Ontario Condo Law Blog

GMA Condo Alert! (Spring 2013 edition)

Chris Jaglowitz — Wed, 22 May 2013 07:55:31 -0500

The spring edition of our quarterly newsletter was distributed to over 500 attendees of the bi-annual Condo Conference and Tradeshow held April 27 in Hamilton.

Hats off to the Golden Horsehoe Chapter of the Canadian Condominium Institute for another great conference, jam-packed with seminars, friendly exhibitors and the latest updates on the Condo Act Review process still underway.

The newsletter is now available for download (here) and features:

Supers' Units Assessment Victory!
Bob Gardiner's Committee Criteria
Condo slammed for lax rule enforcement

While our newsletters often include items posted to our blog, you will periodically find exclusive content not featured elsewhere. Be sure to read each issue cover to cover.

Time to abolish the owner-occupied director position

Chris Jaglowitz — Tue, 14 May 2013 15:31:05 -0500

It is rare for us at Ontario Condo Law Blog to beat up on an underdog, but the owner-occupied reserved position on condo boards is decidedly worthy of that honour.

That reserved position (set out in the Condominium Act, 1998, subsections 28(3), 46(3) and 51(5) to (8)) surely is an underdog - it enjoys little or no support and no one (at least publicly) takes credit for its creation. While at least one of the Condo Act Review working groups is currently considering the fate of the owner-occupied position provision among many other much-needed improvements to our condo law, today’s post lends support to eradicating it. We also ponder what lessons the creation of that now universally reviled provision can usefully teach us as we amend the Condo Act this time around.

For the past 12 years, Ontario condo managers, directors, unit owners and lawyers have bemoaned the unfortunate and ill-advised creation in the Condominium Act, 1998 of the owner-occupied reserved position on condo boards. That position, which is mandatory in condominiums where at least 15% of the units are “owner-occupied units,” is reserved for voting by the owners who occupy their units, and only the those owner-occupiers can vote to remove such a director.

The concept behind the reserved position was two-fold. First, to protect owner-occupiers where the declarant would otherwise control the board during the first year or two of the condo’s life. Second, the position would provide counterbalance in cases where the majority of unit owners are non-resident investors who might elect a board to serve their own interests (presumably to the exclusion of the owner-occupiers). While admirable, these concepts are not particularly compelling, for the following reasons:

1. Neither of these two scenarios is terribly likely;

2. Off-site owners generally don’t vote, let alone conspire to stack the board;

3. All condo directors have a duty to act in good faith and balance the interests of competing stakeholders and could always be held to account for being oppressive to any class of owners, including owner-occupiers; and

4. One position on a 3 or 5 member board does not a majority make!

In over ten years of working with hundreds of condo corporations, I have yet to see a single instance where the owner-occupied reserved position served any useful purpose. In fact, each of the condos I’ve worked with who fill that role would eliminate it in a heartbeat if they had their way.

Though it was intended to protect unit owners, the reserved position has arguably created more trouble than it has solved. In addition to the need to hold two separate elections in some years and other procedural messes that invariably arise to confuse and confound people attending their condo AGM, the creation of the owner-occupied reserved position gives rise to a few rare but very serious problems. These problems illustrate the poor conception and implementation of the reserved position and, we say, cement the fact that it must be eliminated.

First: There may be a dispute as to which owners are owners of “owner-occupied units,” which are defined in subsection 50(5) of the Act as:

a unit of an owner who is entitled to vote in respect of the unit at a meeting to elect or to remove a director where the unit is used for residential purposes and the owner has not leased the unit within the 60 days before notice is given for the meeting, as shown by the record that the corporation is required to maintain under subsection 83 (3).

The record referred to in subsection 83(3) is, of course, a register of the notices that the condo corporation receives from owners who have leased their units and that specifies the tenant’s name, the owner’s address for service and a copy of the lease or renewal or a summary of it. Despite the clear statutory obligation to file these notices upon leasing their units, owners seldom do and this provision is far more honoured in the breach than in the observance. The inevitable result of this and the 60-day requirement in ss. 50(5) above is that which owners are eligible to elect or remove a director to or from the owner-occupied position is difficult to administer, particularly where the manager or board know that a particular owner does not occupy their unit.

Related to this first problem is the distinct possibility that the number of owner-occupied units in any condominium can wildly fluctuate in even a short period of time. There might be 250 owner-occupied units today, but only 100 a month from now. The threshold for removing a director holding the owner-occupied reserved position may be constantly shifting, and there is no effective means to accurately determine the number of qualified electors at any given time, seeing as how clause 76(1)(o) requires a status certificate to contain:

a statement of the number of units for which the corporation has received notice under section 83 that the unit was leased during the fiscal year preceding the date of the status certificate;

This information is basically useless and the Act contains no other obligation for the corporation to advise any person as to the number of owner-occupied units. The safest course is to assume that, in the absence of a current section 83 notice, all units are owner-occupied units, but this is hardly an accurate measure.

Second: While subsection 46(3) specifies that a requisition for a meeting to remove directors must state whether any of the directors to be removed holds the owner-occupied reserved position, it does not specify that the requisite 15% of the owners signing the requisition must be eligible to vote for the removal of that owner-occupied director. It is therefore possible for 15% of the unit owners to properly requisition a meeting for the removal of the owner-occupied director, even if those owners do not own owner-occupied units and are therefore not entitled to vote for that director’s removal. Cue the head-shaking.

Third: If the sole item of business to be conducted in a requisitioned meeting is the removal of the director holding the owner-occupied position (where only owners of owner-occupied units have the right to vote), the board is obliged to give notice of the meeting to all of the unit owners, including those who do not reside in their units. While this is not necessarily a bizarre concept, it is certainly incongruous.

Fourth, and perhaps most telling: The minimum requirement for quorum at any condominium owners’ meeting is 25% of all of the units. In the weirdest case where even 100% of the owner-occupied units is less than 25% of all of the units, it would be impossible to reach quorum at a meeting where the sole business is removal of the director holding the owner-occupied position, unless a number of non-resident owners show up or file proxies to reach quorum, which is probably unlikely if those offsite owners cannot vote on the sole item of business at the meeting.

While these four problems are, admittedly, technical and seemingly trivial, there are actually condominium corporations grappling with these very issues in 2013 and whose owners are frustrated and confused with the process and with the fact that their condo corporation is spending money dealing with these issues. In a world where some unit owners feel compelled to make preposterous allegations and to challenge the most insignificant item that appears slightly out of order, the last thing a condo corporation needs is another potential ground for owners to challenge condo elections. The reserved position creates precisely the type of procedural hiccup that malcontents and conspiracy theorists can seize upon and hold up (incorrectly) as a sign that something’s rotten at their condo.

When the government of the day ignored the recommendations of the people and groups who work in condominiums daily and proceeded to implement the reserved position in the Condo Act 1998 without the help of those condo people, the creation of a substantial blunder was inevitable and, indeed, condo meetings for election and removal of directors from 2001 to this very day in 2013 remain unnecessarily complex, confusing and sometimes costly.

And for what? By any measure and after listening to any condo manager who has run an annual general meeting and has seen the confused look on people’s faces when explaining the need to hold the owner-occupied election, the problem is a live one that needs to be addressed in the only way that makes sense: The owner-occupied reserved position must be eliminated, period.

Those involved in the Condo Act Review process now underway and the lawmakers who ultimately consider the results of that process during the legislative deliberations to come must remember the lesson of the owner-occupied position, which can be summarized thusly:

Don’t mandate a solution that we did not request to fix a perceived problem which does not actually exist, especially where that solution will cause more problems than it would ever solve.

While the Condo Act necessarily and unquestionably constitutes a delicate balancing of various competing interests and should provide the basis for a strong democracy, the interests of the unit owners as a collective must always come first when it comes to how condominium corporations govern themselves. The concept of recognizing separate classes of unit owners or allowing fewer than a majority of all the owners to remove directors has no place in Ontario’s condominiums.

Creative solutions are required to address some of the serious persistent problems in condo-land, but the fundamental precepts of democracy and fairness cannot be overridden. To this end, government must guard against the temptation to deliver an "answer" to a question that no one asked and be doubly sure not to create more problems than they solve with the next Condo Act.

Another cause of owner ignorance: Lousy condo doc packages

Chris Jaglowitz — Fri, 10 May 2013 08:33:30 -0500

Those of us who work with condo corporations often grumble that unit owners have no appreciable knowledge or understanding of the declaration, by-laws or rules that govern their condominium. Indeed, if you ask any 100 (or 1,000 or 10,000) unit owners whether they have ever read those documents, the overwhelming majority will candidly tell you that they have not. While there are many different reasons why owners fail to even attempt to learn how their condominium works and what is expected of them, at least one of those reasons is squarely the fault of the corporation itself.

