general operating bylaw

General operating bylaws due for update

Recent legislative reforms affect road map for condo governance
Thursday, September 27, 2018
By Danielle Swartz and Natalia Polis

Every condominium corporation has a general operating bylaw which regulates the affairs of the corporation and provides a road map for how corporations are to govern themselves. Older condo corporations may still have the original general operating bylaw prepared by the declarant. Others may have amended their general operating bylaw in 2001, after amendments to the Condominium Act in 1998.

In November 2017, many more recent amendments to the Condominium Act were brought into force, affecting the governance of condo corporations. Despite these amendments, many corporations have not updated their existing general operating bylaws. As a result, many corporations’ operating bylaws contain provisions that are either inoperative or inconsistent with the latest amendments to the Condominium Act.

Under section 56(8) of the Condominium Act, a bylaw provision that is inconsistent with the provisions of the Condominium Act will be deemed amended. Updating general operating bylaws will ensure managers, directors and owners can find all of the amended provisions in one comprehensive document, rather than having to navigate through the complex web of changes in the Condominium Act and its regulations. Corporations can also avoid potential challenges from owners who mistakenly rely on contrary provisions in their current general operating bylaws. As such, now is a good time for corporations to update their general operating bylaws.

Changes to condo records

Condo corporations are required to maintain certain documents as records of the corporation. The amendments to the Condominium Act classify these records as either core records or non-core records. With the new records-request process, it is important that condo corporations understand which documents fall under each category, as the timeframes and procedures for providing these records to requesting owners differs. Failure to abide by the new records-request process can lead to a Condominium Authority Tribunal application and a fine of upwards of $5,000. A revised general operating bylaw may serve as a useful tool for condo corporations by outlining the different categories of records, and may greatly assist condo corporations when a records request is submitted.

A core record of a condo corporation includes:

  • Declaration, bylaws, rules and current budget;
  • Shared facilities agreements;
  • Recent financial statements, auditor’s report and reserve fund plan;
  • Periodic information certificates issued in the last 12 months;
  • Minutes from meetings of owners held in the last 12 months after Nov. 1, 2017;
  • Record of owners, mortgagees and leases; and
  • Any other record that is specified as a core record in the corporation’s bylaws.

Any record that is not a core record is a non-core record.

The amendments also implemented new retention periods for financial records. Specifically, all financial records of a corporation must be retained for a period of at least seven years, as opposed to the prior six-year requirement. Again, most corporations’ existing operating bylaws will reflect this six-year retention period.

New duties and obligations

Among other things, general operating bylaws outline condo corporations’ duties and obligations. The amendments have expanded these obligations to include preparing and delivering “information certifications” to owners, including periodic information certificates, information certificate updates and new owner information certificates.

These new information certificates must be sent to owners at different times in a condo corporation’s fiscal year and when certain events occur. Most notably, the periodic information certificate must be sent to owners within 60 days of the last day of the first quarter of the corporation’s fiscal year and within 60 days of the last day of the third quarter of the corporation’s fiscal year. Information certificate updates must be sent to owners upon “triggering” events such as changes in the composition of the board of directors or changes to the corporation’s insurance policies.

By reflecting condo corporations’ duties and obligations, including the information certificate requirements, within general operating bylaws, managers and directors have a one-stop-shop for understanding their responsibilities and acting according to the Condominium Act, thus avoiding any potential liability that could stem from their failure to do so.

Changes to board of directors

General operating bylaws stipulate director qualifications and disqualifications. The amendments push for greater transparency on the board level and provide new qualifications and disqualifications that should be reflected in a corporation’s general operating bylaw.

Most significantly, any person running for a seat on the board of directors must provide certain disclosure statements prior to his or her election or appointment. Candidates must disclose:

  • If they are a registered owner of a unit in the corporation;
  • If they are a resident of a unit in the corporation;
  • If they, their spouse, child, parent, spouse’s child or parent, an occupier of a unit in the corporation, is/are a party to a legal action to which the corporation is also a party and a brief general description;
  • If they have been convicted of an offence under the Condominium Act or under the regulations within the last 10 years;
  • If they have a direct or material interest in a contract or transaction to which the declarant (i.e. the developer) or an affiliate of the declarant is a party (other than in the capacity as a purchaser, mortgagee, owner or occupier of a unit); and
  • Any other disclosure requirements outlined in a corporation’s bylaw.

Any director who fails to abide by these new disclosure requirements will be disqualified from the board.

Another amendment is the mandatory director training. Every director appointed or elected to the board of directors after Nov. 1, 2017, must complete mandatory director training. The director training is offered online through the Condominium Authority of Ontario’s website and covers all facets of condo governance. Directors have six months from their election or appointment to complete this training. Otherwise, they will be disqualified from the board.

Changes to owners’ meetings

General operating bylaws further outline the procedures for calling and holding owners’ meetings. The amendments provide new notice obligations for corporations as well as quorum requirements.

Specifically, the amendments require corporations to send out two sets of notices: the preliminary notice and the notice of meeting.

For all owners’ meetings except requisitioned meetings, the preliminary notice is to be sent out at least 35 days before the meeting and at least 20 days before the notice. The preliminary notice outlines the purpose of the meeting and stipulates a deadline for owners to request that additional material be included in the notice package — for instance, their candidate disclosure statements and resumes.

The notice of meeting must be sent out at least 15 days before the meeting and includes any materials that owners have requested be included in the notice package. Corporations are not obligated to include any additional material unless 15 per cent of owners have requested the material to be included and the material is not contrary to the Condominium Act.

The amendments also provide new quorum thresholds that may assist corporations in obtaining quorum at meetings. Particularly, the amendments provide that quorum at any first and second attempt to hold an owners’ meeting is 25 per cent of the units. If quorum is not present at the first and second attempt to hold the owners’ meeting, the quorum threshold decreases to 15 per cent of the units for any third or subsequent attempt to hold the meeting.

Updating general operating bylaws to reflect these recent amendments will help to clarify how corporations’ affairs will be conducted going forward. Experience to date suggests that passing an electronic voting bylaw first, to permit the use of electronic voting, can make it easier to get these important updates to a corporation’s bylaws approved by owners, which requires a favourable majority vote at a duly constituted meeting.

Danielle Swartz is a second year associate with Lash Condo Law. She is building a practice in condo development, corporate governance, and representing condo corporations in court proceedings and dispute resolution.

Natalia Polis summered and articled with Lash Condo Law and has returned as a first year associate. As counsel for condo corporations, she draws upon her past experience as an assistant condo manager at her family’s condo management company.

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