Legal

October 19, 2017 Published by Toronto and Area Chapter - By Brian Horlick, Luis A. Hernandez

Protecting Condominium Owners Act, 2015: Moving Forward

From the Fall 2017 issue of the CCI Toronto Condovoice Magazine.

The Condominium Act, 1998 (the "Condo Act") has governed condos since May 5, 2001, and is designed, in part, to protect the over 1.3 million condominium owners and residents in Ontario. The Protecting Condominium Owners Act, 2015 ("PCOA") received Royal Assent on December 3, 2015, which amends the Condo Act and also enacts the Condominium Management Services Act, 2015 ("CMSA"). The CMSA is an independent piece of legislation which will govern the industry of condominium management (this will not be discussed in this article).

The majority of Condo Act changes from the PCOA are scheduled to come into force on November 1, 2017 after over 16 years since the last major update to the Condo Act. For some perspective on how the world has changed in that time, consider that when the Condo Act came into force the first iPhone was still 6 years away, Survivor by Destiny's Child was on the Billboard Top 100 songs, and the first of both the Harry Potter and Fast and the Furious movies were on the verge of being released. The world changed, dramatically, in this time and the number of people living in condominiums has drastically increased, yet, the legislation which governs condos is just now changing. Whoever said the law was slow to adapt?

In any event, the Ontario government has finally listened to the overwhelming pleas for change and, with CCI's invaluable input, has made strides in further protecting condominium owners. These protections include necessary improvements to how condos are governed, with an emphasis on greater transparency and accountability of condo boards. To address all of PCOA's major changes to condo legislation in this article would be impossible, and, to this end, we want to touch on the most significant changes that will impact condo owners as of November, 2017. Such major changes include the creation of an administrative authority and the creation of a tribunal to resolve disputes under the authority's jurisdiction.

Changes to the Condo Act Regulations

The government of Ontario has undertaken an open and collaborative public engagement process to inform the amendments it introduced in PCOA to improve upon the existing framework set out by the Condo Act by listening to the public's concerns. As is human nature, some will say the changes go too far, while others will say that they do not go far enough in regulating condos, the boards which run them, and the people who reside in them.

The Condo Act already possessed a robust set of regulations, including Ontario Regulation 48/01 ("Reg 48/01"), which is the primary regulation amended by PCOA. When looking at the changes to the Condo Act's regulations, the government has identified four areas of potential improvement: communications, director qualifications, meeting procedures, and records.

Communications

1. The PCOA's changes are focused on communications from condo corporations to owners, and touch upon subjects such as a corporation's board, finances, insurance, reserve fund, legal proceedings, and other matters. Under the amendments to Reg 48/01, condominium corporations will be required to send out three different types of information certificates to owners: A "periodic information certificate" ("PIC"), which is to be sent to owners twice in a corporation's fiscal year, namely within 30 days of the end of the first fiscal quarter and within 30 days of the end of the third fiscal quarter;
2. An "information certificate update" ("ICU"), which is to be sent to owners when certain events trigger the need for an update, including, when there is a change in the directors on the board; and
3. A "new owner information certificate" ("NOIC"), which must be sent to all new owners of a condominium unit, containing information from the most recent PIC and ICU that was sent to owners. This is in addition to status certificates that must be provided by a corporation upon request.

The intent is that condo corporations now have a positive obligation to keep owners informed as to how the condo corporation is being managed, as condominiums are peoples' homes and often represent their most significant investment. Therefore, the government has decided that owners deserve total transparency from the corporation and the PCOA was designed to achieve this objective.

Another interesting communications amendment is a condo corporation's ability to enter into agreements with its owners to communicate with them electronically. Corporations will now be able to send notices to owners using methods of electronic communication if the owner agrees to that method of delivery. The amendments define "electronic communication" to mean a "communication that is transmitted in digital form or in other intangible form … or by any other means that has capabilities for transmission similar to those means". In a prudent move by the government, and considering it may be the greater part of two decades before we see another change to this legislation, the government wisely left the definition of electronic communications broad to permit future technologies to be captured by this definition.

Director Qualifications and Disqualifications

There have been increasing public policy concerns regarding who can and cannot be on condominium boards and PCOA seeks to address these concerns by imposing greater accountability on directors.