I cannot possibly count the number of crappy condo document packages (whether or not accompanied by a status certificate) that have crossed my desk over the past decade that featured one or more of the following cardinal sins:

1. Include by-laws or rules that have been repealed (despite the fact that s. 76(1)(f) of the Condo Act requires copies of the current declaration, by-laws and rules);

2. Include old (but un-repealed) by-laws exhibiting ancient management agreements or insurance trust agreements that have long since been superceded (even though while seemingly required by s. 76(1)(f), these items can probably be omitted as being irrelevant and of no value whatsoever to anyone);

3. Contain draft, altered or forged versions of the declaration and by-laws – Honest to God, we often encounter condominiums whose boards are using declarations and by-laws that are materially different than those registered on title!;

4. Exhibit superfluous documents like first year budgets (for a 20 year-old condo) or any other materials that are expired or are not strictly required by s. 76(1);

5. Are incomplete because they’re missing vital documents or useful pages of any document;

6. Feature any documents without proper page numbering;

7. If in hard copy, feature no table of contents or include no tabs to separate the documents;

8. If delivered electronically, do not contain an electronic content page or bookmarks (or are not included in a “PDF portfolio”);

9. Are printed single-sided (such a waste!) or are poorly bound;

10. If electronic, are not scanned for optical character recognition (OCR) and are therefore not searchable, or are scanned at improper settings, causing gargantuan file sizes (over 2 megabytes);

11. If the documents are bound separately from a dated status certificate, do not bear a date that the package was last revised, making it impossible to tell if, many years later, the documents have ever been superceded; and

12. Include dozens of useless pages listing all the Property Identification Numbers to which the by-law is registered. While it’s handy to include the main registration page with the critical details, there’s no need to include the other pages that simply list PINs, and I will rant another day about the completely unsatisfactory state of the documents generated by the Teranet electronic land registration system.

Have you seen any other common blunders in making status certificate packages? Let me know by adding a comment.

Though some might argue that the answer is in delivering materials electronically, I’m not so sure. As seen above, packing up these materials in an electronic PDF file is no guarantee of a usable package. In fact, it is just as easy (and maybe easier) to deliver a terrible package in electronic format as a hard copy. If the contents are not carefully selected, double-checked and produced, an electronic document package can contain virtually all of the faults listed above.

Admittedly, the measly fee that the Condo Act prescribes ($100 inclusive of 13% HST) for issuing status certificates does not lend itself to generating a high-quality product, but many professional condo management firms deliver document packages that are concise, easy to use and will serve as a handy, functional reference to the unit owner for years to come. Those firms recognize that the document package is reflective of their building and the good care that they take of it and the way they serve their members. This concept would catch on like wildfire if it was perceived as a way to increase market value.

Pick up a copy of your current status certificate package and ask yourself if you’d care to read it. If not, strike a committee to review the package for accuracy and to find ways to improve it and enhance the production values. Then generate a good electronic package to distribute in response to status certificate requests and, since it's sitting there, send each of your owners and residents a copy.

While delivering a well-prepared document package is no guarantee that a unit owner or prospective purchaser will ever read the materials, the effort is worthwhile if it removes a major obstacle to owners understanding their condominium and their rights and obligations. More importantly, it will eliminate one legitimate excuse for owners being ignorant of these important documents.

Microblog posts to April 1, 2013 - Court and Tribunal Decisions

Chris Jaglowitz — Mon, 01 Apr 2013 09:20:04 -0500

Canadian courts and tribunals decided plenty of condo law cases during the first quarter of 2013. Here’s a roundup of the most notable.

ONCA: Condo board deemed to know about a claim after unit purchaser with specific knowledge of that claim joins the bd. http://canlii.ca/t/fv10w

ONSC stays lawsuit over shared facilities dispute between 2 condos until mediation and arbitration exhausted. http://canlii.ca/t/fvhtp

ONSC: Mortgagee awarded costs of application for condo lien discharge when condo's lawyers run up big bill needlessly. http://canlii.ca/t/fvm3f

OMB sets terms of minor variance to reduce parking space requirement at Brampton temple in a condo unit. http://ow.ly/h6MhL

ONSC: Condo corps are landlords that may require personal use of an owned unit and can evict tenants, per RTA s.46. http://canlii.ca/t/fw3mj

ONSC sets procedure for YCC 42 unit owners to review and object to accounts of that condo's outgoing administrator. http://canlii.ca/t/fvwwm

ONCA orders rectification of title register in land boundary dispute. http://bit.ly/ZpjMqL

HRTO: No discrimination by condo and property manager requiring unit owner to remove unauthorized balcony enclosure. http://canlii.ca/t/fvsl4

ONSC: Condo to pay oppression damages of $40K + costs for not enforcing noise rules and for harassing complainant. http://ow.ly/hTFHP

ONSC: Remedial work on condo garage was maintenance and repair, not “substantial change” as alleged by unit owner. http://canlii.ca/t/fwd1p

NSSCC: Condo recoups damages re water heater leak on basis of owner failing to stop flood, not failure to maintain. http://canlii.ca/t/fw64z

ABQB: Live-in caregiver for blind elderly unit owner doesn't violate condo’s single family use restriction. http://ow.ly/iLpDd

ONCA: City holds bag for gas pymts made when landlord defaults, bank sells rental bldg.http://ow.ly/iLWP5 No good deed goes unpunished.

ONSC: Condo directors failed to restore landscaping as ordered; found in contempt of court and must pay cost of work. http://ow.ly/iZraJ

ABQB: Condo's refusal to assign indoor parking spot not oppressive when owner knew she was buying an outdoor spot. [Forthcoming: 2013 ABQB 153]

ABQB: Common element lease given by developer-controlled condo board invalid for lack of notice to purchasers. http://canlii.ca/t/fwjbx

BCCA: Class actions by strata lot owners not barred by representative action provisions in BC Strata Property Act. http://ow.ly/je12E

ONARB: Municipal tax assessment of amenity units owned by condo corp reduced to nominal $9 value. http://ow.ly/jlHQb

BCSC: While original sale of strata unit overturned, 2nd sale order given after breach of injunction by rowdy owners. http://canlii.ca/t/fwm3k

ONSC bars property manager from acting as paid representative at Landlord Tenant Bd, being unauthorized law practice. http://ow.ly/jkKZw

HRTO: Bedbug infestation is not a disability; adverse treatment of condo unit owner with bedbugs not discriminatory. http://canlii.ca/t/fvsl0

HRTO: Condo supers discrimination complaint to proceed while wrongful dismissal lawsuit pending; issues are distinct. http://canlii.ca/t/fwnd2

ONSC approves condo purchasers’ class action suit vs. developer over excess development charges. http://ow.ly/jANBK

As always, stay tuned to @ChrisJaglowitz on Twitter for live updates on latest cases, news and commentary.

Supers' Units $9 Assessment Victory! - Your filing deadline is April 1st

Bob Gardiner — Mon, 18 Mar 2013 16:10:10 -0500

Condos would be wise to consider immediate filing of a 2013 Request for Reconsideration with MPAC for their superintendent's unit and any other common amenity service unit before the imminent April 1st filing deadline, in order to take advantage of the new $9 nominal assessment ruling.

The Assessment Review Board ruled last Friday that 40 participating supers' units should be assessed for taxation at nine dollars each. That means no municipal tax.

That precedent is important because it applies not only to supers' units, but extends also to other common amenities service units, such as parking, guest, mechanical, gatehouse, recreational and other units owned by the corporation providing amenities or services to its unit owners. The ARB based its primary decision upon analysis of the nature of service easement aspects which merge s. 12 of the Condominium Act with s. 9 of the Assessment Act to enable an exemption from the full current value concept which otherwise governs assessment of realty parcels.

The ARB concluded alternatively that the market value of the supers' units was minimal and already resided in the owners' residential, parking and locker units.

The ARB also concluded that it was inequitable to assess supers' units differently than guest units. Last year, Bob Gardiner had convinced MPAC to reduce the assessment of over 200 of GMA's condo clients' guest and visitor parking units to a nominal assessment of $9 each, based upon his unique Request for Reconsideration rationales.

Bob has persistently spear-headed this initiative since 2005. Much of the language of the 35 page decision is based on his written and oral argument explaining over 100 legal concepts to rationalize 6 grounds for appeal, supported by 14 legal precedent cases contained in his Legal Authorities binder, as well as 200 pages of documents in his Statement of Facts binder.

David Fleet, an assessment law expert, and Carol Dirks, a condo lawyer, also forcefully submitted key arguments in a teamwork approach. The team convinced the ARB to accept a "condo world" view of common amenity service unit assessment, instead of the assessment arguments so capably submitted by MPAC's lawyer, Don Mitchell.

It is possible MPAC may appeal the ARB's decision, but the deadline to file the 2013 Request for Reconsideration for your Corporation’s common amenity service units expires April 1, 2013. You should receive legal advice well before that deadline. You can file even if you have already paid the tax. A copy of GMA’s 2013 RfR enrollment form and further information can be obtained from Gardiner Miller Arnold LLP by emailing bob.gardiner@gmalaw.ca.

Directors personally responsible for costs of litigation to quash owners' rights

Chris Jaglowitz — Thu, 14 Mar 2013 15:46:25 -0500

Noteworthy costs awards were recently released in Middlesex Condominium Corporation No. 232 v. Owners, which we cited as number 6 in our top 10 condo law cases of 2012 as follows:

Faced with an increasingly unhappy ownership, the board commenced an application for appointment of an administrator. The owners then requisitioned a meeting to remove directors, prompting the board to make an unsuccessful bid for the requisition meeting to be delayed until after the application for appointing an administrator was heard. The court ultimately dismissed the board’s application to appoint an administrator, finding that s. 131 of the Condo Act was designed as a last resort for condominiums in perilous circumstances and not as a way to allow a board that has lost the confidence of the owners to get their way regardless of the democratic will of the owners. The court has not yet released its decision on costs, but given this board’s brazen disregard for owners’ democratic rights, this seems like a suitable case for the directors to be held personally responsible for the legal costs as in Boily v. CCC 145 above. The tactics used by the corporation in this instance were despicable.

