Repairs, Maintenance and Renovations

January, 13 2022 Published by Golden Horseshoe Chapter - By Patricia Elia, Henry Jansen, Matthew Atkin

Duty to Repair – The Case Study

From the Volume 11, Winter 2022 issue of the CCI GHC Condo News Magazine

CASE STUDY 1

MANAGER’S PERSPECTIVE:

This case study involves a townhouse condominium corporation with condemned cantilever rear balconies. The situation occurs more frequently than you might expect because of the nature of this type of construction.

Often, Boards have several replacement options when dealing with this type of failure. It is imperative that the Board and property management company work closely with their lawyer and engineer to develop a replacement plan.

In this case, the Board of Directors, working with their engineer, changed the design from a cantilever to a rear post design balcony that was attractive and cost-effective. Unfortunately, the corporation was not adequately funded to undertake this project with available funds.

As a result, the Board and property management completed a cost-benefit analysis comparing special assessment and loan options. Once the analysis was complete, the Board consulted with their lawyer, auditor, reserve fund planner, and specialized lender.

Following this consultation, the Board, working with management, arranged to hold a town hall meeting to inform the broader community of the project plans and provide owners with relevant information and analysis. The town hall was also an opportunity to promote transparency and allow for questions from the owners to be addressed by the professionals on the town hall panel, including the lawyer, auditor, property manager, engineer, and specialized lender.

Once the town hall was complete, and based upon feedback from the owners, the Board decided to levy a special assessment instead of taking the bank loan to fund the project.

Before construction began, the Board, working with property management and the engineer, developed a comprehensive communication plan, providing affected owners with a detailed construction schedule, expected impacts, and regular updates.

At the conclusion of the project, a close-out communication was sent to the owners, providing them with a recap of the project, including total costs, and requesting their feedback on how the project was handled by management and the Board.

CASE STUDY 2

This case study involves a condominium corporation with a suspended swimming pool and imminent failure. This situation is critical to assess and understand because this situation occurs frequently but is often addressed inadequately, and there is significant room for improvement in approaching this scenario.

Signs of failure first presented themselves when it was noted that pieces of concrete were crumbling and falling from below the pool, and water leakage was observed. These conditions were all identified during regular preventative maintenance inspections. Once identified, the findings, including photographs, were provided to the Board of Directors, along with the recommendation that the Board seek and obtain professional advice regarding these matters.

The Board agreed with the manager’s recommended course of action and instructed management to contact their engineer of record and their lawyer. Once aware of the conditions, the engineer recommended a visual inspection to better understand the current condition.

Following the visual inspection, the engineer determined that core samples and a chain-drag test were required because the extent of the deterioration had progressed substantially. This information was conveyed to the Board and the Corporation’s lawyer, and, upon review, the lawyer advised the Board that it was obligated to complete this additional investigative work.

The Board followed the lawyer's advice, arranging completion of the recommended work, and was subsequently advised by the engineer that the pool shell was in a condition of imminent failure. The engineer recommended to the Board that project specifications be developed, competitively and formally tendered, and a bid summary prepared. The Board agreed with this process and instructed the manager to move forward.

Once the engineering process was complete and the Board had the letter of recommendation from the engineer, they again met with their lawyer and management to discuss options.

Because the Corporation was adequately funded and had followed their Reserve Fund Plan, the Board decided to proceed with immediate replacement of the pool shell. The Board, working with their management company and lawyer, provided updates to the entire community throughout this process to ensure transparency and the factual dissemination of information.

Before entering a contract with the recommended bidder (CCDC), the Corporation’s lawyer reviewed the contract to ensure the protection of the Corporation.

MANAGER’S PERSPECTIVE:

Matthew Atkin, GSA Property Management

1.Make the entire Board aware of issues immediately.

2.Recommend to the Board that they seek professional advice from the very beginning to ensure that the matter is handled correctly and with a comprehensive plan in place.

3.Following Board approval, arrange for prompt professional review and facilitate discussion with the Board and the appropriate professionals (often more than one professional, i.e. lawyer and engineer).

4.Following Board approval, arrange for the consulting engineer to provide project specifications, formally tender the project, conduct a bid analysis and issue a letter of recommendation to the Board.

5.Arrange a meeting with the Board and related professionals to develop a funding and construction plan to ensure compliance with industry best practices and the Act.

6.Work with the Board and professionals to develop a Communication Plan to ensure the owners are adequately and regularly updated on the progress of the project.

7.Depending on the scale of the project and impact to owners, arranging a Town Hall meeting to answer owner questions and educate owners on the process the Board has followed. It is strongly recommended that the related professionals be in attendance for this type of meeting.

8.Engage the Corporation’s lawyer to review the CCDC contract before the Corporation enters into an agreement to ensure the Corporation is adequately protected.

9.Provide regular updates to the owners on how the project is progressing and how they may be impacted.

