Directors have a statutory duty under Ontario’s current Condominium Act to repair and maintain the common elements of a condominium. In complying with this duty, directors have a certain amount of discretion.
However, when modifications to the common elements are so significant that they constitute a “substantial change” under the Act, directors are required to seek special approval. In particular, subject to certain exceptions, the owners of at least two-thirds of the units in the condominium must vote in favour of approving the work before the changes can be made.
If the directors choose to ignore this requirement, the consequences can be dire. As such, it’s important to understand what the Condominium Act sets out. Recent case studies provide further guidance in making the distinction between repairs and maintenance and substantial change.
What Ontario’s Condominium Act sets out
Section 97(1) of the Act infers that “repairs” and “maintenance” are those measures which either fix damage or maintain the common elements, and which use materials that are reasonably close in quality to the original materials. These particular modifications to the common elements do not require approval or notice to owners.
A “substantial change” under the Act is a type of modification that is an “addition, alteration or improvement” and in which the estimated cost will exceed 10 per cent of the annual budgeted common expenses for that year, or one that is treated like a substantial change to the common elements by the board of directors.
Note: Where any change, including a substantial change, is necessary to ensure the safety or security of a person using the property, or assets of the corporation, or to prevent imminent damage to the property or assets, section 97 of the Act exempts directors from the requirement to seek prior approval from owners.
Courts have established that if the renovation work being done to the condominium fits into the category of a “repair” or “maintenance”, it is not a “change” invoking section 97 requiring approval of the owners. The test courts have laid out for what constitutes a “repair” or “maintenance” is reviewed below.
New appearance not necessarily a “substantial change”
Harvey v. Elgin Condominium Corporation No. 3 stems from leaks from the corporation’s garage roof decks into units. The Elgin condominium corporation’s board of directors investigated and found that there were substantial design flaws in the decks. To address these flaws, new decks had to be installed and a special assessment fee had to be imposed on all of the owners to pay for the work.
One owner disagreed that such substantial repairs were necessary. To stop the repair work, he claimed the repairs were substantial changes and they could not proceed without two-thirds of the owners’ approval.
In the Harvey case, the court found that for the work to qualify as “repairs” under the Act, the work had to be completed using materials that were reasonably close to the original. This allowed, however, for changes necessitated by current construction standards, and therefore the decks could be vinyl instead of the original wood of which they were constructed.
The court found that a difference in appearance after the repairs are complete does not necessarily constitute a “substantial change.” It noted that an upgrade that results in a more contemporary appearance does not necessarily qualify the repair as a substantial change, as the directors are allowed a certain degree of latitude in making the repairs.
Ultimately, the court accepted that the repairs did not constitute a substantial change, as the decks had been constructed in a way that was as reasonably close to the original decks as possible, while still avoiding the pitfalls of the previous materials. The court also found that the changes were necessitated by safety concerns, as the leakage through the decks was causing mould, sagging floors and rotten support beams.
Even a less expensive design option may require owner approval
The most recent decision regarding the distinction between repairs and substantial changes is Boily v. Carleton Condominium Corporation. In the Boily case, the court found that directors who instituted substantial changes without the approval of the owners, and who insisted on carrying out a design that had not been owner approved, should be personally fined thousands of dollars.
Problems for the board of directors began when it authorized some necessary repairs to the condominium’s underground garage. This resulted in the complete removal of the landscaping above the garage.
In restoring the landscaping, the directors suggested a new design which included additional parking spaces, less vegetation, differently designed planters, a new address sign and other changes to the colour scheme. This new design was less costly to install and maintain than the previous configuration.
A group of owners opposed the new design, claiming it would constitute a “substantial change” to the common elements and therefore required the consent of two-thirds of the owners. The directors, however, viewed the restoration as simply repairs and maintenance.
The parties eventually agreed to let the owners vote on whether to restore the original design or implement the new one, as contemplated by the Act. At the meeting, only 60.5 per cent of the owners voted in favour of the new design, which was 11 votes shy of the special majority the directors needed to proceed with the new design.
At the request of the owners, the court ordered that the courtyard be restored to the original design. The directors, however, still felt they knew what was best and made changes during the restoration to implement certain elements of the new design they preferred. For example, they installed a new street sign, a differently shaped traffic circle, a street lamp, different planters and different vegetation.
The parties went back to court and the directors attempted to justify their deviations from the original design. The court, however, did not accept their justifications, and found that the directors should have asked the court for further directions if they were truly unable to comply with the court’s order, rather than simply disobeying it.
For violating the court’s order, the directors were each found in contempt and personally ordered to each pay $7,500.
Key takeaway: Consider early whether a repair is really a repair
Boily presents a cautionary tale. Directors should be proactive when dealing with repairs to the common elements and consider at a very early stage whether the repairs are in fact repairs and not additions, alternations or improvements which invoke section 97 and, if a substantial change, require an owner’s meeting and owner approval.
The board must consider whether the materials used for the renovation are sufficiently similar to the original materials. The board must also consider how substantial the cost of the project will be. Open communication with the owners at this early stage can help avoid the kind of drawn out legal battles experienced by the directors in the cases above.
Another important lesson from Boily is that directors must ensure that they closely adhere to any court orders concerning repairs. When there is uncertainty about whether the modifications are repairs, regular maintenance or a significant change, the court is the ultimate decisionmaker. Strict compliance with court orders is not optional.
As always, boards should consult with a condo lawyer about available options and how to avoid director liability when effecting changes to the condominium’s common elements. After all, it is now clear that a new courtyard design unapproved by a special majority of owners can go bad, really bad.
Deborah A. Howden is a partner with Shibley Righton LLP in Toronto. She is a member of the condominium law group. Deborah can be reached at email@example.com.
Leanne Flett is an articling student with Shibley Righton LLP in Toronto. She can be reached at firstname.lastname@example.org.