While it may not be clear from this description, the MCC 232 case is made up of two components decided by different judges: The board’s application for appointment of an administrator that was heard by Justice Carey and, second, the board’s motion heard by Justice Bryant for an injunction to restrain an owners’ meeting to remove the board until after the application for appointment of an administrator was decided. Both components were dismissed and the old board was removed and replaced. The rulings on costs were subsequently reserved until February 11, 2013. We understand that leave to appeal these costs rulings is presently being sought.

In the costs ruling on the failed motion for an injunction restraining the requisition meeting, Justice Bryant ordered the former board members to personally pay the unit owners’ legal costs of $15,000, being $3,000 for each of the five former directors.

In the costs ruling on the failed application for appointment of an administrator, Justice Carey ordered the former directors to personally pay the unit owners $21,300, being $4,260 apiece.

Added together, these two costs awards result in five very unhappy former condo directors, but the punishment may not yet be complete. These rulings only deal with the costs incurred by the unit owners in the litigation. They do not appear to address the costs paid or payable to the corporation’s lawyer for conducting the litigation. It is therefore possible that the new board might bring fresh proceedings to require the former board to pay those costs out of their own pocket. Given the courts’ findings in these two costs rulings, this may be a natural next step after any appeals have been decided.

In considering the issue of costs payable to the unit owners in this case, Justice Carey relied on the following findings of fact, which were common to both components of the case:

1. The former Board asked only one contractor to quote on the work that they wished to have done. While that quote was adjusted by the contractors, it remained as just one company's opinion. The request for a second quote from the group representing a large number of residents was met with condescension and dismissiveness.

2. The board all participated in what I find was a pre-orchestrated termination of the Annual General Meeting (“AGM”) when the vote on financing the repairs went contrary to their wishes and they were facing a removal vote.

3. The former Board members, rather than agreeing to postpone the decision and seek another opinion as to remedying the building's issues, brought an action to appoint an administrator and suspend the operation of democracy in the building based on what I found to be wildly exaggerated claims lumped together in their material under the heading "Uncertainty, Chaos and Anarchy".

4. The former Board members had their counsel advise residents not to attend the meeting called for August 8, 2012 when they should have known that the facts claimed in that letter were not correct as there was no order prohibiting the meeting from going ahead.

5. The former Board members instructed their counsel to proceed with the application for the appointment of an administrator even though they had been voted out at the August 8 meeting. The former board members continued to use the MCC 232 designation and declined to participate in their personal capacity. This appears designed to avoid cost liability.

6. The former Board members tried to use their refusal to recognize the August 8th vote as further reason for the court to appoint an administrator and further evidence of chaos at the condominium as two groups were claiming to be the Board. They in effect tried to use their refusal to accept the democratic will of the majority of residents as a reason to suspend its operation.

Justice Carey went on:

[4] As a result of these findings I conclude that the Board was not acting in good faith in pushing ahead with this unnecessary litigation. It would be unfair to have the majority of residents who opposed the arbitrary measures of the former Board pay for their actions out of the Condominium's reserve fund. The former Board members were in effect the true litigating parties.

[8] My conclusion that the former Board members were not acting in good faith precludes their indemnification pursuant to s. 38(2) of the Condominium Act, 1998.

[9] I have concluded that the facts here support an award of costs against the former Board members personally. Their behaviour was deliberate, egregious and requires sanction. Anything short of full indemnity costs would penalize the residents unfairly.

Justice Bryant’s conclusions were similar:

[18] Based on the material filed before me, I find that the old Board acted in bad faith when it brought an [application for an] injunction to prevent the unit holders from exercising their statutory right to remove the old directors and elect the new directors pursuant to s. 46 of the Act. This Court in dismissing the application for an injunction stated:

The Court finds that the Board's motion is for the sole purpose of preventing the owner's from exercising their rights to hold a Requisition Meeting to remove the Board Members from office and preventing their statutory right to elect a new Board.

[20] The application for an injunction was an unnecessary step in the proceeding. The old Board members tried to maintain its positions as Directors when they no longer represented the majority of unit holders. It was improper because it attempted to prevent unit owners from exercising their statutory right to remove the older directors and elect new directors. I find that the Applicant's application for an injunction was tenuous and without merit.

The legal advice given to the old board is a noteworthy issue in this case. In his costs ruling, Justice Carey said:

[5] I have no evidence that the board relied on legal advice in their actions. I can only conclude that their legal counsel were instructed to take the steps they did.

Similarly, Justice Bryant said:

[17] Counsel for members of the old Board did not file any evidence that members of the old board relied in good faith upon a report or opinion of a 1awyer. Counsel for the old Board did not file any new material on the matter of costs. Counsel recycled documents previously filed . . . which had been filed to support the request for the appointment of an administrator . . .

The legal advice given to the board is important here because condo directors can ordinarily expect to be indemnified for amounts incurred as a result of their acts or omissions while acting as directors. The entitlement to indemnification is restricted, however, by subsection 38(2) of the Condo Act, which provides:

No director or officer of a corporation shall be indemnified by the corporation in respect of any liability, costs, charges or expenses that the person sustains or incurs in or about an action, suit or other proceeding as a result of which the person is adjudged to be in breach of the duty to act honestly and in good faith.

As for how a condo director can avoid being found in breach of the duty to act honestly and in good faith, subsection 37(3)(b) of the Condo Act provides:

A director shall not be found liable for a breach of a duty [to act honestly and in good faith] if the breach arises as a result of the director’s relying in good faith upon,

(b) a report or opinion of a lawyer, public accountant, engineer, appraiser or other person whose profession lends credibility to the report or opinion.

While a quick read of this subsection may suggest that directors can protect themselves simply by obtaining a legal opinion that supports their views or justifies their acts, the “relying in good faith” wording actually provides the court with significant discretion in deciding whether directors are properly entitled to protection.

The concept of “reliance in good faith” can beautifully and effectively eliminate the potential abuse of directors shielding themselves with opinions given by unqualified professionals or based on inaccurate or incomplete information, or that the directors know or ought to know are plainly wrong or inapplicable. This wording can further eliminate the potential for directors to cherry-pick seemingly helpful portions of a report or opinion, take statements out of context or draw far-fetched conclusions.

The judges in the MCC 232 case also found that the extent to which directors can rely on an opinion has reasonable limits. As Justice Carey said:

The Board ultimately is responsible for their own decisions and cannot on these facts hide behind either their counsel or the [engineers’] report.

Even if this former board had produced proof that the corporation’s lawyer had given an opinion stating that it was both possible and appropriate to use litigation as a means to quash the owners’ democratic rights or to seek appointment of an administrator, it was open for the court to find that the directors could not rely in good faith on such an opinion and, in so doing, remove the protection afforded by subsection 37(3)(b). The lesson: A condo board cannot shield itself from liability simply by obtaining a lawyer’s opinion that matches their plans or view of the world. A court will take a long hard look at the situation and determine for itself whether the directors are entitled to indemnity.

Although some might say that these costs rulings represent a dark day for condo directors and will dissuade owners from volunteering to serve on their condo boards, we applaud the result in this case as a victory for common sense and fairness. These rulings affirm the vital principle that condo directors are expected and required to be responsive to their constituency and respect the democratic rights of the unit owners.

The only directors who have anything to fear from the proposition in this case are those who:

fail to hear, understand and respond to their owners’ concerns;
maintain an adversarial stance with owners rather than collaborate constructively;
think their solutions are the only ones and that owners can provide no useful input;
use the corporation’s power and resources to suppress owners’ rights;
employ dirty tricks at annual general meetings;
disobey the letter or spirit of the Condominium Act; or
refuse to leave graciously after being democratically dismissed.

With rulings like this one, our courts tell us that the days of condo boards running roughshod over owners’ rights without consequences are over. Directors who fail to heed this warning risk their fortunes.

Comments due for Stage 1 Findings Report on Condo Act Review

Chris Jaglowitz — Thu, 07 Mar 2013 16:39:24 -0500

Following Stage 1 of Ontario’s Condo Act Review last fall, a findings report was issued in January 2013 by Canada's Public Policy Forum, the facilitators spearheading the review process. That findings report is available for review. See here for executive summary and here for full report.

Comments on this findings report are being received until March 11, 2013.

The report encompasses comments submitted by the public at large and at five information sessions held by the Minister at locations across Ontario, and includes findings of the 36-member citizen panel and four full-day stakeholder round-table sessions.

The report is well-written, thoughtful and demonstrates a deep understanding of a broad array of issues and problems that need to be looked at further and solved. Reading the full report is worthwhile, even if only to see that the single or small few problems faced by any single group are a mere drop in the bucket relative to the large number of issues affecting the various stakeholders in the condo community. The Condo Act is complex legislation that affects a lot of people and parties in very different ways. Legislation of this magnitude deserves the type of comprehensive public review process now underway.

