Legal

November 26, 2024 Published by Toronto and Area Chapter - By Julia Lurye

Changes to the Common Elements

From the Fall 2024 issue of CCI Toronto Condovoice Magazine.

One area that continues to be a cause for confusion is changes made to the common elements

Whether the changes are to be made by the condominium corporation or by unit owners, the rights and obligations that attach to each party vary considerably. What follows is a basic guideline for both condominium corporations and unit owners contemplating changes to the common elements.

Changes to the Common Elements by the Corporation

A condominium corporation can make changes to the common elements provided that, in certain circumstances, it gives prior notice to unit owners or obtains approval of owners. Section 97 of the Condominium Act, 1998 (the “Act”) identifies circumstances where a condominium corporation must give notice to owners or obtain approval of owners prior to making any changes to the common elements.

At the outset, it is important to note that maintenance and repairs by a condominium corporation are not deemed to be additions, alterations or improvements to the common elements, pursuant to section 97(1) of the Act.

There are 3 circumstances where a condominium corporation does not need to give notice to owners or obtain approval of owners prior to making changes to the common elements, as set out in section 97(2) of the Act:

1. the change to the common elements is required by law or to comply with a mutual use agreement (such as a cost sharing agreement);
2. the change to the common elements is necessary to ensure the safety or security of persons using the property, or if it is required to prevent imminent damage to the property or assets; or,
3. the estimated monthly cost of making the change to the common elements is no more than the greater of $1,000 or 1% of the annual budgeted common expenses for the current fiscal year. (Side note: once the new amendments to the Act come into force, the $1,000 or 1% threshold will increase to $30,000 or 3% of the annual budgeted common expenses and will be based on the estimated total cost of the change.) It is important to note that a condominium corporation does not need to give notice to owners or obtain the approval of owners to use reserve funds to carry out major repairs and replacements of the common elements, pursuant to section 95(2) of the Act.

The circumstances requiring notice to owners and/or approval of owners largely relate to the estimated cost of the proposed change to the common elements.

Pursuant to section 97(3) of the Act, if the monthly cost of the change to the common elements is more than $1,000, but less than 10% of the annual budgeted common expenses, then the condominium corporation is required to give notice to owners together with the opportunity to requisition a meeting. The condominium corporation may only proceed with making the changes to the common elements where the owners failed to requisition a meeting within 30 days of receiving the notice, or, if a meeting of owners is requisitioned, then the owners have not voted against the proposed changes to the common elements at the meeting.

If the estimated total cost of the change to the common elements is more than 10% of the annual budgeted common expenses for the current fiscal year, then the change is considered to be a “substantial change” and prior approval of owners is required. In particular, a substantial change requires that notice be given to owners and that owners vote on the proposed change at a meeting of owners. To this end, the condominium corporation can only implement the change to the common elements if owners of at least 66 2/3% of the units in the corporation vote in favour of the proposed change.

The board of directors can also elect to treat any change to the common elements as a substantial change, and provide notice to owners and hold a vote of owners. Under the new amendments to the Act, which have yet to come into force, the condominium corporation will be required to provide notice to owners and obtain owner approval in circumstances where owners would regard the change to the common elements as causing a material reduction or elimination of their use or enjoyment of the units that they own, the common elements or assets of the corporation, even where there is a reduction in common expenses payable by unit owners.

The decision of Little v. Metropolitan Toronto Condominium Corp. No. 590 provides a helpful overview of section 97 of the Act. In this case, the corporation used reserve funds to carry out certain work on the property, including upgrading the security system, upgrading the entrance canopy and providing a handicap access, and renovating the lobby. An owner disagreed with the corporation’s use of the reserve funds and commenced a court application.

The Court held that the security system upgrade did not require prior notice to owners because it was related to safety and security. The Court found that the entrance canopy upgrade was simply a substitution of what had once been a modern canopy and that having a handicap access was a change required by law; and therefore, no notice was required. With respect to the lobby renovation, the Court found that although the manner in which the votes were collected by the corporation was improper (in that, not enough votes were collected at the meeting of owners, so the corporation decided to continue to collect votes for another 120 days after the meeting was terminated), the proposed changes to the lobby were fully disclosed to the owners prior to the renovations and the required number of owners approved the lobby renovations – albeit not a meeting of owners. Accordingly, the court dismissed the application with costs against the owner.

