negligence

Potential cost of CMRAO’s discipline process

Case highlights regulatory body's 'powerful enforcement'
Thursday, March 3, 2022
By James Davidson and Nancy Houle

According to its website, the Condominium Management Regulatory Authority of Ontario (CMRAO) is a regulatory body providing oversight of condo managers and management companies.

We normally think of the CMRAO as the body that oversees the licensing of Ontario’s condominium property managers. But the CMRAO’s mandate also includes education, training, discipline and enforcement. In other words, there’s more to the CMRAO than just licensing.

The CMRAO’s enforcement rights

In a case late last year, two condominium corporations complained to the CMRAO about a manager’s failure to turn over records following termination of the management contract. The failure to turn over records was a specific violation of Section 54 of the Condominium Management Services Act, 2015 (CMSA) and Section 35 of Regulation 123/17 (the general regulation under the CMSA).

Quite separate and apart from any consideration of disciplinary procedures, the CMRAO brought a court application against the manager; and the CMRAO successfully obtained an order requiring the manager to comply with a manager’s obligations under Section 54 of the CMSA. The court also ordered the manager to pay costs of $7500 to the CMRAO.

The CMRAO’s authority to make this sort of court application exists under Section 67(1) of the CMSA, which reads as follows:

‘If it appears to the director (of the CMRAO) that a person is not complying with this Act or the regulations or an order made under this Act, the director may apply to the Superior Court of Justice for an order directing that person to comply, and, upon the application, the court may make the order that the court thinks fit.”

So, the bottom line is that the CMRAO can be a powerful enforcement alternative for anyone (for instance, a condominium corporation) who is concerned about a manager’s failure to comply with the CMSA.

The potential cost of the CMRAO’s discipline process

The CMRAO also has the authority, in an appropriate case, to discipline a condo manager. The CMSA and regulations spell out the mandate of the CMRAO to receive complaints and to take disciplinary procedures. Among other things, the CMRAO may:

  • Attempt to mediate or resolve a complaint.
  • Give the manager a written warning.
  • Require a manager to take further educational courses.
  • Require a principal condominium manager to take further educational courses.
  • Refer a matter, in whole or in part, to the CMRAO discipline committee.
  • Suspend or revoke a manager’s license (with prior notice and the right to a hearing).

Depending upon the circumstances, a discipline process, particularly a hearing by the discipline committee, could become very expensive and sometimes quite lengthy, involving lawyers and expert witnesses. This, in turn, raises the following questions: Who would be responsible to cover the manager’s costs for the hearing? Normally, a complainant would not be ordered to pay such costs. And the CMRAO also won’t normally be ordered to pay such costs. Is this cost simply part of a manager’s “cost of doing business”?

Let’s take a simple example: Mary Smith is managing a 100-unit high-rise, Condominium Corporation No. 123. One of the owners in the condominium, Fred Jones, makes several complaints about Mary to the CMRAO. Some of the complaints are very serious, including allegations of unprofessional conduct involving alleged discrimination and harassment. The CMRAO is not able to “get to the bottom” of the complaints. The CMRAO concludes that the complaints are serious enough to merit a hearing by the discipline committee. The committee holds a hearing and ultimately determines that the complaints are without merit, and orders no discipline against Mary. However, the costs for Mary’s defence total $100,000.

The management contract (between Mary’s principal condominium manager and the condominium corporation) includes a typical indemnification provision, whereby the condo corporation agrees to indemnify the manager against costs incurred as a result of claims, provided the claims don’t result from the manager’s negligence or misconduct. Does that indemnification provision apply? Is the condo corporation obligated to cover the costs of Mary’s discipline hearing?

And of course this raises some further questions: Are these costs covered by the manager’s professional (E & O) liability insurance or by the condo corporation’s insurance? And is the manager even a named insured under the condo corporation’s insurance?

According to our enquiries, the answers to these questions may, in many cases, be unclear. So, our recommendations are as follows:

First and foremost: Ask the insurers involved—the manager’s insurer and the condo corporation’s insurer—whether or not they would cover the defence costs in the event of a hearing by the CMRAO discipline committee. If not, you might also ask whether or not it is possible to obtain such insurance for an added premium.

Then, with the benefit of that “insurance information”, and after a good discussion between the condo corporation and the manager about responsibility for such costs, you can hopefully make the appropriate revisions to the indemnification provision in the management contract so that the responsibility is clear.

When it comes to the CMRAO, there is more to think about than just licensing.

James Davidson and Nancy Houle are partners at Davidson Houle Allen LLP Condominium Law. dhacondolaw.ca

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