You can send your comments or suggestions directly to ONCONDO or use the handy Discussion Guide the PPF has prepared to help you organize your thoughts to comment meaningfully on the report. To help encourage you to participate, we reproduce the text of the salient part of the Discussion Guide below (while encouraging you to review the full guide):

Issues and Questions to Discuss

Everyone participating in the discussion is encouraged to read through the Report or the executive summary.

1. Governance

Each condominium is a corporation that is governed by a board of directors. The Condominium Act sets out general rules for all boards, and within those rules each board operates somewhat differently.

Does the Report address issues you may have experienced in how your condominium is governed? If not, what additional issues should be considered?
What do you think of the proposed solutions?
What additional suggestions or comments do you have related to improving how condominiums are governed?

2. Dispute Resolution

In Ontario, disputes around condominiums are generally resolved informally. When this is not possible, mediation and then binding arbitration by an independent third-party are used. Sometimes an arbitration decision can be appealed to the court.

Does the report address issues you may have experienced in resolving condominium disputes? If not, what additional issues should be considered?
What do you think of the proposed solutions?
What additional suggestions or comments do you have related to improving how condominium disputes are resolved?

3. Financial Management

Condominium owners pay a monthly common expense fee to cover shared operating expenses and repairs. Part of this fee goes to the condominium’s reserve fund, which is saved for major repairs and replacement of common elements. Reserve fund studies are completed by qualified professionals, who recommend and prioritize changes to the board.

Does the report address issues you may have experienced in how your condominium’s finances and reserve fund are managed? If not, what additional issues should be considered?
What do you think of the proposed solutions?
What additional suggestions or comments do you have related to improving financial management or management of a condominium’s reserve fund?

4. Consumer Protection

Buying a condominium can be complicated. Protections for buyers of new condominiums under the current Act include a 10-day “cooling off’ period and requiring deposits and money paid to the developer to be held in trust. Protections for resale buyers include a detailed status certificate so buyers know the unit and building’s history and financial condition. These protections are aimed at making the purchase of a condominium easier and more transparent.

Does the report address issues you may have experienced in purchasing your condominium? If not, what additional issues should be considered? (Please specify whether you purchased new or resale).
What do you think of the proposed solutions?
What additional suggestions or comments do you have related to improving the purchasing process?

5. Condo Manager Qualifications

Condominiums are very diverse – some can be relatively small and simple to manage, while others are larger and more complex. At the same time, some boards manage their condominiums directly, some hire outside managers. All condominium managers need certain general skills, while other skills only apply to certain condominiums.

Does the Report address issues you may have experienced in how your condominium is managed? If not, what additional issues should be considered?
What do you think of the proposed solutions?
What additional suggestions or comments do you have related to improving how condominiums are managed?

6. Other Issues

You may have additional issues or concerns that have not been addressed in the Report. You can raise those concerns here along with potential solutions.

The full Discussion Guide contains useful background info and further details for preparing and submitting your comments. Check it out.

Are your issues and concerns covered in the report, or included in the six major categories the review has identified thus far? Have you got horror stories to share or little pet peeves about the Condo Act you’d like to see addressed? Send your comments soon (by March 11) and stay tuned for news about Stage 2 of the ONCONDO review, slated to launch on March 21, 2013.

Elevator class action lawsuit ends in $12 million settlement

Chris Jaglowitz — Mon, 25 Feb 2013 15:25:57 -0500

Compared to our American neighbours, Canadian courts play host to relatively few class action lawsuits. Class actions involving condominiums are quite rare. Even rarer are class action suits that actually generate significant cash returns to condominiums but, as they say, there is a first time for everything.

In 2008, Toronto Community Housing Corporation (TCHC) commenced a class action lawsuit against ThyssenKrupp Elevator over the cost of replacing faulty sheave jammers installed during or before 2006. A sheave jammer is a secondary braking device designed to stop the movement of an elevator in the event the primary control and braking systems do not operate effectively.

In July 2006, the Technical Standards and Safety Authority (TSSA) issued Director’s Safety Order 207/06, requiring replacement of all sheave jammers manufactured or installed by ThyssenKrupp. The available evidence shows that class members replaced approximately 2,100 sheave jammers in elevating devices in Ontario as a result of the TSSA Order. The average replacement cost was $10,000 per sheave jammer, which cost was typically paid by the various building owners or condo corporations.

The plaintiffs in the class action claimed that ThyssenKrupp, not the elevator owners, was liable for the costs incurred by the owners in removing the faulty sheave jammers and replacing them with an alternate emergency braking device as ordered by the TSSA.

The case was certified as a class action in August 2011 and proceeded to mediation in summer 2012, where a $12 million settlement was reached. In November 2012, the Ontario Superior Court of Justice approved that settlement of the lawsuit and established a process for eligible affected parties to claim their share of the pot.

Owners or former owners of elevators that were fitted with ThyssenKrupp/Northern sheave jammers may be eligible for compensation from the settlement fund if:

(i) they incurred expenses as a result of replacing the sheave jammer with an alternative form of secondary braking device as was required by TSSA Order 207/06; and

(ii) they did not opt out of the class action on or before May 31, 2012.

The court approving the $12 million settlement of the TCHC action noted that the 300 parties who opted out of that class action included about 100 potential claimants (some being condominium corporations) whose claims were handled by Tarion, being Ontario's new home warranty insurer. Tarion reportedly brought and settled its own lawsuit on behalf of its insured parties, so those parties have been opted out of the TCHC action will be recovering funds separately.

The court also noted that the potential recovery for all of the eligible class members (before considering the 30% contingency fee awarded to class counsel) is approximately 57% of the average damages sustained, which seems remarkably high, given the pittance that typically flows from most class action settlements. More noteworthy is that this percentage increases if fewer than all of the eligible members claim their share, since the pot will then be divided among fewer claimants.

The takeaway: Be sure that your condo corporation (if eligible) submits a claim promptly for its part of the settlement pot!

More info and the claim paperwork is available at www.elevatorclaim.ca.

The deadline for filing a claim is March 29, 2013. Claimants that have not submitted their completed claim form by that date will receive nothing and lose any right to claim compensation, so don’t be late.

While class actions are generally unsuitable for most disputes involving condominiums and for that reason it is unlikely that they will ever be more than a very rare occurrence in condo land, this case is an outstanding example of how a group of similarly-affected parties can effectively seek and obtain compensation. More importantly, it reminds the marketplace that shoddy work or products and unfair business practices are not acceptable.

GMA Condo Alert! (2012 Condo Conference and Winter 2013 editions)

Chris Jaglowitz — Sat, 23 Feb 2013 12:14:58 -0500

As usual, the delegate goodie bag at the ACMO/CCI Condo Conference in Toronto last November included a copy of our Condo Alert! newsletter. That special conference edition featured a piece on recent court decisions about costs under section 134(5) of the Condo Act.

Following on that theme, the Winter 2013 edition of our newsletter (distributed at the ACMO educational luncheons) includes further commentary on how courts are handling claims for those costs, and recaps our top 10 condo law cases of 2012.

We are now seeing a turning point in how courts award costs of Condo Act compliance cases. Condo boards and managers who aren't aware of the new realities are at risk and the stakes are too high to be caught with your pants down. Staying ahead of the curve is downright essential, so download your free copies of the Condo Alert! today.

Given that the local groundhogs forecast an early spring this year, we've started work on the next season's issue of the newsletter, to be released at the CCI Golden Horseshoe conference on April 27, 2013 in Hamilton. Let us know what other newsletter topics you'd like to read about.

Condo Act regulations refined, translated to French

Chris Jaglowitz — Tue, 22 Jan 2013 12:53:05 -0500

Although they have been in force for nearly 12 years, the regulations under the Condominium Act, 1998 have been available in English only. Thanks to recent amendments, our Francophone confederates can now rejoice that those regs include a complete French language version.

On November 22, 2012, the Ontario government filed Regulations 383/12 and 384/12, which amended Regulations 48/01 (“General”) and 49/01 ("Description and Registration”) respectively.

In addition to adding French versions of the Condo Act regs, the recent amendments were intended to correct typographical errors and improve accuracy. Most notably, the General regulation is amended to include improved definitions of the various classes of reserve fund studies. The Regulatory Registry webpage points out that: “These amendments do not change the policy or intent of the regulations.”

While it is good to see that the Condo Act regulations are being fine-tuned from time to time, we remain hopeful that more substantial revision of the Act and regs is not far away.

Bonne lecture!

Microblog posts to 12/24/2012 - Court and tribunal roundup

Chris Jaglowitz — Mon, 24 Dec 2012 15:09:42 -0500

Because we’ve been tardy in posting our microblog pieces lately, here is a super-duper bundle of condo-related decisions by Canadian courts and tribunals released since our last microblog compilation post on April 30, 2012.

Enjoy these items while preparing chestnuts on an open file, but please be sure to exercise proper fire safety techniques.