The takeaway is that the type of change and the estimated cost of the proposed change are critical factors in determining whether prior notice to owners or approval of owners is required.

Changes to the Common Elements by Owners

The Act does not vest a right in an owner to make changes to the common elements (including exclusive-use common elements). Instead, the Act provides for a mechanism whereby an owner can make changes to the common elements so long as the owner complies with the requirements set out in section 98 of the Act.

Section 98 of the Act provides that owners cannot make changes to the common elements unless they first 1) obtain the approval of the board of directors and 2) enter into an agreement with the condominium corporation (known as the “Section 98 Agreement”) which identifies who will have ownership of the change, and who will be responsible for insurance, maintenance, and repair.

The Act requires that any Section 98 Agreement be registered on title to the unit so that any obligations relating to the changes will be binding on the owner of the unit, and his or her successors in title. In order for the board of directors to be in a position to meaningfully consider an owner’s request to make change to the common elements, it would be prudent for the owner to submit to the condominium corporation the plans, the specifications, and the permits (if any) setting out the details of the proposed changes to the common elements when seeking the board’s consent.

The board of directors should then review the plans and specifications submitted by the owner, together with its engineers, and confirm that the proposed changes to the common elements:

1. will not have an adverse effect on units owned by other owners;
2. will not give rise to any expense to the condominium corporation;
3. will not detract from the appearance of buildings on the property;
4. will not affect the structural integrity of buildings on the property according to a certificate of an engineer, if the proposed addition, alteration or improvement involves a change to the structure of the buildings; and, 5. will not contravene the declaration or any prescribed requirements.

Pursuant to section 98(1)(c) and (d), and 98(2) of the Act, if the changes to the common elements relate to non-exclusive use common elements, and if the changes to the common elements will result in any costs to the condominium corporation, then a notice to owners and/or a vote of owners may be required in accordance with section 97 the Act, as discussed above.

It is important to keep in in mind that the Act only came into force in 2001. Prior to that time, under the predecessor legislation to the Act, there was no comparable mechanism governing owner-initiated changes to the common elements. In most cases, such changes were typically carried out in accordance with the condominium corporation’s declaration. And, most (if not all!) declarations require owners to obtain board approval before making any changes (including installations or decorations) to the common elements. 

But, what constitutes as an addition, alteration or improvement to the common elements?

In Wentworth Condominium Corp. No. 198 v. McMahon, the issue before the Court was whether a hot tub installed on the exclusive use common element ground floor patio was captured by section 98 and required board approval.

The application judge found in favour of the unit owner – that is, the hot tub was not an addition, alteration or improvement and therefore excluded from section 98.

The corporation appealed. The Court of Appeal agreed with the application judge’s conclusion: i) the hot tub was not an addition because it was not connected to the structure; ii) the hot tub was not an alteration because it was not a permanent change to the structure; and iii) the hot tub was not an improvement because it was removable and therefore was not a permanent fixture that increases property value.

Do note that the hot tub was installed on a ground fl oor of a patio; therefore, unit owners who want to install a hot tub on the terrace of their 40th story penthouse suite may not be able to rely on this case for approval.

In MTCC No. 985 v Vanduzer, a unit owner installed a gazebo on her exclusive use common element terrace without attaching it to the terrace, contrary to manufacturer’s specifications– without board approval and without entering into a section 98 agreement.

The Court, relying on the hot tub decision in McMahon, held that the gazebo was an addition to the common elements. The intended use of the gazebo was such that it would be considered an addition if it was installed properly. The improper installation did not change whether the gazebo is an addition, alteration or improvement. Accordingly, the Court ordered the owner to remove the gazebo from the common element terrace.

The decision in Vanduzer can be seen as closing a potential loophole that the Mc- Mahon decision may have created. That is, a unit owner cannot evade section 98 of the Act with respect to an object that would ordinarily be considered an addition, alteration or improvement simply by installing that object incorrectly.

As set out above, both the corporation and the unit owners have certain rights and obligations when it comes to making any changes to the common elements. It is recommended that each change be reviewed on a case-by-case basis, with help from legal counsel, to ensure that it is implemented in accordance with the Act.

---

Julia Lurye, Partner, Horlick Condominium Law