Canada’s Voice for Apartment Owners, Managersand and Association Executives Canada’s Voice for Apartment Owners, Managers andAssociation AssociationExecutives Executives Canada’s Voice for Apartment Owners, Managers
Vol.5 No.2 May/June 2012 rentalhousingbusiness.ca
RENTAL HOUSING BUSINESS
RENTAL HOUSING BUSINESS
Rental property and the capital gains tax
Marg Gordon Gateway Property Management’s
Two key players in the rental housing industry in Western Canada
Today’s interest rates and tomorrow’s growth Infilling on multi-residential property? Watch out! Building owners: Elevator responsibility and liability
Environmental Management Report
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Formerly Profile Magazine
Vol. 5 No. 2 DIRECTOR
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PHOTOGRAPHY Donna Santos
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his month’s issue of Rental Housing Business (RHB) magazine contains important details and a flyer on CFAA’s Rental Housing Conference 2012, which is being held in Vancouver from June 13 to 15. We are the only national publication covering the event, so make sure to look for us if you plan to attend this important conference. This month, we have an interesting profile of Marg Gordon, CEO of the British Columbia Apartment Owners & Managers Assocation (BCAOMA). She has spent a significant portion of her life learning about issues that are important to her and her community, and then trying to find solutions to those issues. Marg is now spending her time serving as the voice of the association and the rental housing sector, and acting as a lobbyist and advocate for the industry. We also have a profile of Scott Ullrich and Gateway Property Management, a BCbased company that manages multi-family rental buildings, condominiums, and commercial properties for various clients, including real estate owners, property developers, and asset managers. The company also shares its knowledge of property management by providing consulting services to developers and investors. This month’s issue includes an environmental management report for 2012, with insights, tips, and advice from various industry professionals on developing an environmental management plan. Other articles that should interest apartment owners and managers cover the capital gains tax, elevator responsibility and liability, and infilling on multi-residential property. We also have industry news and information that relate directly to the rental housing industry. We hope that you enjoy the features and articles in this month’s issue of the magazine, and that we have a chance to see you at next month’s CFAA Rental Housing Conference. Best Regards,
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To view the online edition of RHB, please go to www.rentalhousingbusiness.ca
FAA is the voice of rental housing owners and managers at the national level. Much of our work is communicating with the federal government about issues that affect for-profit rental housing providers, such as income tax rules, housing programs, energy incentives and regulations, and CMHC underwriting practices. A new issue is the government’s move to reform CMHC’s mortgage insurance. There are a number of ways in which that could adversely affect rental housing owners, and at least one way in which reform could improve the position of rental housing providers. See the article on page 16 for more details. The government’s move to reform CMHC’s mortgage insurance is yet another reason why residential landlords need a strong and unified voice speaking to the federal government. CFAA is that national voice. However, the rental industry would be better off if CFAA were better resourced, and if landlords came together more consistently through CFAA to present one view to the government. Government relations experts know that when an industry speaks with one voice it is more likely to succeed in defending its interests than when it speaks with many voices. CFAA is drawing landlords together to address federal issues with one voice, but there is still much work to do.
details about the conference, see pages 32 and 36, and the enclosed conference flyer. To attend, you need to register immediately. As well as CFAA’s official voice, Rental Housing Business Magazine is a showcase for leaders among rental housing providers and association executives. This issue features Marg Gordon, the CEO of the British Columbia Apartment Owners & Managers Association (BCAOMA), one of CFAA’s leading member associations, as well as Scott Ullrich, the CEO of Gateway Property Management, the largest fee-manager in Western Canada. CFAA hopes you will enjoy the Ullrich and Gordon profiles, and the other articles in this issue. Join us at CFAA’s Rental Housing Conference to interact with Scott and Marg, and over 50 other leaders of the rental housing industry.
