Condominium Act Reform: What Issues Still Need to be Resolved

October 2014

Springfest 2014 was a one-day event for building owners, property managers, facility managers, and others responsible for building maintenance and facility operations. Yonge-Sheppard Condominium News attended the Springfest presentation on Condominium Act Reform. This was an opportunity to hear from individuals involved in the Condo Act reform process, their perspectives on some of the major issues, and to better understand some of the challenges in condominium management. This article summarizes some of the topics discussed during the presentation.

Mario Deo, Partner, Fine & Deo Barristers and Solicitors

Armand Conant, Partner, Shibley Righton LLP
Bill Thompson, President, Malvern Condominium Management
Sally Thompson, Executive VP, Halsall Associates

Why Update the Condo Act – The current Condo Act is, in essence, a set of rules those in the condo industry are expected to follow. As with all rules, people will find ways to circumvent their intent. Furthermore, as area density increases, more rules become necessary because people want to protect their space. For these and other reasons, it was deemed necessary to update the Condo Act.

Condo Corporation Elections – Condo corporations are sometimes described as the fourth level of government and for good reason. After federal, provincial and municipal levels of government, condo corporations have similar powers as government for a smaller constituency.

Condo owners participate in elections to vote for individuals they believe are most capable to make decisions for their condo corporation.

Unlike the three levels of government, a condo corporation operates under a different set of rules. Voting in federal, provincial or municipal elections does not require a quorum for an election to be valid. Also, each individual must vote or forfeit the right. Proxies are not allowed. Yet the quorum and proxy aspects of condo elections have been the source of many concerns and problems for condo corporations.

Perhaps a quorum and proxies should be reconsidered. The current three opportunities to obtain a quorum, and solicitation of proxies, may be creating unnecessary problems.
Moving forward may require eliminating the system of quorum and proxies. Such an approach would eliminate the single biggest problem and source of abuse within condo corporations.

Online voting provides what some believe to be a superior alternative to proxies and quorums. (See earlier article on Online Voting in Yonge-Sheppard Condominium News – click here.) A paperless process providing greater control and fewer opportunities for abuse seems superior to creating yet more rules to control abuses.

Bylaws – Condominium corporation bylaws can only be changed after a successful vote by condo owners. Condo board members already have authority to make decisions for the corporation and are elected by condo owners. There appears to be no reason why the condo board should not have authority to change or update condo bylaws, within reason, without requiring a separate vote by owners.

New Condo Buildings – Owner Contributions in First Year – Too many condo corporations undercharge condo fees in the first year or two, thereby requiring greater compensating increases soon afterward. In a 14 condo study of owner contributions for the first year a condo building was open, it was found that the proper contribution amount was between 25% and 60% of the operating budget. The current requirement is that funding be at 10% of the operating budget. In essence, new condo buyers are being tricked into buying something they may not be able to afford.

Submetering, considered important for controlling utility costs, has compounded the problem. When submetering is utilized, each unit pays its own utility cost which reduces the amount in the operating budget. When 10% of the operating budget is calculated to determine condo fees, it is then based on this smaller operating budget thereby requiring even greater fee increases after the first year.

An alternative approach is to set condo fees at a percentage of construction costs. This would provide new condo owners with more realistic condo fees in the first years and hopefully minimize fee increases in future years.

Fraud Protection – At present it is too easy for two directors to sign a cheque and walk away with money. Millions of dollars sitting in a bank account is too enticing for some.

Disclosure Statements – The purpose and contents of a Disclosure Statement are stated in the Condo Act.

Some building developers are finding ways to limit their costs and liabilities through these disclosures which are often not read.

When Disclosure Statements become a way to hide information and trick people, this should be an indication that changes are necessary.

Repair vs. Maintenance – Within the Condo Act it can be unclear what constitutes repair vs. maintenance. This confusion impacts on who pays for some items in a building. It becomes more problematic when damage caused to a condo unit results from actions arising in another unit. And the dollar value of this damage usually exceeds what occurs in common areas.

Unit owners are responsible for repairs to their unit and exclusive common elements. They are not responsible for regular maintenance to the infrastructure. It could be argued that outside caulking of a building is repair work for which unit owners are responsible. In practice, this area is inaccessible to unit owners and the work is usually undertaken by the condominium corporation.
A clearer distinction between repair and maintenance would create greater consistency and reduce conflict.

Condo Office – Creation of a Condo Office was first proposed as a way to offer dispute resolution as a faster, cheaper and more cost effective way to resolve conflicts. It morphed into a broader solution that should include education, maintaining a condo corporation database and licencing of condominium managers.

Unresolved is the issue of who pays. Most interest groups seem content to allow condo owners to pay for this office through a monthly fee.

It was stated in the presentation that condo owners support this new fee once its value is explained.

Editor’s Comments on the Condo Office

There appears to be an implied assumption that condo owners require, desire and are prepared to fund a Condo Office most are unlikely to utilize. This continues to sound like a special tax on condo owners.

While most condo owners may support a more effective dispute resolution option, funding such an operation through this special tax could create more problems.

If a Condo Office is deemed valuable, it should only offer services that can be funded by those who require such services.