Specific Legal Issues
CUSTOMIZING THE CCDC CONTACT FOR CONDOMINIUM CORPORATIONS
From the Volume 31 issue of the CCI Eastern Ontario Condo Contact Magazine
As we all know, there are two seasons in Ontario… Winter and Construction. No sooner does the winter season end, than construction begins. As regular springtime maintenance schedules are rolled out, sometimes regular maintenance is also complimented with the undertaking of major repairs. Major repairs attract major costs. Further, maintenance and major repair take on interesting realities when they are done in a condominium environment where there are people living and inhabiting the space as a community.
In the overall process of contemplating, designing and implementing repairs, Boards and property managers are often faced with reviewing a multitude of contracts in various forms, from consultants, engineers, contractors etc. From the engineer’s retaining agreement to the construction agreement, we have seen contracts spanning hundreds of clauses, to million-dollar contracts spanning two pages (as a side note, if you are spending large sums of money on a major repair and are asked to sign a two-page contract, this is usually a red flag that your corporation is not adequately protected). This can be an intimidating, if not overwhelming process of playing connect the dots for Boards and managers – just on the contractual side alone. Even while in the midst of a project, Boards still must consider the management of a community and the juggling act this can often be.
As contracts govern the relationship between parties, the terms of the contract are important before something goes wrong and one party (or both parties) become unhappy. Whether it be with the work, timing of the work, delay, payment disputes etc., legal disputes often turn on the actual terms of the contract, regardless of whether the Board of Directors understood all the terms, or how they applied.
As with any contract, Boards should seek legal advice with respect to their corporation’s legal obligations under any construction contracts. Many terms may seem routine, or boilerplate, however, the old adage, “you don’t know what you don’t know”, often applies and clarity can be provided by legal counsel through risk identification and risk management strategies. Realistically, the parties who work with the condominium corporation are not always looking out for the best interests of the condominium corporation. However, it is the responsibility and duty of the Lawyers who work for the condominium to do just that. Boards may be concerned with getting the repairs commenced as soon as possible, and therefore, minimal consideration may be given to the terms of the contract outside of i) the costs, and ii) when the work is scheduled to begin / finish. Or perhaps, there is an assumption that the terms of the contract cannot be negotiated or amended.
One of the most common types of contracts in the condominium industry, as far as construction work goes, is the CCDC 2 contract, which is a fixed price contract. However, although it is one of the most common contracts, is generally comprehensive, and seems, at first glance, that it contemplates every scenario, the CCDC 2 contract is not specific to condominium corporations. Moreover, it can (and should), be amended. There are some important issues that should be considered when reviewing a standard CCDC 2 contract:
1. The CCDC 2 Standard Terms:
There are three parties mentioned regularly throughout a standard CCDC 2 contract. The Owner (condominium corporation), the Contractor and the Consultant. Normally the Consultant, who drafts the specification, issues the tender documents, and oversees the project, drafts the contract, attaches the addendums and any supplemental conditions. When reviewing the contract itself, it is important to:
i) Know that every party to the contract (which should include the Consultant) will be acting in their own best interests, and not solely in the best interests of the condominium corporation. The Board should retain legal counsel to advise on how the contract should be amended to provide the corporation with adequate risk management in respect of all parties to the contract;
ii) Confirm with the Consultant that any amendments made to the contract are added as a schedule of Supplementary Conditions. This way, it is easier for counsel to understand the changes made to the Standard form of the CCDC 2 contract. We have been concerned with condominiums being presented with “standard” CCDC 2 contracts, which are in fact heavily modified throughout the body of the contract, with such changes being unknown to the condominium corporation. Do it by schedule.
iii) Consider the actual work being done, where it is being done, and for whom. As part of the attachments to a CCDC 2 contract, corporations should insist that their declaration and description be attached, and a supplemental condition be added which states that the contractor is familiar with the Corporation’s boundaries. In addition, if work is to be done to a condominium corporation’s common elements, the contract should clearly state that no work is to be done to the units.
2. Termination clauses:
The standard terms of a CCDC 2 contract only permit termination under a specific set of circumstances, and upon certain things happening. There is no “termination for convenience.” If the condominium corporation, for whatever reason, wants the ability to terminate the contract without having to pay any damages related to lost profit / overhead that would typically be in play when an unlawful termination is affected, such a clause should be added. This type of clause can often be incorporated into a CCDC 2 contract on such terms that would require the condominium corporation to ensure the contractor is paid for all work performed as well as demobilization costs, upon the triggering of the clause;
3. Warranty Period:
The standard CCDC 2 contract provides for a warranty period that is one year from the date of Substantial Performance of the Work. This can be, and often is, negotiated to provide for a longer warranty period. If the warranty period is negotiated, the CCDC 2 contract must be amended to reflect the new negotiated period.
4. WSIB Certificates:
The standard terms of the CCDC 2 contract do not provide for adequate protection to condominium corporations and place the onus on a condominium corporation to request compliance with workers compensation legislation. This obligation can be placed on the contractor to proactively provide such documentation to the condominium corporation at regular intervals.
The standard terms of a CCDC 2 contract do not include an indemnification by the Consultant to the owner. Consideration should be given as to whether this should be included. More and more, we are seeing complex repairs whereby the contractor is sued, and simply relies on the fact that it carried out the work in accordance with the specifications – which were drafted by… the Consultant. In addition, the Consultant should also be required to provide evidence of its insurance.
When disputes arise with respect to construction projects, the first document that everyone will turn to is the contract. If the matter is required to be litigated, the Court will also look to the terms of the contract. Thus, consideration should be given to the terms of the contract and Board Members should make sure that their condominium corporations are adequately protected.
Jonathan practises in all areas of post-development condominium law, with a particular interest and expertise in commercial and construction litigation in the context of a condominium. Jonathan considers himself to be incredibly intelligent, hardworking and diligent, and one day hopes to convince his colleagues that he is all of these things.
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