to try to help the parties settle) [CAT Fee:  $50.00]

Step 5:  Tribunal Decision [CAT Fee:  $125.00]

II. Representation

The CAT Rules say that parties can be represented in the process (if they wish) by:

(a) a lawyer or paralegal licensed by the Law Society of Upper Canada; or

(b) a person who is exempt from the Law Society’s licensing requirements. This includes a friend or family member who is helping the User without receiving any fee, or a licensed condominium manager.

III. Costs

In terms of costs, the CAT Rules state as follows:

Recovery of fees and expenses

The Tribunal may order a User to pay to another User any reasonable expenses or other costs related to the use of the Tribunal, including:

(a) the Tribunal’s fees paid by the other User;

(b) the other User’s expenses or other costs that were directly related to that User’s participation in the Tribunal’s process; and

(c) the other User’s expenses or other costs that were directly related to a User’s behaviour during the Tribunal process that was unreasonable or for an improper purpose, or that caused an unreasonable delay.

 Legal fees generally not recoverable

The Tribunal will not order one User to pay to another User any fees charged by that User’s lawyer or paralegal, unless there are exceptional reasons to do this.

In summary, the “losing party” generally won’t be ordered to pay the “winning party’s” legal or paralegal costs (if any).  And this will of course be a growing issue as CAT is given increased jurisdiction (over more and more types of condominium disputes) in the years ahead.

Some parties may understandably decide, as a result, not to involve lawyers or paralegals in many CAT disputes.  For condominium corporations, one or more Directors or Officers may sometimes be comfortable handling the process.  In other cases, the property manager may be an excellent representative. [NOTE: This may however be an “extra service” for the manager – perhaps entitling the manager to a reasonable, extra fee (which would likely not be recoverable in the dispute).]

But some condominium corporations may still be most comfortable having legal representation in these disputes – despite the fact that the costs will generally not be recoverable.  [Also:  In some instances, the case precedent may be an important factor for the condominium corporation.]

With this in mind, we are planning to train one of the members of our team (whether a condominium law paralegal or junior lawyer) to assist our clients with CAT disputes…in order to make this service as economical as possible for our clients.  That way, we’ll be ready to assist, at reasonable cost, if we are ever asked to do so.

One final comment:  In our view, the condominium corporation’s liability or D & O liability insurance likely would not respond (or provide coverage) in most CAT disputes.  But this might depend upon any specific allegations in a given case.  So, insurance coverage is always something to keep in mind.

IV. The CAT Rules also cover various other matters relating to the CAT process, including:

(a) Methods of Communication, primarily involving use of CAT’s on-line system (or alternative methods of communication approved by CAT);

(b) Presentation of evidence;

(c) Delivery of relevant documents;

(d) Witnesses; and

(e) Public Access.

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.

Changes Are Almost Here…Important Dates To Keep In Mind

We’ve been waiting for changes to the Condominium Act, 1998 for years. Five years to be exact.  On June 8, 2012, the Ministry of Consumer Services announced that the Government was to launch a “Condo Review Consultation.   On December 3, 2015, Bill 106, Protecting Condominium Owners Act, 2015 received Royal Assent.  Since then, we’ve been watching and waiting as the regulations have been drafted.

After much anticipation (and trepidation) the Phase I changes are coming into force.  Here are some important dates that you need to be aware of:

November 1, 2017:

• Phase 1 of the amendments to the Condominium Act, 1998, come into force. These changes address:

Information Certificates (to be issued by condominium         corporations)

Notices from corporations to owners and mortgagees

Required Disclosure by Directors and Director Candidates

Mandatory Training for Directors

New Procedures in relation to Meetings [If you have a meeting scheduled on or after December 10, 2017 see below for requirements that apply.]

Quorum and Voting

Voting Requirements for By-laws

Record-keeping and durations

Access to records

For more details, click here for Jim Davidson’s article in Condo Contact.

• The licensing provisions of the Condominium Management Services Act, 2015 (“CMSA”) come into force.

• The Condominium Authority Tribunal (CAT) will begin accepting applications. Disputes about records will be the first type of dispute that can be filed with the CAT.

• The Condominium Management Regulatory Authority of Ontario is to be designated as the administrative authority for the CMSA.