John Dickie John Dickie, CFAA President
We invite you to join other industry leaders at CFAA’s Rental Housing Conference 2012 in Vancouver from June 13 to 15. For
CFAA Member Associations British Columbia Apartment Owners and Managers Association (BCAOMA) www.bcaoma.com P: 604.733.9440, 1-877-700-9440
Kingston Rental Property Owners Association (KRPOA) www.kingstonrentals.com P: 613-572-7276
Rental Owners and Managers Society of BC (ROMS BC) www.romsbc.com P: 250-382-6324, 1-888-330-6707
Eastern Ontario Landlord Organization (EOLO) www.eolo.ca P: 613-235-9792
London Property Management Association (LPMA) www.lpma.ca P: 519-672-6999
Saskatchewan Rental Housing Industry Association (SRHIA) www.srhia.ca P: 306-653-7149
Federation of Rental-housing Providers of Ontario (FRPO) www.frpo.org P: 416-385-1100, 1-877-688-1960
Manufactured Home Park Owners Alliance of British Columbia (MHPOA) www.mhpo.com P: 1-877-222-4560
Waterloo Regional Apartment Management Association (WRAMA) www.wrama.com P: 519-748-0703
Greater Toronto Apartment Association (GTAA) www.gtaaonline.com P: 416-385-3435
Multiple Dwelling Standards Association (of Toronto) (MDSA) P: 416-362-6372
Hamilton & District Apartment Association (HDAA) www.hamiltonapartmentassociation.ca P: 289-440-3185 Investment Property Owners Association of Nova Scotia (IPOANS) www.ipoans.ns.ca P: 902-425-3572
4 may / june 2012
New Brunswick Apartment Owners Association (NBAOA) www.nbaoa.myidealhome.com P: 506-640-1460 Professional Property Managers’ Association (of Manitoba) (PPMA) www.ppmamanitoba.com P: 204-957-1224
The Canadian Federation of Apartment Associations represents the owners and managers of close to one million residential rental suites in Canada, through 15 organizations across Canada. CFAA is the sole national organization representing the interests of Canada’s $40 billion rental housing industry. For more information about CFAA itself, see www.cfaa-fcapi.org or telephone 613-235-0101
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TABLE OF CONTENTS
Marg Gordon of BCAOMA (page 28) with Scott Ullrich of Gateway O’Shanter Development Company – pg 12 Property Management (page 8)
Gateway property management Gateway manages multi-family rental buildings, condominiums, and commercial properties for various clients, including real estate owners, property developers, and asset managers.
marg gordon Marg Gordon is CEO of the British Columbia Apartment Owners & Managers Association (BCAOMA), a provincial industry advocacy and education association located in Vancouver that represents and educates apartment owners and managers.
2012 environmental management report Special Supplement This report provides Canadian property managers, as well as apartment owners and managers, with information, tools, and advice on developing and improving your environmental management plan.
infilling on multi-residential property? watch out! Before infilling or otherwise developing existing residential complexes, landlords need to identify the risk of liability to existing tenants and take measures to avoid those risks.
CMHC reforms likely to raise some interest rates Reforms to CMHC’s participation in the covered bond market are likely to raise banks’ cost of capital for real estate loans.
rental property and the capital gains tax When calculating your capital gains, it is very important to have maintained receipts for capital additions or improvements made to the building and property.
TODAY’S INTEREST RATES & TOMORROW’S GROWTH With interest rates historically low, locking into a 10-year mortgage becomes very attractive, so how do you avoid risking access to built equity in the future?
MANAGEMENT REPORT 2012 ENVIRONMENTAL
develop relationships at the 2012 cfaa conference Delegates are invited to take part in social activities that will help build relationships with new and current contacts and foster new business deals.
34 SPECIAL SUPPLEMENT
5/19/12 4:32:05 PM
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[ Gateway ]
[ Gateway ]
G AT E WAY P R O P E RT Y MANAGEMENT
ateway Property Management Corporation began as a twoperson operation in the basement of its first client’s 300-unit rental building. Founded in 1964 by Bert Ullrich, the company currently manages more than 400 buildings (over 33,000 units) across four provinces. Gateway also has 120 corporate employees in six cities and more than 500 on-site employees in 34 communities. Although Bert retired in 1990, Gateway remains a family-operated business, as his son Scott (who came to work for his father in 1983) is the company’s Chief Executive Officer. Gateway manages multi-family rental buildings, condominiums, and commercial properties for various clients, including real estate owners, property developers, and asset managers. The company provides a complement of property management services, as well as property development, consulting, and investment advice. Since its inception, Gateway has continued to fulfill its mission to work collaboratively with its clients to achieve their property goals. “Our goal is not to be the biggest property management company in Canada, but rather to provide the best service possible,” said Scott Ullrich, CEO, Gateway Property Management Corporation. “We consistently strive to achieve AAA service, and that means working with top quality employees and service providers.”