COURT AND TRIBUNAL DECISIONS

ONCA: Tarion warranty rulings don't preclude civil suits for condo construction defects (unless LAT decides appeal). http://canlii.ca/t/fv135

ONSC avoids deciding whether proxies from condo meetings should be redacted before inspection by unit owners. http://canlii.ca/t/fv9fn

ONSC awards partial costs on condo corp's compliance application, setting up the owner for a big surprise later. http://canlii.ca/t/ftrpd

ONCA: Consumer Protection Act applies to hot water heater rentals, affirms supplier's liability for damages after leak. http://bit.ly/11jC0rp

ONSC approves class action settlement re ThyssenKrupp elevator sheave jammers. Deadline for claims is March 29, 2013. canlii.ca/t/ftvp5

ABQB appoints investigator at unit owner’s request when ineptitude of condo bd and mgmt amounts to “improper conduct.” http://bit.ly/JbbjeI

NBCA: Email exchange not a binding agreemt to buy and sell condo listed on Kijiji this time, but maybe next time! http://bit.ly/K9AWww

ONSC picks apart, summarily dismisses condo corporation's claims against its developer over sale of parking units. http://bit.ly/IOPd0o

BCHRT: Strata corp to pay fmr unit owners $8K for ineffective response to complaints of cigarette smoke infiltration. http://bit.ly/Kji9z7

ONCA upholds lien and Condo Act compliance order vs unit owner. Owner can assess “additional actual costs” if demanded. http://bit.ly/KwwMTv

ONCA: Non-owner lacks standing to bring Condo Act application vs condo corp, board and its lawyer. http://bit.ly/KBXHMi

ONSC: Requisition for condo owner meeting invalid because of false statements, meeting restrained, muckrakers muzzled. http://bit.ly/Kyn7Ha

ONSC: Condo cannot backcharge and lien for its legal costs of defending small claims court cases brought by unit owner. http://bit.ly/L3DYWY

ONSC: Condo Act does not mandate mediation when tenants violate rules. Mediation still useful in such cases, though. http://bit.ly/LmQiOz

ONSC finds condo director breached duty but won't bar him from running for office, contacting bd or starting lawsuits. http://bit.ly/MdDgDW

ONCA clarifies condo corporations’ right to full indemnity & “additional actual costs” in obtaining compliance orders. http://bit.ly/LH9SoV

ONSC: For denying unit owner access to his suite for 1 day, condo corp to pay $500 as nominal damages for oppression. http://bit.ly/O5UJy8

ONCA upholds summary dismissal of non-owners' suit vs. condo corp. Non-owners lack standing to sue over condo's money. http://bit.ly/O5Y7Jp

HRTO: Middlesex Standard Condo Corp No. 733 to face the music unless it wakes up and files response to complaint. http://bit.ly/P1CzkS

ONSC: Condo's 6-yr lawsuit for conversion/construction deficiencies vs many parties may proceed but on timetable. http://bit.ly/PaMi8K

ONLAT: Condo corp's requested conditions on unit owner's liquor license rejected, not necessary in the public interest. http://bit.ly/MyCAOv

BCCA overturns forced sale of condo unit. Strata Act doesn't permit such orders. http://canlii.ca/t/fs38s

ONSC (needlessly?) sets voting process for dysfunctional condo emerging from 6-year court administration. http://canlii.ca/t/fs8vb

ONSC gives restraining order vs owner for assaulting neighbours, declines removal from condo bd or forced sale of unit. http://bit.ly/NqJi9Q

ONSC aims for May/June 2013 trial date in Channel condo fraud cases. Delay hurts unit owners' ability to sell. http://bit.ly/P44ukU

ABQB debunks most of the typical nonsensical legal arguments raised by freemen and other vexatious litigants. http://canlii.ca/t/fsvjq

ONSC: Condo purchaser's negligent lawyers to pay costs of $850K in complex 12-yr case over illegal floor. http://bit.ly/Q2ozbB

ONSC: Condo denied additional actual costs of $60K+ for not producing its legal bills in rule enforcement case. Ouch. http://canlii.ca/t/fss8c

ONSC: Small claims court has no jurisdiction to hear disputes over municipal property tax accounts. http://canlii.ca/t/fstk5

ONSC: Condo may enter, remove unauthorized balcony enclosure installed by a previous owner. No limitations problem. http://bit.ly/UUe6Sw

ONSC: Unit owner to pay 100% of condo corp’s legal costs in enforcement case, can collect half from tenant. http://canlii.ca/t/fsz09

ONCA: Bank can't be found negligent in property mgr's theft of condo money when condo didn't raise negligence at trial. http://bit.ly/WqcE8P

ONSC awards condo $1.3M for massive fraud by Khan/Channel Mgmt using related contractors to bill for bogus repair work. http://canlii.ca/t/ft07f

BCSC prohibits rowdy condo unit owner from playing tv, music or using hottub on deck & balcony from 11pm-8am. http://canlii.ca/t/ftcqb

ONSC overturns automatic dismissal of unit owner’s 4-yr old case vs. condo corp re injury from in-suite fireplace. http://canlii.ca/t/ft5ms

ONSC: Condo developer’s principal avoids contempt of court by delivering turnover records. http://canlii.ca/t/ft3jz

HRTO tosses unit owner's human rights complaint after same issues were raised and decided in earlier court case. http://bit.ly/QTWKTd

Thanks for following our blog and Twitterfeed this year. If you're interested in staying up to date on the latest caselaw and commentary, make it your new year's resolution to follow me on Twitter.

Top 10 condo law cases of 2012

Chris Jaglowitz — Mon, 24 Dec 2012 14:46:35 -0500

It’s time for our annual tradition of looking back at the past year of cases decided by Ontario courts and tribunals and highlighting a few noteworthy items.

Selecting this year’s batch is slightly trickier because we have not posted a microblog entry since late April 2012, but those readers following me on Twitter will have been kept up to date all along. For those of you not following the live feed, I’ll post those items separately and will make it my new year’s resolution is to keep up those posts more frequently.

Here we go. Drum roll, please!

10. Pearson v. Carleton Condominium Corporation No. 178, 2012 ONSC 3300

Indemnification clauses contained in condo declarations, by-laws and rules do not permit condo corporations to recover (as common expenses) legal costs incurred in defending against small claims court actions brought by unit owners. The court vacated a lien registered by the condo to secure collection of its legal costs incurred where the small claims court dismissed the unit owner’s action against the condo but did not award the condo any costs.

9. York Condominium Corp. No. 42 v. Hashmi, 2012 ONSC 4533

After six years of court-appointed administration, the unit owners of YCC 42 voted overwhelmingly in favour of returning to self-governance but needed the court to give detailed directions on conducting the first election of directors. Given that director elections are amply governed by the Condo Act and the corporation’s own by-laws, the fact that a court ruling was required does not bode well for this condo’s successful rehabilitation from administration. Let us hope that these unit owners have learned the lesson to pay attention to the goings-on at their condo and, further, to ignore the siren song of “vote for me and I’ll reduce your condo fees” which brought this condo and others like it to the brink of disaster.

8. Metropolitan Toronto Condominium Corporation No. 1352 v. Newport Beach Development Inc., 2012 ONCA 850

In a detailed discussion on the nature of the Tarion warranty conciliation and decision-making process, the Ontario Court of Appeal confirmed that an unsuccessful attempt to address construction deficiencies using the Tarion processes does not prevent a unit owner or condo corporation from subsequently bringing a lawsuit to deal with those deficiencies, so long as an appeal of the Tarion ruling is not heard and decided by the License Appeal Tribunal. We can’t say it often enough that condo corporations need to get legal advice at an early stage on how to pursue claims for construction deficiencies.

7. Boily v. Carleton Condominium Corporation 145, 2012 ONSC 1324

Where the condo corporation breached a settlement agreement made with unit owners, the court found that the directors had acted in bad faith and were therefore liable personally for the legal costs incurred by the unit owners in enforcing the settlement. This is among the first instances where such a costs ruling was made and is probably not the last. While any decision that visits personal liability on condo directors might potentially scare people away from holding office, an effective deterrent is needed for directors who abuse their powers and improperly squelch owners’ democratic rights. This type of ruling is long overdue.

6. Middlesex Condominium Corporation No. 232 v. Owners, 2012 ONSC 4819

Faced with an increasingly unhappy ownership, the board commenced an application for appointment of an administrator. The owners then requisitioned a meeting to remove directors, prompting the board to make an unsuccessful bid for the requisition meeting to be delayed until after the application for appointing an administrator was heard. The court ultimately dismissed the board’s application to appoint an administrator, finding that s. 131 of the Condo Act was designed as a last resort for condominiums in perilous circumstances and not as a way to allow a board that has lost the confidence of the owners to get their way regardless of the democratic will of the owners. The court has not yet released its decision on costs, but given this board’s brazen disregard for owners’ democratic rights, this seems like a suitable case for the directors to be held personally responsible for the legal costs as in Boily v. CCC 145 above. The tactics used by the corporation in this instance were despicable.

5. Chan v. Toronto Standard Condominium Corporation No. 1834, 2012 ONCA 312

The unit owner unsuccessfully appealed a judge’s decision upholding a lien against the owner’s unit and granting the condo’s request to enforce the single family use restriction and to charge back certain repair costs. Further, the unit owner challenged the lower court’s costs award against her for $41,706 on a full indemnity basis. The court of appeal saw no basis for interfering with this costs award and found that, with respect to the owner’s argument that this award may be increased if the condo were to seek ‘additional actual costs’ above this amount using s.134(5) of the Condo Act, the unit owner would have the right to have those costs, if they were demanded, assessed under s. 9 of the Solicitors Act. The owner’s application for leave to appeal this decision to the Supreme Court of Canada was dismissed in November 2012.

