Legal

December 20, 2021 Published by Eastern Ontario Chapter - By James Davidson

Looking Forward to 2022

From the Volume 30 issue of the CCI Eastern Ontario Condo Contact Magazine

As we near the end of 2021, we naturally look forward to 2022.

1. Expanding Jurisdiction of the CAT

Effective January 1, 2022, the Condominium Act, 1998 will be amended to include some specific prohibited nuisances. A new Section 117 (2) will be added to the Act, along with a new Section 26 of Regulation 48/01. The effect of these amendments will be to prohibit unreasonable noise, odour, smoke, vapour, light, or vibration causing a nuisance or disturbance to others on the property.

The Condominium Authority Tribunal (CAT) will have jurisdiction over disputes respecting any such alleged nuisances. This will be a dramatic, further increase in the CAT’s jurisdiction.

I should add that Section 117 (1) of the Act (with some amendments) will continue to prohibit more dangerous activities and conditions, going beyond mere “nuisance”. And the Courts will still have jurisdiction over disputes under Section 117 (1).

2. A Change to the CAT’s Rules Respecting Costs

The CAT’s Rules of Procedure currently state that “the CAT will not order a User to pay to another User any fees charged by that User’s lawyer or paralegal, unless there are exceptional reasons to do so”.

As a result, a losing party (at the CAT) is generally not ordered to pay any of the costs incurred (for the CAT process) by the winning party, apart from the winning party’s fees paid to the CAT. In my view, there are some important negative consequences:

• There is a long-standing (and in my view, reasonable) principle in condominium law that costs incurred because of a violation by an owner should be the responsibility of that owner… in order to protect the innocent owners from such costs. Most condominium corporations also have “indemnification” provisions in their governing documents that confirm this principle. The above CAT Rule defeats this principle.
• The risk of having to pay costs is an important settlement incentive. If there is no significant risk of having to pay costs (in the event of an unsuccessful result), the parties will be less inclined to settle, and this will result in excessive CAT hearings.
• The risk of having to pay costs (in the event of a violation) also serves to encourage compliance (for the benefit of the condominium community as a whole). Violators who are reminded (in warning letters or demand letters) of the “cost risk” are often much more inclined to comply.
• The reduced cost risk also increases the opportunity for vexatious or frivolous applications (including cases where the frivolous or vexatious nature is not clear or obvious).

Thankfully, it appears that the CAT may have recognized the above negative consequences… and is currently exploring a possible amendment to the above-noted CAT Rule. Hopefully, we will see an amendment soon.

3. The Insurance Crisis

Premiums and deductibles (on condominium insurance) are increasing drastically, and many condominium corporations are even having difficulty obtaining any insurance at all. Thankfully, the province of Ontario has recognized the existence of this crisis in condominium insurance. As a result, the province is seeking feedback from the public… and changes are likely in the offing. Among other things, I think we may see the following:

• The Condominium Act may be amended to entirely eliminate the obligation upon condominium corporations to arrange insurance for standard units. Instead, the Act might say that condominium owners must arrange all insurance for their units (perhaps with certain minimum insurance requirements). At the same time, the Act might say that owners must repair their units (rather than only allowing the Declaration to say so).
• Alternatively, the Act may be amended to introduce a “statutory” standard unit description which excludes finishes and other features (like flooring, cabinets, baseboards, etc.) which are at higher risk of insured damage. Those features would then be considered “improvements”, to be insured by the owner in every case.
• At the same time, condominium corporations may be required to arrange periodic “insurance risk assessments” (to be carried out by an appropriate expert)… perhaps in tandem with reserve fund studies.

4. Tarion

In October of 2019, Ontario’s Auditor General issued a “Special Audit of the Tarion Warranty Corporation”. The audit included the following “overall conclusion”:

Our audit concluded that Tarion’s processes and practices do not always conform to the spirit or intent of the Ontario New Home Warranties Plan Act. Tarion lacks effective processes and standards to consistently fulfill its dual mission of enforcing home warranties and regulating builders.

One key recommendation that has been implemented was the recommendation to establish a separate licensing and regulatory body for home builders. Effective February 1, 2021, the Home Construction Regulatory Authority was designated to serve this purpose. However, many of the recommendations are “still pending”. I think we may see some additional improvements to Ontario’s new home warranty program in 2022.

5. The Pandemic and Virtual Meetings

History tells us that pandemics don’t last forever. The COVID-19 pandemic is now about two years old, but the variants of the virus just seem to keep coming. I’m certainly not qualified to offer any predictions about when this pandemic might end. But let me say this:

As time goes by, and particularly if the virus becomes endemic (to many or most parts of the world) – as many experts predict – I think we may see some return to in-person meetings (if and when they are felt to be “safe enough”). I still think that virtual meetings will continue. In fact, I think we may find that most meetings, going forward, will be virtual meetings (or sometimes hybrid meetings – allowing both in-person and virtual attendance). The fact of the matter is that virtual meetings have some significant advantages in terms of time savings and convenience.

6. Some Other Amendments to the Condominium Act and Regulations

There is a long list of amendments “still to come”. Here are some of the amendments that I think we might see in 2022:

• It will be possible to charge an owner for actual expenses (caused by
the owner or an occupant of the unit), and to add those amounts to
the owner’s common expenses, if this is permitted by the Declaration.
[This should hopefully resolve some of the confusion and difficulties
created by the Amlani decision!] ALSO: Owners will be given a specific
opportunity to challenge such chargebacks.

• Shared Facilities Agreements are to be mandatory in many cases.
• New Procurement Processes (tendering) will be required for certain contracts (to be prescribed).
• There will be significant changes respecting Directors to be elected by “non-leased owners”.
• There will be increased disclosure obligations for Declarants – including specifics about First-Year Reserve Fund budgeting.
• There will be more detail in relation to claims for First-Year budget deficits (including detail respecting calculations for phases of Phased Condominiums).
• Reserve Funds: Will have additional permitted purposes. There will also be a specific definition of “adequate”. In addition, an expert opinion will be required if the Reserve Fund balance falls below a certain prescribed amount.
• Common Element Modifications: There will be revisions to “minor changes” that fall within the Board’s authority. There will also be added detail about calculating the “cost” of a change.

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James Davidson is one of the founding partners of Davidson Houle Allen LLP. Jim has been practicing condominium law for over 35 years. He represents condominium corporations, their directors, owners, and insurers throughout Eastern Ontario. His experience also includes building deficiencies, shared property interests, co-ownership and construction law. Jim is proud to be an associate (ACCI) and also a fellow (FCCI) of the Canadian Condominium Institute.