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Fate of outstanding condo law reforms unknown

Changes to rules for developers, finance not yet in force
Friday, September 28, 2018
By Michelle Ervin

The fate of some of the planned changes to Ontario’s condo laws remains unknown following the election of a new provincial government three months ago.

The previous administration, led by the Liberals under Kathleen Wynne, passed and last fall started to phase in legislation reforming the Condominium Act. To date, this has established mandatory licensing for condo managers, new governance requirements, including mandatory training for condo directors, and an online tribunal for disputes over condo records, among other things.

The new administration, led by the Progressive Conservatives under Ontario Premier Doug Ford, has yet to stake out a position on the outstanding provisions of the legislation. Some of these provisions are designed to start condo corporations off with enough money in their reserve fund and stop developers from downloading construction costs onto unit owners.

As the new minister of government and consumer services, Todd Smith is the provincial government’s point person on the condo file.

“Our government recognizes that buying a home is a significant and important financial decision,” Smith said in an emailed statement. “We are committed to making sure that the appropriate protections are in place to protect Ontario consumers.”

“Consumer protection is a large and important part of the Ministry of Government and Consumer Services,” Smith added. “We are looking at this policy area along with a number of others to determine how best to strengthen the protection of consumers.”

The incoming administration could proceed on the condo file in essentially one of three ways: roll out the rest of the changes to Ontario’s condo laws as planned by their predecessors, change course in a major or minor way, or do nothing.

“Obviously the biggest hope is that the PCs will pick up with the amendments, that it doesn’t just languish where it is now,” said engineer Sally Thompson.

Outstanding legislative provisions

While the Condominium Act reforms that have been phased in to date are now law, the outstanding legislative provisions are sitting on the books awaiting accompanying regulations. After regulations are in place, the outstanding legislative provisions must be proclaimed into force in order to take effect.

Thompson, president of CCI Toronto, pointed to provisions that would help to establish and maintain adequate reserve funds in condo corporations as high priorities.

An adequate reserve fund, which remains to be defined in regulations, is key to the financial health of condo corporations. The fund is designed to ensure corporations collect enough money from owners through monthly maintenance fees to pay for major repairs and replacements as needed. This helps corporations save up for significant expenses incrementally — rather than having to ask owners to split the sizable bill when, for example, the elevators need to be modernized — and shares capital costs across current and future owners, in proportion to their time spent living in the building using its assets.

Also to be defined in regulations is how much money needs to be allocated to the reserve fund in year one of condo corporations.

“Right now, we’re still putting condos out on the street at 10 per cent of operating budget,” said Thompson, “and so when the reserve fund study providers come in, they’re having to take the boards through a 200 to 300-per-cent increase in the reserve contribution over the first few years.”

Underfunded reserves aren’t the only reason boards may have to hike monthly maintenance fees in brand new condo corporations. Some developers compel corporations to buy or lease back assets such as the guest suite or amenity room, and schedule payments to start in year two of the building’s operations, as Armand Conant, partner at Shibley Righton LLP, explained.

Conant said he believes these construction costs should be reflected in the purchase price of condo units, where they are transparent to consumers. To do otherwise obscures what the true cost of living in a particular community will ultimately be as buyers drawn in by lower unit prices face higher monthly maintenance fees post occupancy.

“This is what one of the reforms was going to prohibit, so that you don’t have a nasty wake-up call in year two, with a huge increase in common element fees because a bunch of costs were deferred to year two,” he said.

Conant flagged provisions such as this, which deal with consumer protection as it relates to developers, as high priorities. If brought into force, another provision would prohibit developers from limiting their responsibility for common element construction deficiencies to what’s covered under Tarion.

“I do hope that we get to the rest of the [Condominium] Act as soon as possible,” added Conant.

Challenges to resolve

Not everyone is eager to see outstanding legislative reforms rolled out right away.

Condo lawyer Denise Lash said that there have been challenges with some of the changes that have been brought into force so far that ought to be resolved before implementation continues. Lash, president of CAI Canada, added that condo corporations are also juggling other issues, including new regulations that have made it harder for boards to reject requests from unit owners to install electric vehicle charging stations.

