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Condo Owners and the Ontario Condo Act

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The rules are changing. What you need to know if you own, or plan to own, a condo in Ontario

If you are one of the 1.3 million Ontarians living in condos, your world may be about to change for the better.

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Because Ontario’s condo market has gone through considerable growth and change over the past 16 years, the provincial government has reviewed the existing Condominium Act through an 18-month collaborative public engagement process—and is now proposing the Protecting Condominium Owners Act (PCOA) to better protect the interests of condo owners and buyers.

The Condominium Act review generated over 200 recommendations and most have been incorporated into the proposed PCOA.  These are the five key changes.

  1. Streamlining Dispute Resolution
  2. Enhancing Consumer Protection
  3. Strengthening Financial Management
  4. Improving How Condos are Run
  5. Condo Management Licensing

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Streamlining Dispute Resolution

In many cases, condo companies currently have an unfair advantage when it comes to dispute resolution. Disputes between condo companies and unit owners can be too long and expensive for most individual unit owners which often causes them to concede.

The PCOA seeks to resolve this imbalance by simplifying the dispute resolution process. The proposed act would establish the Condo Authority: a non-profit organization run by members of the Ontario Public Service. It would be completely independent of both condo licensing and condo registries in order to prevent conflicts of interest.

The Condo Authority would educate condo owners on their rights and responsibilities, giving them the power to manage their own conflicts. This would ultimately prevent smaller disputes from escalating into drawn-out legal conflicts.

In the case of bigger or more complex conflicts, the Condo Authority would be responsible for administering the Condominium Authority Tribunal, which would aim to efficiently resolve these disputes through mediation, case management, and adjudication.

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Enhancing Consumer Protection

The proposed reforms would also protect condo owners by mandating clarity, transparency and equitability, ultimately helping condo buyers to make better-informed decisions and protecting them from inflated unit costs.

The PCOA would demystify the workings of a condo company and its relationship with the unit owners in a number of ways. First through the creation of a Condo Guide, a comprehensive, easy-to-read document that would outline the rights and responsibilities of a condo owner, explain how condo corporations work, and explain how owners can request information meetings.

The Condo Guide would be published by the province and distributed by developers to prospective unit owners at the time of sale, allowing them to process the information during the ten-day “cooling off” period.

The Condominium Act review also revealed that many condo owners unknowingly leave themselves open to unexpected expenses.

Many condominiums share their property with non-condo enterprises such as dry cleaners and coffee shops. These businesses are typically convenient and welcome additions to their host buildings, but they often drive up the cost of utilities by using significantly more power and water than individual owners.

The PCOA would protect condo owners from these unexpected additional costs by mandating written agreements between condo corporations and non-condo properties regarding the associated costs and maintenance of shared facilities—ultimately establishing methods for distributing shared costs and addressing other potential issues.

The PCOA would go on to regulate the writing and distribution of the disclosure statements issued by developers.  These statements are usually long, dense and rarely, if ever, user-friendly.  The proposed reform would establish rules outlining the required form and content, and also mandate that the disclosure statements be comprehensible, transparent and that they include all necessary information.

The reform would also broaden the Ontario New Home Warranties Act (ONHWPA), which currently covers only certain types of condos and completely excludes Condo Conversion projects (condos incorporating elements of existing buildings). The PCOA would extend the ONHWPA to cover certain condo conversion projects, recognizing that they now account a considerable number of existing and proposed condo developments.

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Strengthening Financial Management

The PCOA would further empower condo owners by keeping them informed and educated on the financial matters affecting their investments, ultimately giving them more power and control over important changes.

The key here is transparency. The PCOA recognizes that buyers and owners need timely and reliable information as well as access to their companies’ financial records. They also need the rules surrounding the establishment and adjustment of budgets and those surrounding insurance to be clear and accessible.

To meet these needs, the PCOA would require every condo corporation to prepare and present an accessible annual budget covering operating accounts and reserve funds.

Adequately maintained reserve funds are an existing requirement for condo corporations. Under the current act, condo corporations must undertake regular reserve fund studies to ensure they have sufficient funds to cover any necessary major repairs, and to replace and maintain aging common elements such as roofs and plumbing.

However, the review process revealed that reserve funds are often too low to meet the needs of their corporations and that few condo owners are encouraged or prompted to learn how the reserve funds work.

As a result, condo owners may find themselves called upon to make significant contributions to unexpected costs. For instance, if a reserve fund is not properly maintained through regular contributions from condo fees, the unit owners could be forced to make sudden substantial payments to cover emergency repairs or renovations—and they may not be financially prepared to do so.

The PCOA aims to rectify this flaw by expanding the purposes of the reserve funds to include major repairs and projects mandated by PCOA regulations, and by better defining exactly how much money an “adequate” reserve fund would contain.

The new Act also addresses condo board spending restrictions. While restrictions are undeniably necessary to protect the interests of the individual condo owner, condo boards need some flexibility in order to authorize needed work on their properties. The PCOA aims to strike a balance between these two needs.

As it stands, condo corporations are allowed to make certain changes without giving notice to owners if the cost of the changes does not exceed $1 000 or 1% of the annual budget, whichever is higher. While this policy might seem fair in theory, the Condominium Act review revealed that some condo companies have manipulated the limits at the expense of unit owners.

In order to safeguard condo owners from the resulting unnecessary expenses, the PCOA would better and more clearly specify the cases in which condo corporations would be allowed to make changes without notice.

In the case of proposed necessary off-budget spending—emergency repairs, for instance—the condo board would be required to inform owners within a specified time.

The Condominium Act review also addressed the maintenance responsibilities. Many condo owners are unsure of what elements they are allowed or expected to maintain and have called for clearer distinction in order to prevent misunderstandings and disputes.

Under the PCOA, condo corporations would be responsible for the maintenance and repair of the common elements, leaving the maintenance and repair of individual units to the unit owners.

These obligations would be clearly outlined in the condo declaration, which would also be required to state when a corporation is required or permitted to carry out maintenance or repair on the units themselves and how and when they would be reimbursed by the unit owners.

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Improving How Condos are Run

Given that condos are home to a growing number of Torontonians, one would like to think of them as thriving communities.  Unfortunately, these communities are not currently functioning and communicating as well as they could be.

The condominium act review revealed that many condo owners feel “out of the loop” when important decisions are made, creating a detached relationship between them and their building managers.

To address this, the PCOA would require condo boards to issue regular information regarding the corporation’s insurance, legal proceedings, and contact information. Regulations would be set to determine how and how often this information would be issued. The proposed format is an “information certificate” which would be similar to a newsletter and distributed on a regular basis.

It would also establish regulated procedures to procure contracts with maintenance companies and other needed services, preventing “kickbacks” to companies owned by condo board members—another concern that came up during the Condominium Act review.

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Condo Management Licensing

Condominiums should ideally be run by fair and competent managers; however, the Condominium Act review revealed that as this is not always the case, steps need to be taken to ensure that condo managers are consistently willing and able to act in the best interests of the unit owners.

The PCOA would issue the Condominium Management Services Act: a compulsory licensing system for condo managers requiring regulated training and an established code of ethics. In order to ensure impartiality, the Condominium Management Services Act would be established by the Licensing Authority, an independent non-profit corporation. Ultimately, this would ensure that condo managers be fair, honest and competent.

If the PCOA is passed, Ontario’s condo laws will undergo a massive overhaul, updating them to better reflect the current needs of the average condo owner for the first time in many years.

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