10.Upon the conclusion of the project, provide the owners with a “close out” update and request their feedback on how they feel the project was handled by Management and the Board. While you can expect some negative feedback, it is often helpful to receive this feedback and use it to plan for future projects.

LEGAL PERSPECTIVE:

Patricia Elia, Elia Associates PC

In managing the legal risk associated with a capital asset replacement due to failure, it is important to know where you are in the timeline: Is failure pending? Or has failure occurred?

Basically,

Failure is pending

1.Know your duty under the Condominium Act, 1998 (the “Act”): pay attention to the following sections: 26, 37, 117, 119 and the constating documents. Make sure the Status Certificate is updated.

2. Engage your professionals, both engineers and lawyers to talk about what is the nature of the failure and what the risks are. Do not under estimate the value of a well drafted and comprehensive set of opinions. Penny wise pound foolish is not the way to go. This means retaining experts now! Get more than one opinion.

3.Understand priorities of risks to be managed. Legal, engineering and accounting may be helpful in identifying risks and their scope.

4.Ensure that your professionals are strong and clear, especially on life safety matters. It troubles me when professional opinions are unclear. While I appreciate risk needs to managed by professionals, the professional duty must be fulfilled. Boards should ensure that the scope of the retainer is accurate. Legal can assist in this because it may have consequences from an evidentiary perspective.

5.The scope of work of a professional should provide advice on the potential solutions, legal or engineering consequences, unknowns which may arise and potential costs.

6.Legal counsel should provide a legal strategy with respect to how to address these matters in accordance with the and all other applicable laws. The interesting thing about condominium law is that there is a rich intersection of compliance with other laws within the statutory framework of the Act and the caselaw. Opinions should address: the Act requirements, other laws, director liability, insurance concerns, a review of all contracts for key components including the scope and nature of work, duties, covenants, indemnities and insurance provisions and obligations. The opinion may also discussions about special assessments and/or loans, if applicable.

7.Notifications in the status certificate should be made of any pending issues so that everybody pays any costs associated with the same and arguments are avoided whereby a purchaser says that they never knew about something that the Board knew about.

8.Timely engagement of professionals can work to protect the Corporation and manage the risk to the Board of Directors.

9.Communication with Community:

a.Who is doing it?

b.How should it be done?

c.What are the options available to the Board?

d.Who should speak on behalf the Corporation?

e.When should it be done?

f.What should be released?

10.What if people bury their heads in the sand? Pull their heads out of the sand and move forward. Legal can help by getting a court order, if people will not cooperate.

Failure has occurred and is now an emergency

1.If an emergency occurs, i.e., the underground has already collapsed, the Corporation must proactively manage the risk. This will require the immediate engagement of profes- sionals irrespective of financial issues. This will mean that property management, lenders, insurers, engineers, contractors, lawyers and municipality potentially will need to assess the risk.

2.Understand priorities of risks to be managed now that failure has occurred.

3.Immediate steps: Working with municipality and police. Organizing evacuation of the premises. If there is a risk to persons, then people need to be told to leave and if the building is condemned then there is absolutely no choice. Work with property management and security to get this effected.

4.Know your duty under the Condominium Act, 1998 (the “Act”): pay attention to the following sections: 26, 37, 117, 119 and the constating documents. Make sure the Status Certificate is updated.

5.Putting insurers on notice immediately!! This has legal implications to the Corporation.

6.Further on the legal side, opinions should be provided to the Board regarding liability and who may be responsible, legal proceedings and the legal framework of next steps. Is a section 97 approval required, is a borrowing bylaw required? What needs to be effected? What are the risks associated with each step?

7.On a parallel thread to the foregoing, the Board will need to work with professionals in determining what evidence or information or data is required by each of the professionals: insurers, engineers, legal, contractors etc. Coordinating the efforts of the Board with all professionals and transmission of data.

8.Once people are safe, then communication strategy should be more fulsomely developed and implemented. This would include town hall meetings and duly constituted unit owner meetings.

9.Communication with Community:

a.SEE Item 9 above.

10.Be prepared to apologize.

ENGINEER’S PERSPECTIVE: RESERVE FUNDS

Henry Jansen, Criterium Jansen Engineers

Very simply, a Reserve Fund Study is at a minimum a 30-year maintenance plan for your condo corporation. It is a tool prepared by your engineer for the Board and property management to use in maintaining the real estate asset. It is a goal. If the reserve fund says something needs to be repaired or replaced in certain year, this does not mean that this actually has to happen as laid out in the annual expenses. Sometimes a roof will last another year. Sometimes you may need to replace the roof a year earlier. The reserve fund is a living, breathing document. Like I said earlier it is a planning tool. It should be used in constant consultation with your engineer.

It needs to be continually updated. This is a minimum of every 3 years as outlined in the Condo Act. But we have some condo corps which update the reserve annually. You should always plan projects a year in advance and adjust your reserve fund as critical projects come to the horizon and actual contractor quotes for work are obtained.