The PCOA deals with director qualifications and disqualifications, by introducing requirements, that, among other things, impose disclosure obligations for candidates and elected directors. The PCOA also sets out mandatory training requirements for directors. Directors may be disqualified from running for or holding director positions for failing to disclose or failing to get trained.

The disclosure process for candidates and elected directors makes use of the new procedures for information certificate updates, preliminary notices of meeting (discussed below), and notices of meeting to transmit information about directors to owners. The regulations will require that candidates and elected directors disclose, among other things, the following information:

• If the individual or their spouse, child or parent is a party to any active legal proceedings in which the corporation is also a party;
• If the individual has been convicted of an offence under the Condominium Act or the regulations, within the past 10 years;
• If the individual has an interest in a contract or transaction that the corporation is also a party to;
• If the individual is a unit owner in the corporation and the candidate's common expense contributions are in arrears for 60 days or more; and
• Anything else which a condominium corporation's by-law may require.

In an attempt to deal with owner apathy in many condos, the PCOA lowers the quorum requirements for certain mandatory meetings when quorum cannot be achieved on the first or second attempt. Mandatory meetings will include meetings called to elect one or more directors, meetings called to appoint or remove an auditor, turnover meetings, and annual general meetings. There will now be a tiered system where necessary thresholds for quorum are set as follows:

• 25% of owners at the first and second attempts to hold the meeting; or
• 15% of owners at the third attempt and any subsequent attempts.

This is a monumental step for condominium governance because it permits a corporation to deal with significant matters despite the unfortunate situation of having a largely disinterested community.

Records

Record retention and access to records is a major concern of owners. The PCOA amends section 55 of the Condo Act to address these issues. Under the regulations, specific types of records must be kept by corporations and these records have minimum retention periods. The following retention periods will be applicable:

• A 7 year minimum retention period for financial records and other operating records of the corporation;
• An unlimited retention period for fundamental corporation documents, including current or unexpired versions of agreements and insurance policies; and
• In-person ballots and proxy instruments from meetings of owners will need to be kept for a minimum of 90 days from the date of the meeting.

Additionally, the regulation changes include a new framework for the method by which a corporation should maintain its records. This new framework includes keeping electronic records which would need to be stored in a manner capable of reproducing the record in an intelligible form within a reasonable time. The government clearly looked to the future by embracing emerging technologies with the PCOA and leaving such definitions open-ended.

Condominium Authority of Ontario ("CAO")

Ontario Regulation 181/17 ("Reg 181/17") designates the Condominium Authority of Ontario as the administrative authority for the purposes of the Condo Act and it is expected that the CAO officially will start work on September 1, 2017. The CAO was incorporated as a not-for-profit corporation and it is governed by an independent board of directors. Similar to other administrative authorities, the CAO will be funded through user fees, which will be charged to condo corporations and users of its services. These fees are yet to be determined but are intended to be at a minimal cost to the unit owners.

The CAO's purpose is to administer services that protect and serve the condo community, including providing basic information about condo ownership and living, overseeing the Condominium Authority Tribunal, and providing education for condo directors to meet their training obligations under Reg 48/01.

Condominium Authority Tribunal ("CAT")

Ontario Regulation 179/17 ("Reg. 179/17") sets out the types of disputes that the Condominium Authority Tribunal will hear. Presently, the CAT will have exclusive jurisdiction to hear and to make legally binding and enforceable decisions, including disputes related to records under section 55 of the Act.

If you are familiar with Residential Tenancies law in Ontario, you may see a parallel between the CAT and the Landlord and Tenant Board ("LTB") which seeks to resolve disputes between landlords and tenants through mediation or adjudication. The CAT will operate in a similar, but distinct fashion, with a mandate to solve disputes between condominium owners and condominium corporations. Similar to the LTB, decisions made by the CAT will be subject to review by the Divisional Court of Ontario, which will hear appeals from CAT findings on questions of the applicable law, but not on questions of fact. Furthermore, should certain disputes not fall within the scope of the CAT, existing dispute resolution mechanisms will continue to apply (i.e. Small Claims Court, mediation and arbitration, and Superior Court applications and/or actions).

The CAT is also expected to come into effect as of November 1, 2017 and it will begin accepting applications for resolution of disputes in late 2017.