November 25, 2017:

Condo Act Primer hosted by Davidson Houle Allen Condominium Law –   Join us as we complete a walk-through of the Phase I Condominium Act amendments, with ample opportunity for questions. For more details, click here.

December 10, 2017

• If you have a meeting of owners scheduled on or after December 10, 2017 (that you did not provide notice of prior to November 1, 2017) you must comply with the new procedures in relation to meetings, including the Preliminary notice requirements and new prescribed forms (expected to be available soon!) for Meeting Notices and proxies.

December 31, 2017

• All Condominium Corporations must be registered with the Condominium Authority of Ontario and fees from September 1, 2017 to March 31, 2018, must be paid. What happens if you don’t register?  Review our blog to see.

• This is the final date for a Corporation to provide a Periodic Information Certificate (PIC) if the last day of the first quarter fiscal end or third quarter fiscal end is on November 1, 2017.

• A PIC must be delivered within 60 days of the end of the first and third fiscal quarter.  Be sure to review the fiscal end date for your first and third fiscal quarter and set reminders that your PICs are due within 60 days of those dates.

[Note: To see if your condominium qualifies for an exemption from producing information certificates, check out our blog respecting exceptions.]

February 1, 2018

• The remainder of the changes to the Condominium Management Services Act, 2015 come into force.

Appeal Court Confirms Owner’s Obligation to Prove Case When Challenging Lien

In the recent decision Washington v. York Condominium Corporation No. 441, the Divisional Court confirmed that when a unit owner challenges a lien, it is the unit owner’s obligation to establish, on a balance of probabilities, that he or she was not responsible for the alleged damage.  In this case, the appellate judge set aside a lower court decision ordering a condominium corporation to return a chargeback to a unit owner.

This case concerned a plumbing blockage that affected the plaintiff owner’s unit, along with three other units, in the condominium.  The owner (and plaintiff) used his unit to prepare food for Caribbean cuisine dishes for restaurants.  Apart from the plaintiff, no other owners involved used their units in a way that produced food grease.

After discovering the blockage, the plaintiff contacted a plumber to assess the situation.  The same plumber was then hired by the property manager to clear the blockage.  The plumber’s notes revealed the caused of the blockage was from grease or hardened grease.  In addition, the plumber filmed the actual clearing of the blockage in which he states that the blockage is “grease and chicken grease”.

Based on the above information, the Board of Directors concluded that the plaintiff’s unit was the cause of the blockage, and demanded payment for costs incurred in the amount of $17,336.84.  Later, the condominium registered a lien against the plaintiff’s unit.  The plaintiff paid the above-noted amount and commenced an action claiming his unit was not the cause of the plumbing blockage.

The trial judge agreed with the plaintiff and rendered judgment in his favour.  The trial judge reasoned that, based on the totality of the evidence, the condominium failed to definitively prove that the source of the blockage was from the plaintiff’s unit.

The Divisional Court disagreed.  It confirmed that it was the plaintiff’s obligation to establish, more likely than not, that he was not the source of the plumbing blockage.  The Divisional Court also stated that the trial judge failed to consider key evidence: the audio of the above-noted video; and the reasoning of the Board of Directors to conclude the plaintiff was the source of the blockage.  The trial judge had discounted the reasoning of the Board of Directors on the basis that the members were “irresponsible” and “rather flippant” in their decision because their discussion of the subject was “laden with expletives”.  In other words, the members were excessively cursing.

The Divisional Court disagreed with the trial judge’s consideration of the evidence because it did not accord with the required degree of deference to which a Board of Directors of a condominium corporation is entitled, as outlined by the Ontario Court of Appeal.  Following the argument of our very own Christy Allen, the Ontario Court of Appeal in 3716724 Canada Inc. v. Carleton Condominium Corp. No 375 confirmed that courts should be careful not to usurp the functions of the boards of condominium corporations, especially when the Board has acted reasonably, honestly, and in good faith.

Overall, this decision serves as a reminder to condominium corporations that if an owner challenges a lien, it is the owner’s obligation – and not the condominium’s obligation – to establish that he or she was more likely than not, not the source of the alleged damage.  While the owner bears this onus of proof, the condominium is always open to lead evidence that will result in the plaintiff failing to establish his or her case.

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.