4. Durham Standard Condominium Corporation No. 187 v. Morton, 2012 ONSC 5132

In successfully obtaining a compliance order requiring the unit owner to remove a dog, DCC 187 obtained a costs award of $10,000. Two months later, the condo demanded that the owner pay over $73,000 for legal costs and registered a lien for that amount. On a subsequent motion, the court ruled that the owner must pay only $29,000 but, because no evidence of the actual legal costs was tendered, the condo was ordered to pay the owner $6,000 for legal costs of that motion. The owner appealed this ruling and succeeded in reducing his obligation to the original $10,000, less the $6,000 costs he obtained on the subsequent motion and costs of the appeal of $11,000. The ultimate result of the case was that while the condo had successfully obtained a compliance order, it had to absorb all of its legal costs (over $70K) and pay the unit owner $7,000. Ouch.

3. Metropolitan Toronto Condominium Corporation No. 710 v. Khan, 2012 ONSC 5494

Notorious rogue property manager Manzoor Moorshed Khan and several of his companies were ordered to pay $1.3 million as damages for fraud. Court found that Khan orchestrated a massive fraud by using his management firm (Channel) and other related companies to invoice the condo for work which was never performed or was not authorized by the board. The court heard that the condo board relied on Khan’s advice regarding payments to be made to service providers and contractors and that if Khan had approved a payment and gave the board a cheque to sign, the board members would sign the cheque. Given that Khan went bankrupt then fled the country, there is no prospect of recovering money here.

2. Ahmad v. 1288124 Ontario Inc. (3 decisions)

In this multi-stage proceeding regarding a declarant’s failure to comply with its turnover obligations under s. 43 of the Condo Act, the court gave a number of orders, including:

First: That the turnover meeting and election of directors was valid notwithstanding that the declarant’s principal (holding proxies for more than half the units) did not arrive until after the meeting had concluded and, further, that that the declarant failed to turn over to the condominium the materials specified in sections 43(4), (5) and (7) and 55; Second: Costs of over $16,000 was awarded to the corporation and its unit owners for costs of the application, plus an additional $10,000 in damages as per section 43(9)(c); Third: Contempt proceedings were initiated against the declarant’s principal for wanton failure to obey orders to deliver materials. The contempt appears to have been ultimately purged.

1. Perper v. York Region Condominium Corp. No. 860, 2012 ONSC 3019

A requisition calling for an owners meeting to remove condo directors was declared invalid because it and an accompanying letter contained false and misleading statements. The ringleaders circulating those materials were found to have deliberately disseminated false information so as to persuade their neighbours that the board was engaged in misconduct and that the condo was in financial trouble in order to induce owners to sign the requisition. In addition to invalidating the requisition, the court restrained the ringleaders from circulating those written materials or making those allegations and from canvassing or soliciting in respect of any election or owners’ meeting for the balance of the year. This decision is a dangerous one that uses a sledgehammer to fix a problem easily solved with a flyswatter. For this reason, and for being a needless affront to owners’ democratic rights, this case deserves further comment in a separate piece. Stay tuned.

Happy holidays from all of us at GMA, and best wishes for a healthy, happy 2013.

Prorogation and condominium democracy

Chris Jaglowitz — Mon, 05 Nov 2012 10:30:19 -0500

The big news story in Ontario politics lately is the premier’s decision to step down and prorogue the legislature until a leadership convention is held to choose a new party leader. That leadership convention will take place in late January, just under three months from now. Until then, the legislature and its work is suspended and proposed legislation is effectively dead. Some have called the growing use of prorogation as an affront to democracy.

While prorogation has no immediately comparable concept in the condominium world, the failure to hold a condo annual general meeting (“AGM”) comes pretty close. There are few or no other things a condo board can do to thwart or frustrate unit owners’ democratic rights than deny the owners their statutory right to meet and receive the financial statements, appoint auditors and elect directors on a regular basis.

Holding condo AGMs is required by statute. Section 45(2) of the Condominium Act, 1998 (“the Act”) provides:

The board shall hold a general meeting of owners not more than three months after the registration of the declaration and description and subsequently within six months of the end of each fiscal year of the corporation.

The corporation’s obligation to hold an AGM within this timeframe is absolute. While there may be a legitimate reason why this timeframe cannot be met in any given year, delays should be the rare exception rather than the rule. As a best practice, any delay in holding the AGM should be preceded by providing the unit owners with a cogent explanation for the delay and a commitment to hold the AGM soon and by a certain fixed date.

One of the more common scenarios that might necessitate a short delay in holding an AGM is where the condominium’s auditor has not completed the audit or delivered the financial statements and report required by sections 66 and 67 of the Act. Those statements and report are a critical part of the AGM because section 69 provides as follows:

Delivery of statements
69. (1) The board shall place before each annual general meeting,

(a) the financial statements as approved by the board;
(b) the auditor’s report; and
(c) all further information respecting the financial position of the corporation that the by-laws of the corporation require.

Copy with notice of meeting
(2) The corporation shall attach to the notice of the annual general meeting a copy of the financial statements and the auditor’s report.

Where the auditor cannot deliver financial statement and reports in time for the meeting to be held within 6 months of fiscal year-end, the board or management should ask the auditor for a written explanation for the delay and an estimate as to when the statements and report will be complete. This would be the least information any unit owner should expect to receive where the delay in holding the AGM relates to the delivery of the financial statements and auditor’s report. Besides, if the auditor is the cause of the delay, there is no sense in the board or management taking the heat unnecessarily. On the other hand, if the auditor’s work is held up or obstructed by the board or management, the responsible party should own up to the resulting delay in convening the AGM.

A delay in the auditor completing its work, which would ordinarily create a delay of a few short weeks, is one of the very few legitimate reasons for an AGM to be delayed beyond the statutory deadline. In fact, unusually long delays (being 3 months or more beyond 6 months after fiscal year-end) are rare and should be viewed as a serious warning sign. This is because holding AGMs is among the most fundamental and important parts of condominium democracy. Indeed, the AGM is where the board accounts for itself and receives its mandate from the owners. Given the critical role of the AGM and the statutory obligation to hold it within a certain period of time, refusing or failing to call and hold an AGM in a timely way gives the strong impression of impropriety and destroys the presumption of a board’s innocence and good faith. It is, after all, a breach of the law, and thus it may be proper for the board’s feet to be put to the fire for a needless delay.

Without a compelling reason communicated in a timely way, it is understandable and perhaps even prudent for any right-minded condo unit owner to view a board’s failure to hold an AGM within 12-16 months of the previous meeting as a clear signal that the board has no appreciation of its role and obligations, or any regard for the owners’ democratic rights or, even worse, that the board is deliberately concealing theft or fraud, its gross ineptitude, indecision or arrogance. Any of these things justify taking steps to change the composition of the board. This usually requires requisitioning a meeting for the AGM business to be held or, alternatively, to remove and replace the directors.

The board’s response to such requisitions is revealing of its motives and the directors’ view of democracy. When a board seems to be “holding on too tightly” to power and creates improper arguments or obstacles to holding a meeting, owners are correct to become suspicious and to obtain legal advice to help them enforce their rights using the Condo Act processes or, in extreme cases, the courts. Boards that recognize the importance of owners' rights will convene a requisitioned meeting without delay and present themselves to the owners to give their explanation and to receive the owners' verdict of their performance.

While the buck always stops with the board for any decision it makes, condominium managers or lawyers that condone or facilitate a condo board’s improper denial of owners’ democratic rights place themselves in harm’s way and likely deserve to be dismissed by a new board. It is true that managers and lawyers have an obligation to follow a condo board’s instructions, but they must also give the board good advice, having regard to all applicable legal requirements and the fact that the rights of the ownership as a whole must be respected. If they choose not to resign, managers or lawyers receiving instructions from a board which may be contrary to the law or common sense should state their objections to those instructions in writing and insist that the board acknowledge the objection and confirm the offending instructions.

Although it is no excuse, one factor that increases the likelihood of a condo board choosing not to hold regular AGMs is the perception that the unit owners do not care. When owners don’t attend AGMs, file proxies or stand for election, one can see how a board could get the impression that the owners have abrogated their democratic rights, do not care about their condominium and are content to be ruled in a dictatorial manner. It is often said that we Canadians “get the government that we deserve.” That concept seems to ring true. If unit owners expect to enjoy their democratic rights, their muscles must be regularly exercised by attending meetings, filing proxies, voting, standing for election and by remaining eternally vigilant. When those rights are infringed, offenders should be made to understand that such acts are unwelcome and will not stand.

Like other levels of government, boards of condominiums that suspend, interfere with or obstruct how democratic processes function should be shown the door.

Condo residents' panel hard at work while legislature prorogued

Chris Jaglowitz — Mon, 29 Oct 2012 17:08:02 -0500

While prorogation has brought legislative business at Queen's Park to a screeching halt (and which helpfully killed Bills 72 and 95 that would amend the Condo Act in weird ways), readers will be glad to know that Ontario's Condominium Act review and modernization process is steaming ahead.