The legislative reforms required condo corporations to file returns with a newly established entity called the Condominium Authority of Ontario — which is responsible for creating a public registry of corporations, among other things — by March 31. Approximately 1,900 of Ontario’s more than 11,300 corporations have yet to do so.

The legislative reforms have also introduced a series of new mandatory forms. Among them are the proxies that owners who are unable to attend meetings use to vote and help their corporation reach quorum — the minimum attendance level required to conduct business.

“We can’t get meetings because no one wants to fill out proxies, because they’re so complicated,” said Lash.

She said the ministry has indicated that it’s preparing instruction sheets and revising the proxy form for a second time.

“I don’t think anyone expected it to be perfect,” Lash added, referring to the legislative reforms generally. “What’s good about it is the ministry’s asking for feedback from the different interest groups.”

Dean McCabe, president of Meritus Group Management, said the Association of Condominium Managers of Ontario (ACMO) hopes to see the ministry continue to consult the sector and finish rolling out the remaining legislative reforms. McCabe, who sits on ACMO’s board, pointed out that some of the changes to Ontario’s condo laws that have been introduced to date rely on some of the outstanding provisions in order to work properly.

For example, he said, there is a new requirement for condo corporations to give owners at least 35 days’ preliminary notice of meetings, which overlaps with the 35 days corporations have to call and hold meetings requisitioned by owners.

“We have exactly zero days to send out a preliminary notice. On the day that we receive a requisition, we have to send out a preliminary notice of meeting of owners to all owners,” explained McCabe. “It’s an impossible timeline to meet.”

If implemented, one of the outstanding provisions of the legislative reforms would give condo corporations 40 days to call and hold meetings requisitioned by owners, leaving time to satisfy the preliminary notice requirement.

As for the Progressive Conservative government’s intentions for this and other planned changes to Ontario’s condo laws, more information appears to be months away, according to the statement provided by the minister of government and consumer services.

“We will be working with industry, stakeholders and consumers as we determine next steps,” said Smith. “I look forward to providing further updates in the coming months.”

Michelle Ervin is the editor of CondoBusiness.

2 thoughts on “Fate of outstanding condo law reforms unknown

  1. The Performance Audit that is completed by the NEW OWNERS ( the condo Board at Turn Over) will examine each component and its level of completeness when compared with shop drawings and the Sales Brochures ( what was promised )

    This is an independently hired group of engineers that prepare the BOD when they meet with the Builder / Developer and their Tarion counterpart.

    How is an additional level of over sight of value?

  2. My puzzle to add to the above is how come despite ongoing reserve studies through the years and how come despite being advised that our reserve was more than adequate when we bought almost a decade ago…were we dinged with free hikes of thirty five percent in a period of three years which we are just finishing regarding replacing an aging elevator system (two)
    If the reserve studies were sufficient? Clearly then not tethered to specifics in regulation re what is adequate not and not just for new buildings the problem remains.
    I see that since the fee hike isn’t in regulations and thus not yet in force maybe our proactive board jumped the gun and didn’t yet have to compress the toll in three years now completed and could have stretched it out from when the laws actually came into force. Which is still pending per the article if I have interpreted it correctly.
    Our board now has added normal fee hikes going forward so perhaps again has been overly proactive. Unless all those reserve studies now mandated every three years were only professional opinion akin to an appraisers? Oddly some twenty years out we were told we would get a reduction???? Which would be about the time elevator replacement might be starting once again to be a concern
    Noting that the gta has a huge unplanned and unbudgeted for problem with aging elevators and is closing low income hosting solutions at a rate of one and a half a day per media maybe our politicians needs to eat their own breakfasts first
    Would I be correct in saying per this article that since the regulations are still up in the air and there is no benchmark for adequate reserves that our board jumped the gun while developers of now builds can still do what the well intended legislation wanted to avoid. And that for less diligent boards special assessments are still the norm?
    Try to consider the impact of this on seniors with fixed incomes who have been living in these building and the impact on resales due to high fee scare away when not everyone has adopted the new regulations because they arent yet legally in force?

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