Written by Leonard A. Gangbar, Andrew L. Jeanrie and Natalia E. Iamundo
The Province of Ontario recently introduced Bill 106, Protecting Condominium Owners Act, 2015, to amend the Condominium Act, 1998, largely in response to the immense growth and change in the condominium sector in Ontario in recent years.
Bill 106 passed first reading (of three) in the Legislature on May 27, 2015.
If passed in its present form, Bill 106 would introduce substantial amendments to the Condominium Act (together with corresponding amendments to ancillary legislation, such as the Land Titles Act, the Ontario New Home Warranties Plan Act, the Planning Act, and the Building Code Act, 1992). The following are some of the highlights from the perspective of both condominium developers and corporations:
Condominium Disclosure and Development Changes
- Bill 106 will introduce a number of changes that will impact the sale and development of condominium projects. Some of these changes are as follows:
- The requirement to include a statement in the declaration of how the proportions of each owner's common expenses and common interests are determined;
- The requirement that developers provide at the time of purchase an easy-to-read condominium guide to purchasers (prepared by the government), setting out some standard information about condominiums and the rights and obligations of owners and the board of directors;
- Additional disclosure statement requirements, including a statement of circumstances that the declarant knows, or ought to know, may result in an increase in the common expenses after the expiry of the one-year period following registration of the declaration and description and the provision of final first-year budget figures at least 10 days before the closing date of the purchase and sale. These requirements are aimed at curtailing the practice of deferring certain costs of the condominium corporation until the expiry of the first-year period after the condominium is created (so they do not need to be included in the first-year operating budget);
- Removing the restrictions around registering a phase in a leasehold condominium corporation, a common elements condominium corporation or a vacant land condominium corporation;
- Requiring developers to disclose to a purchaser the final first year budget at least ten days before the closing date of the agreement of purchase and sale;
- Amending the Ontario New Home Warranties Act to allow most of the warranties available to buyers of new condos to apply to conversion projects. This could improve the marketability of conversion projects;
- Refining the definition of "material change" to mean a change that results in an increase of 10 percent or more (or such other threshold as may be set out in the regulations) in the common expenses set out in the budget statement. This amendment sanctions the current rule of thumb adopted by many in the condominium sector that any increase of 10 percent or less in common expenses does not constitute a material change and thus introduces an objective standard by which to determine what constitutes a material change;
- Allowing for regulations to specify what parts of the property constitute a unit or an asset owned by a condominium corporation or form part of the common elements, and prohibiting condominium corporations from acquiring an interest in a unit, other real property or personal property for consideration, until the new turnover board agrees otherwise, and unless the regulations provide otherwise. This is aimed at impeding the forced purchase or lease of certain units and assets of the condominium (e.g., HVAC units, elevator units, superintendent's suites);
- Expanding the rights of condominium corporations, by resolution of the board within 12 months of the election of a new turnover board, to terminate certain agreements entered into before such new turnover board was elected. This is aimed at impeding the ability of developers to bind condominium corporations to management agreements, common element leases, and other arrangements entered into by the declarant-controlled board;
- Permits the adoption of regulations that mandate that certain disclosure material (including declarations, descriptions, bylaws, and rules) be made available on declarants' websites;
- Requiring a developer to stipulate in the first year budget which portion of the common expenses are to be paid into the reserve fund, and the regulations will govern how such portion is to be calculated. Failure to comply will result in a developer becoming liable to the condominium corporation for the amount required for compliance; and
- Specifying the circumstances in which shared facilities agreements are required and allowing for regulations to prescribe provisions that must be included in a shared facilities agreement. This is aimed at setting a level of standard practice in the condominium sector to minimize future disputes over the management and maintenance of shared facilities.
- A new act will be created, the Condominium Management Services Act, 2015, that would require people who provide management services to condominium corporations be licensed. In addition, licensees may only provide management services in accordance with a written contract. The details of the licensing system, including the training and educational requirements, or the proposed code of ethics, will be developed as part of regulations to be adopted under the act. At this point, no drafts of these regulations are available.
- Bill 106 will amend the Condominium Act so as to change a wide range of condominium management matters, including: the entering into of certain contracts without following certain procurement processes; increased disclosure to owners; clarifying the rules relating to reserve funds; changing voting procedures; and requiring directors to complete certain training requirements.
Dispute Resolution between Condominium Corporations, Owners and Mortgagees
- Bill 106 allows for the creation of a not-for-profit corporation as a Condominium Authority and a Condominium Authority Tribunal to hear certain classes of disputes between condominium corporations and owners or mortgagees. The Condominium Authority is expected to be self-funded, which it will accomplish by imposing a fee on each condominium unit in the Province (expected to be approximately $1 a month).
We expect that several of the key amendments will be fleshed out by Regulations to be developed either before or after Bill 106 is adopted and/or comes into force. At this point, the Province has not provided an estimate as to when Bill 106 is expected to receive final reading and, most importantly, when it is expected to come into full force and effect.
As Bill 106 continues to progress through the legislative process, Bennett Jones will monitor its progress and analyze the implications on the condominium industry in Ontario.