Condo Act Recommendations – Our Analysis

November 2013

The Condo Act Solutions Report offers a balanced and reasoned set of recommendations. There are, however, some weaknesses in seven areas of these recommendations as identified below. It is our opinion that these are weaknesses in the recommendations detrimental to condo owners or based on invalid assumptions.

Yonge-Sheppard Condominium News has made a submission to the Ministry identifying our concerns.

Reserve Fund Contributions

Recommendations have been made regarding the level of the reserve fund appropriate for new condominiums. There is a lack of guidance on what constitutes an inadequate reserve fund for existing, in particular older, condominiums. We suggest that further consideration be given to providing some level of guidance on what is deemed an adequate reserve fund within the Condo Act.

Condo Office, funded through a fee paid by condo owners

Recommendation is for this new office to provide continuing education for condo owners, dispute resolution and licensing of condominium managers. While we support the creation of a Condo Office, funding this office through a fee paid by condo owners is inappropriate for reasons which include;

  • It has been assumed, with no justification, that condo owners will willingly pay yet another fee (some would say tax) to create yet another level of governance. Agencies such as the Condo Office should be funded from existing revenues or must be able to generate sufficient additional revenues through service fees.
  • There is a stated belief that condo owners would support a new fee being imposed on them. No documentation has been presented to support this belief.
  • Creation of a continuing education program funded by condo owners implies that condo owners require, desire and are prepared to fund such a program. The reality is that condo owners are not so different from renters or those who own a house that a uniquely and forcibly self-funded program is warranted. Furthermore, condo owners should not be subject to a level of continuing education not required by those who own a house or renters. Put differently, condo owners should not be forced to fund an initiative simply because they own a condo. Those who desire such programs should be prepared to pay for their education rather than having it forcibly funded by others who have obtained this education through other means.

We suggest that funding for the Condo Office come solely from service fees. This would be consistent with the recommendation to fund a Condo Manager Licensing Authority through service fees.

Dispute Resolution Process managed through the Condo Office

While there may be agreement that the current dispute resolution process does not work well, the solution is not to create a new process forcibly funded by all condo residents. Individuals and condominium corporations should be responsible for the costs of resolving their dispute.

The recommendation presumes it is reasonable to burden all condo owners with the cost of this process. This cost should not be borne by a majority of condo owners unlikely to avail themselves of the process. As with the existing dispute resolution process, it is reasonable and fair to expect those in need of dispute resolution to pay its cost. This would facilitate parties coming to an agreeable solution rather than dragging out a conflict because neither party has a direct cost to bear.

We would like to see funding for dispute resolution solely through service fees.

Limit on Allowable Reserve Fund Increases

Creating a limit on the allowed increase in reserve fund contributions could create more problems than it may resolve. Such limits may be inadequate for corporations which have allowed their reserve fund to drop to a dangerously low level. It may also be inadequate for corporations which desire to upgrade their building and where there is agreement to covering the cost through higher reserve fund contributions.

Annual Reserve Fund Budget Requirement

Requiring boards to develop two budgets as part of enhanced financial controls is commendable. In addition to the current operating budget, a reserve fund budget would be developed each year. This new budget would be based on a more rigorously defined reserve fund study and would have to account for deviations from that study. Boards would be required to notify owners of significant off-budget spending from the operating fund or reserve fund.

We disagree with a tripling of the level at which condo owners must be notified of off-budget spending. (Spending that is higher than budgeted.) This is a weakening of disclosure to condo owners that should not be supported without further clarification.

Director Training Requirements

Individuals who serve as a director for a condo corporation would require a minimum level of training. Such a requirement could very well have a reverse effect from what is intended. This would further limit the pool of individuals willing to serve as a director for a condo corporation. Furthermore, it would likely discourage more highly qualified individuals (such as the owner of a business, perhaps with a MBA or CA designation and 20 years of experience) from serving as a director and reduce the overall quality of a board of directors.

Standards for Management Firms

It is appropriate for an individual qualifying as a condo manager to “not be an undischarged bankrupt” and “agree to a police check for a criminal record.” Comparable criteria are not being recommended for senior management of management firms before receiving their certification. Most condo managers are employed by a management firm. As such, the management of these firms should be required to meet the same standard as their employees in order to minimize the potential of fraud.

We request that senior management of management firms be subject to the same or more stringent criteria being recommended for a condo manager prior to certification for the management firm.