As buildings age, more maintenance and repairs will be needed. You need enough money in your reserve fund to maintain the infrastructure. Do not defer projects and do not just hire a professional which will help you keep maintenance fees low. You are just fooling yourself. Pay now or pay later. It is not more complicated than that.

Below are 2 scenarios and practical tips in the event a:

(1)known failure is pending but there is time to deal with it (i.e., underground garage will require major work in 2-3 years);

  • Take the project seriously and make informed decisions in a timely manner.
  • Start with a Condition Assessment which is different than a reserve fund.
  • The reserve fund should identify when the work should be undertaken.
  • A Condition Assessment is a detailed technical audit prepared by a licensed professional engineer. The inspection process will be partly visual and invasive. Invasive testing can include concrete core samples, sounding of concrete, chain drag, X-ray, etc.
  • The detailed condition assessment should outline the full scope of work that is required.
  • Based on the condition assessment a tendering document and bid package can be created.
  • Based on costs and condition you may be able to complete work in phased projects.
  • Communicate the need and process to you unit owners.
  • Work with your property manager, lawyer, financial lender, and engineer to develop the plan to address the pending failure.
  • Time is of the essence.
  • Timing
  • Condition Assessment, Scope of Work, Tendering and Bid Documents – 2 months
  • Receiving bids and awarding contract – 1 to 2 months
  • Availability of contractors – you should anticipate that the earliest any work can begin in planned fashion would be 6 months from the time the Condition Assessment takes place.
  • It is recommended to always plan projects a year in advance.

(2)an emergency occurs (underground garage has collapsed).

  • Your condo corporation should have an emergency preparedness plan.
  • When disaster strikes it is best to have a plan, so you know what to do. Do you have a plan?
  • Alert the authorities having jurisdiction. This would include fire & rescue, police, ambulance.
  • Step by step work through each crisis with your team.
  • It will be overwhelming. Use the resources you have to work through the crisis.
  • Short term objective – protect life safety.
  • Long term objective– identify problem, do the analysis, design the solution.
    • How did the failure happen?
  • Can it be repaired?
  • Can we rebuild?
  • How can all this be funded?

Patricia Elia is a senior lawyer with Elia Associates and has practiced law for over 25 years in the areas of condominium law and corporate law, in large, medium and the boutique specialty law firm of Elia Associates. Patricia is intrigued by the interplay of economics, the law and critical thinking models in condominiums and she likes to understand people. As a trained mediator, she understands the value of early and creative dispute resolution opportunities. As an active industry participant, she believes that the sharing of knowledge has the potential to empower Boards of Directors. Patricia’s commitment to condominiums has been in leadership roles such as the President of CCI Huronia, Co-Chair of CCI’s National Council, a member of CCI National Executive and a member of all 5 Ontario chapters. She has also sat as Vice-Chair of CCI National’s Government Relations Committee and Governance Committee. She is a founder of Women in Condos. She has been a Condominium Director for the last 19 years and a Unit Owner of a condominium. Patricia is passionate about the condominium industry because of the important role condominiums play in the lives of real people.

Henry J. Jansen, P.Eng., ACCI is president and owner of Criterium-Jansen Engineers.

“There are 2 things that people will always need: food and shelter. Criterium-Jansen Engineers is in the shelter business.”

Henry graduated from McMaster University in 1992 and earned his P.Eng. license in 1994. He has always been a design engineer helping to solve problems. Engineering is applied science. Engineers use theory and then apply practical knowledge to develop solutions. As his career moved to business ownership, he partnered with Criterium Engineers as one of the building engineering leaders in North America.

Henry loves to help clients with their building needs and has developed strong industry leaders to meet the demands of our condominium clients. Criterium-Jansen Engineers is a family team.

Henry is on the Board of Directors for CCI-Grand River and Greater Dufferin Home Builders Association. He is a contributor to the PEO Performance Audit and Reserve Fund Committee. Henry also contributes to CCI Ontario Caucus Tarion Advocacy Committee which advocates condominium issues in front of government leaders. Henry regularly attends and contributes to the CCI-N conferences across the country.

In his spare time, Henry enjoys spending time with family, renovating his home, and camping.

Matthew Atkin, CPM, RCM, CMOC, ARM is Regional Manager / Senior Property Manager at GSA Property Management

Matthew has worked in property management since 1998 and is currently a Regional Manager and part of the Leadership Team at GSA Property Management. Matthew is a licensed professional property manager, member of both the Real Estate Institute of Canada and the Association of Condominium Managers of Ontario and holds the following designations: CPM (Certified Property Manager), RCM (Registered Condominium Manager), CMOC (Certified Manager of Condominiums) and ARM (Accredited Residential Manager.

Matthew enjoys working with all communities and helping them create a property specific and detailed plan to achieve their short and long term goals.

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