At the cornerstone of this review process is the concept of collaborative public engagement, which is intended to solicit broad and direct input from citizens and the various stakeholders affected by the Condo Act. An important part of that process is the specially-chosen condo residents’ panel formed to discuss issues related to the Condo Act and provide advice on how to improve it. Panellists will work alongside a round-table of other condominium stakeholders to agree on a set of priority proposals for changing the Act.

From ten thousand randomly-selected Ontario condo dwellers who were initially invited to join the condo residents’ panel, 36 members were ultimately selected to achieve a balance of age, gender, geography, the number of years they have lived in a condominium, and the type of condo in which they live.

That panel convened for the first time this past weekend, on a wet, dreary Saturday in Toronto. They will meet for another three full days over the next month.

Part of the panel’s deliberations includes short visits by experts invited to speak and answer questions on selected issues within the five key focus areas, being:

consumer protection for buyers
condominium board governance
dispute resolution
condominium finances and reserve fund management
expertise/accreditation of condominium managers

As luck would have it, I was one of three experts who met the residents’ panel to talk about consumer protection for condo buyers. It was a short but enjoyable and memorable gig.

When asked by the session moderator (while introducing your humble scribe), about one-quarter of the panellists indicated that they knew of or had visited the Ontario Condo Law Blog. It is always nice to walk into a room of fans, but it was even more encouraging to watch the citizen panellists at work just before our group’s session, and to see them working together, opening their minds and gathering information, different viewpoints and sharing their experience and opinions.

Judging from their reactions, questions and comments to us visiting experts, the residents’ panel was clearly enthusiastic and highly-engaged. Hopefully the panellists found our input educational, but I found that hearing their ideas and thought processes was particularly enlightening.

Hats off to the citizens on this condo residents’ panel for volunteering their time to participate in this important process with such enthusiasm, and to listen and share their views. We are looking forward to seeing their conclusions as part of the “findings report” now planned for release in early 2013. Kudos also to the people from Public Policy Forum for putting together an impressive piece of public engagement work that was both fun and fascinating to witness and be part of.

There are lots of ways for Ontarians to participate in the Condo Act review process. Get involved today.

Photo credit: @BryanLeblanc

Insurers prefer law reform over peddling insurance: Has Hell frozen over?

Chris Jaglowitz — Wed, 03 Oct 2012 08:59:37 -0500

It is often said that we Canadians are among the best-insured (or most over-insured) people in the world. Our insurers have a special talent to devise and sell policies for virtually any situation or potential exposure and we who face those various risks are more than eager to snap them up. But when it comes to condominiums and the interplay between insurance policies held by condo corporations and unit owners, it seems that the insurers in British Columbia did not get the memo, leaving a gaping hole in coverage for unit owners.

CBC news reported last week that a Vancouver condo unit owner without proper insurance was left holding the bag for the $50,000 deductible payable under the condo’s insurance policy for a flood originating in his unit and causing damage to several units below. This is a typical situation and tales of condo unit owners not carrying sufficient insurance are hardly newsworthy. The bankruptcy lines have always included people who failed to understand their potential exposure or who mistakenly figured they could save a few dollars on premiums. Unlucky under-insured condo unit owners in Ontario have felt that sting for over 20 years and many have consequently lost their homes.

The premise of a more recent Vancouver Sun piece is one that we have written about on this blog before, namely that condo unit owners must ensure that they carry proper insurance with reasonable maximums. On that issue, the Sun asked a Vancouver insurance broker for the easy answer to the common problem facing unit owners:

The solution is to make sure your own unit insurance covers the strata deductible. Rees said he pays $20 a year for such coverage, which is worth $100,000.

While definitely helpful for people to know, this concept is not particularly newsworthy either. The story goes on, however, to challenge the long-time notion of us Canadians being so well-insured:

But not all companies will provide that kind of coverage, said Lindsay de Craene of the InsureBC Group.

For example, she said, only two insurers provide such coverage in downtown Vancouver, where there are seven condo complexes carrying a deductible of $100,000, 19 with a $50,000 deductible and one with a $150,000 deductible.

It seems incredible that so few insurers provide coverage (even on an optional basis) to unit owners at condominiums with deductibles of $50,000 or more. A need clearly exists, yet only two insurers heed the call by providing a product to fill the void. (It is a shame that the Sun does not name these two insurers who offer the additional coverage levels that unit owners should run (not walk) to buy.)

The insurance industry’s response to this apparent crisis, created solely by the fact that so few insurers in B.C. offer adequate coverage for their clients, is mind-blowing. That response is summarized in the first paragraph of the Sun article, as follows:

Government must change the rules so the owner of an individual condo unit doesn’t have to pay the huge insurance deductible on the entire condo complex when something goes wrong in their individual unit, the Insurance Bureau of Canada says.

After scratching our heads for a few minutes, wondering whether this opening paragraph is a mistake and thinking that the journalist has surely botched the story, we are gobsmacked as the piece goes on to say:

“We’ve begun to speak to government officials at a variety of levels to say there’s a problem here,” said Lindsay Olson, vice-president of the Insurance Bureau of Canada for B.C., Alberta and Saskatchewan.

“This is becoming a real issue. There’s a shortfall, and I don’t know what a person can do ... if it’s a common expense it should be dealt with as such.”

She said it is important to read the strata council’s bylaws to see who can be held financially responsible for damage to common assets.

In the past, accidental damage to common assets was the liability of the entire strata unless a single owner had been negligent.

But recently, strata councils have been changing their bylaws so they can designate an individual responsible if the damage occurred in their unit, even if that person had not been negligent.

Such a change is allowed under provincial law. “It’s been tested in court and it’s been permitted. It’s been occurring over the last few years,” Olson said. Previously, deductibles for claims made by the strata were in the $10,000 range.

“Over the last number of years what we have seen happening is strata corporations having higher and higher deductibles on the building insurance policy,” Olson said. Often insurers insist on higher deductibles because of multiple claims, especially water damage, in a complex. Some strata corporations have opted for higher deductibles to lower their premiums.

Under the provincial Strata Property Act, the strata corporation is required to review their insurance policy annually and provide a summary to unit owners at the annual general meeting. According to the Insurance Brokers Association of B.C., it’s the unit owner’s responsibility to make sure their own insurance policy dovetails with their building’s policy and strata bylaws.

Let me get this straight: Rather than create and market the hell out of a product to bridge this gap and make a few bucks in the process, the insurance industry advocates changing the law so that owners cannot be held liable for costs arising from their own negligence? This makes no sense whatsoever.

Section 105 of Ontario’s Condominium Act, 1998 clarified the judge-made rule that condominium corporations in this province can pass by-laws to allow the condominium to recover the deductible amount of cost of repairs made necessary by an act or omission of a unit owner. The underlying concept is to allow condo unit owners to act as a collective and pass a by-law assigning financial liability for repair costs to persons responsible for the damage so as to create a strong disincentive for people to be careless. This makes good sense and British Columbia has obviously followed this lead in its condominium legislation, which provisions have reportedly been upheld by B.C. courts. The Insurance Bureau of Canada seems to have a problem with this concept, but why?

Given that they set the premiums and offer varying deductible amounts in insurance taken by condominium corporations, it is the insurers, better than anyone, who know that deductibles have historically only increased and will likely continue increasing. Why, then, are the coverage levels available to unit owners not increasing in lock step? And why are only two or three insurers offering coverage levels that the Vancouver market seems to need as the deductibles at condos there are skyrocketing? Why is the industry association advocating short-sighted, wrong-headed legislative revision rather than encouraging its members to sell additional coverage to fill an obvious void, and perhaps make a tidy profit?

When juries began awarding million-dollar verdicts to auto accident victims on a regular basis, did insurers and their industry association lobby government to implement statutory caps on personal injury awards? Perhaps. In fact, insurers may have initially stood by and left their policyholders swinging in the wind when it became obvious that the standard policy limits were starting to fall short of providing meaningful protection given the trend of higher jury awards. But they eventually began offering optional increased maximums, with the result that many motorists today carry more than the statutory minimum liability coverage because a slightly higher premium can buy coverage of a cool million, or two or even three. Similarly, what right-minded condo unit owner would want only $25,000 worth of coverage for a repair deductible scenario when the deductible amount in the policy of that owner’s condominium is $50,000 or more?

We here at Ontario Condo Blog are not conspiracy theorists, but we genuinely do not understand what the Insurance Bureau of Canada is advocating or why. That uncertainty could easily lead to wild speculation as to the financial viability of deductible coverage in unit owner policies, though the cost for $100,000 of such coverage in Vancouver is said to be only $20 to $100. One might ask whether insurers are losing their shirts on such policies and whether the insurers presently offering such coverage might, as a result, stop underwriting that line of business or raise the premiums into the stratosphere. We will watch for developments and, hopefully, find some clarity from the insurance industry as to why they propose to meddle with condo laws when they should instead be rolling out and selling better coverage to unit owners.

It is worth mentioning that insurers operating primarily in Ontario have not yet publicly indicated whether they intend to lobby for any particular changes as part of Ontario’s wholesale re-opening of the Condominium Act, which is now underway. The insurance industry’s submissions during this process might offer interesting insight into the true state of that industry and the marketplace, and might confirm whether we Canadians still deserve the dubious title of being among the “best-insured”.

New OHSA workplace poster now mandatory

Chris Jaglowitz — Mon, 01 Oct 2012 11:53:28 -0500

Anyone visiting our office knows that we at GMA are big fans of adorning our walls with exquisite art, most of it painted by Bob Gardiner's dad, the late Perce M. Gardiner.

In keeping with his role of curator of our office/musem, Bob offers this short update on a new posting requirement imposed by the Ministry of Labour, now in force at workplaces across Ontario.

While the government-mandated posters are hardly masterpieces, no workplace is complete without them.

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Condominium corporations are required to post in their workplace a copy of the poster enitled "Health & Safety at Work – Prevention Starts Here" by October 1, 2012.

That poster, released by the Ministry of Labour, concisely outlines the functions of the Occupational Health and Safety Act (OHSA) and summarizes the rights, responsibilities and obligations of workers, employers and supervisors pursuant to that legislation.

The expert advisory panel on Occupational Health and Safety reached the conclusion that many employees were unfamiliar with the OHSA, as well as their duties and rights with respect to health and safety in the workplace. Additional written materials explaining the rights and responsibilities of workers, as prepared by the Ministry, must be made available by the employer, both in English and a majority language of the workplace.

You may obtain a copy of the poster written in 17 different languages from the MOL website. The poster must be at least 8 ½” x 11” in colour or black and white. Failure to conspicuously display the poster may result in an order from an inspector and subject the enployer to the possibility of provincial prosecution and a fine upon conviction.

This is not the only poster that employers must display. See here for other posting requirements imposed by the Ministry or talk to your lawyers for details.

GMA Condo Alert! (Summer 2012 edition)

Chris Jaglowitz — Sat, 29 Sep 2012 13:33:21 -0500

Although the season has officially ended, the summer 2012 edition of our newsletter is now available for download.

Featured in this issue is Syed Ahmed's article on employee termination pay, a topic that confounds many condo managers and boards.

Also featured is Bob Gardiner's updated model Owners' Code of Ethics. This is a worthwhile piece. If all condo unit owners followed Bob's suggested wisdom, the most common types of condo disputes would disappear and we condo lawyers would have a lot more free time on our hands. Condo managers, boards and owners would likewise benefit from the reduction in dramatic but entirely needless, pointless squabbles. Feel free to distribute this code to your unit owners and consider implementing it as a policy at your condominium.

Keep your eyes peeled for our next issue of Condo Alert, to be released at the annual ACMO/CCI Condo Conference on November 2 and 3, 2012. Remember to take advantage of early bird conference registration by October 1, 2012 and special pricing for student condo managers and condo directors.

MCS kicks off Condo Act review info sessions

Chris Jaglowitz — Tue, 11 Sep 2012 19:27:00 -0500

The Ministry of Consumer Services is holding info sessions for the province's Condo Act review over the coming weeks in cities near you.

The first session will be held in Toronto this week. Deets are below.

Our friends at @WB_Condo tweet that further sessions are planned for September 19 in Mississauga and September 27 in Ottawa. More dates to come.

Study: Young tenants aren't carrying insurance

Chris Jaglowitz — Fri, 31 Aug 2012 14:16:35 -0500

With the start of new school year, thousands of college and university students are moving in to rental accommodations near campuses all over Canada.

In their rush to set up their study nooks, stereo systems and beer fridges, young people seem to neglect obtaining proper insurance for their rented dwelling. According to a recent study by TD Insurance, 47% of Canadian tenants under age 35 do not have renter's insurance.

While most young people and especially students live on shoe-string budgets and must forego the luxuries, the cost of being underinsured could be far greater than the insurance premiums. Given the ever-increasing value of textbooks, personal electronics and designer clothes, young people would be hard-pressed to readily replace such items if they were damaged by water, smoke or fire. An alternative place to stay while repairs are made is another potential expense that might strain a student’s budget.

Last, but not least, the potential liability from a negligent act or omission could devastate a student’s financial position and cause a major distraction during studies. An everyday example of the need for liability insurance is a tenant in a condominium unit who causes a flood by leaving the bathtub running or causes a fire by leaving the toaster or stove unattended, resulting in damage to the unit, common elements and neighbouring units. In these cases, the condo corporation’s insurance will cover the cost of repairing the units and common elements but the corporation may back-charge its deductible amount to the owner of the unit where the damage originated. That owner may then look to their tenant for reimbursement of the corporation’s deductible amount, which could range from $2,500 to over $50,000. The tenant must then add the cost of finding alternative housing and replacing their personal property.

While the responsibility to obtain proper insurance ultimately rests with tenants and unit owners, condo corporations always benefit when residents of all ages and stages are properly insured because they face fewer disputes, lawsuits and other costly headaches when nasty situations are covered by insurance. Condo boards and managers should therefore take steps to remind unit owners and tenants what coverage is available under the condominium’s insurance, what is excluded and that residents should obtain professional advice to adequately protect themselves, their personal property and their financial security.

Check out our December 2008 post on the importance of condo corporations educating their unit owners about carrying proper insurance and some tips on spreading the word.

On further thought . . . Reversing earlier board decisions

Chris Jaglowitz — Wed, 11 Jul 2012 12:18:37 -0500

A recent decision of the Ontario Small Claims Court tackles the interesting issue of whether and how condominium boards can reverse earlier decisions in maintenance and repair scenarios.

In 2005, the board of a 40-unit lot-line townhouse complex authorized payment for work to address a recurring plumbing backup problem that was unique to one particular unit. The board of the day had insufficient money in its reserve fund to pay the cost of fixing the problem on a permanent basis but apparently resolved to do the work once the corporation was in a better financial position.

A new board and property manager subsequently took the position that the problem in this unit’s sanitary sewer was not related to the common elements and that the owners of the unit were therefore responsible for solving the problem. The board did not seek to recover its expenditure for the earlier repairs but refused to conduct or pay for any further repairs.

In 2011, the unit owners hired a contractor to repair their sanitary repairs at a cost of $4,500. They asked the condo corporation to reimburse them and, when the request was refused, the unit owners sued the condo in small claims court on the basis that the condo corporation had committed itself with the board's 2005 resolution to solve the problem one day.

The small claims court analyzed Schedule "C" of the condominium’s declaration which included the following components as part of the unit:

“all pipes ... and those portions of the water, storm, sanitary and natural gas services extending from the shut-off valve or main line tee, that provides services that particular Dwelling Unit only."

The court also noted that the owners’ plumber’s report clearly indicated that the sanitary sewer served only the single unit and that the work was performed within the boundaries of the unit. It further appeared that the problem resulted from a design fault between the connection pipes from the unit to the main supply line. In light of these facts, the court agreed with the condo board that the problem did not lie within the common elements that the owners of the unit were consequently responsible for the cost of solving the problem.

To decide the case, the court gave this answer as to whether the board’s 2005 decision to address the problem could be reversed in a later decision.

Of course it can.

Just as a prior Board of Directors can reach a good faith reasonable decision, so can a later Board - armed with the wisdom of better hindsight and research - overrule it in the best interests of all unit owners. In that the July 2011 repair pertained to the owner's unit exclusively, not the common elements, it would have been contrary to the best interests of the other owners - and jurisdictionally flawed - to commit them to fund such a repair.

Both sides relied upon precedent that upholds the right of a decision-making entity to make its decisions reasonably and in good faith. [Cases omitted.] This principle applies both to the 2005 and 2011 decisions.

The 2011 decision, however, in my view, was better researched, with greater benefit of hindsight. It is not irrelevant that the 2005 Board, having committed itself to funding the Plaintiffs' repair, realised very quickly that the Corporation's budget simply could not handle it. Consequently the repairs remained unresolved for years.

It cannot seriously be argued that a decision made reasonably and in good faith is forever - and under all circumstances - binding. The Plaintiffs knew full well when they undertook the repair that the Board was unwilling to reimburse. The Board was entitled to amend its earlier decision prospectively. But it would have been in muddier waters if it attempted retrospectively to assail payments already disbursed to the Plaintiffs, something it has - wisely - never sought to do.

The court dismissed the plaintiffs’ claim for reimbursement of the $4,500 repair cost.

This ruling usefully illustrates that condo boards remain free to reverse earlier decisions when the later decision is made in good faith and is based on credible information showing that the earlier decision is wrong.

Such scenarios often arise when new directors assume office or the board of a previously self-managed condo begins receiving advice from a professional property manager or lawyers with greater experience in condo law. It is not uncommon, for instance, for condo boards to reverse a long-standing practice or policy once advised that the initial decision was legally incorrect. The fact that the practice or policy is time-honoured does not change the fact that it is inconsistent with the Condo Act or the corporation’s documents. Condo corporations should not be handcuffed to an earlier decision if is later found to have been made with erroneous information or poor advice.

Beyond what is legally right or wrong, the next most important factor is how unit owners will react to a sudden about-face on a maintenance or repair issue. A condo board intending to reverse an earlier decision must consider the impact of that change on unit owners and should consider whether the change can be implemented or phased in so as to reduce potential hardship. Additionally, the basis for changing an earlier decision should be clearly explained to owners in order to minimize the potential for hard feelings and conflict. If owners are given a clear explanation for the change, an opportunity to state their views and to be convinced of the correctness of the change, needless dispute can often be avoided.

The case is Apaloo v. Durham Condominium Corporation No. 169, [2012] O.J. No. 2850, as yet unreported publicly.