Rental Housing Business 9
[ Gateway ]
Corporate growth and customer service Gateway grew its business by focusing on the management of rental properties throughout British Columbia. As the company’s clients expanded by purchasing properties in other provinces, they would contract Gateway to manage the newly acquired buildings. Gateway expanded into Alberta, and then Ontario and Quebec, as their clients continued to move across Canada. Once Gateway entered those new markets, they would grow their property management portfolio by contacting new clients. “One of our clients is a residential property asset management company with a large Western portfolio,” said Scott. “This client also has a large portfolio in Ontario, and they contracted us to manage these properties. As a result, we have developed a larger footprint in the province, and have expanded our resource base so that we can properly service our clients.” Gateway believes that it can only provide a high level of service by working with high quality people. The company requires all of its property managers to be certified, to receive training and education on all industry issues, and to supplement their knowledge with courses relevant to their positions. Gateway also mandates that its support staff engage in a certain number of training hours to remain current with the knowledge and skills required for their respective positions. The company encourages all employees to pursue continuing education courses, especially with respect to customer service. “We see our clients as not only the owners of the buildings we manage, but also the residents of our buildings and the trades we employ to service those properties,” said Scott. “By treating all three groups of clients well, and ensuring that they are happy with the relationship, we are guaranteeing the success of our company and a healthy bottom line.” Reaching out to clients Every year, Gateway sends questionnaires to its clients to evaluate what it is doing well, and to identify where it needs to improve its service offerings. In April 2012, the company sent questionnaires via email for the first time to more than 1,300 clients. The electronic format allowed Gateway to reach more clients more quickly and directly, and to analyze the data in greater depth to pull out more measurable results. “The response rate from our clients was just over 30%,” said Scott. “Although we have just started to analyze the data, we’ve already identified opportunities to expand our service offering.” While other industries have embraced social media, property management companies have been relatively slow to venture into this area. Gateway launched a strategic plan in 2011 to use social media to promote its properties and services to potential and existing customers. The plan addresses three social media avenues, including LinkedIn (its business-to-business platform), Facebook (enabling
10 may / june 2012
residents and clients to access more company information, express their issues, and provide suggestions on service), and Twitter (currently in development). “Our Twitter app will probably be called Suite Tweets, and will highlight deals for residents that are available from neighbourhood businesses and other companies,” said Scott. “We also use social media to monitor the company’s reputation, and to maintain the reputations of our building owners.” Gateway is using technology to improve communications with clients and throughout the organization. The company partnered with the developer of an iPhone app that allows people to get information on, and arrange viewings for, properties that interest them while they are walking around the neighbourhood. Gateway has also equipped its property managers with smartphones to ensure that they can access online information wherever they are in the field, and also make them more accessible to management and building staff. Consulting services Some companies do not require Gateway’s full complement of property management services. However, they have been able to benefit from the company’s consulting expertise and knowledge. Some of Gateway’s developer clients employ the company during the construction phase to conduct research and analyze market information, and then provide recommendations on suite mix, layouts, design, and amenities. Gateway will perform due diligence for rental property developers prior to property acquisition and property management planning for existing properties. The company conducts market surveys to determine the highest and best use of properties, and helps to arrange capital to maximize its clients’ returns. It also provides information and advice on the day-to-day property management experience. In April 2012, Concert Properties purchased the Queen Victoria Hotel and Suites in Victoria, BC. The developer contracted Gateway to provide research and suggestions on what to do with the property. Options included tearing down the building for a condo development, turning the hotel into a seniors’ facility, and repurposing it as a multi-family rental building. Gateway conducted a market survey to identify the best use for the property, produced different layout and suite solutions for each option (which included analyzing the feasibility of installing kitchens and upgrading plumbing for rental suites), and determined potential market rents. The company also created capital budgets to do the work, operating budgets after the upgrade, and returns on investment for each alternative. “We worked with a developer that purchased a rental property with 302 units with the goal of building a condo with some rental units,” said Scott. “We put together budgets and a feasibility plan for the client. We also worked with existing unit renters to help them understand the process to ease the transition. We were able to move some of the
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Rental Housing Business 11
[ Gateway ]
renters into the new units, and helped to relocate the other renters in suitable buildings.” Gateway also provides consulting services to self-managing investors who are not yet ready for full-time professional property management. Some investors own only one property, or do not have adequate volume to hire a full-time property management firm. Some rental property owners want to build the business to the point where their families will take over the company when they eventually retire. In these situations, they will hire Gateway to mentor their children or other family members on what is required to properly manage the properties. Gateway also benefits from the arrangement by developing relationships with potential future clients, who will usually contact Gateway when they are ready to make use of the company’s property management services. “Many of our clients want the benefits of our property management experience, and will hire us to provide these services when they are ready,” said Scott. “We work with several associations, including the British Columbia Apartment Owners & Managers Association (BCAOMA) and Rental Owners & Managers Society of British Columbia (ROMS BC), to help their members develop knowledge and experience as property managers. As Past President and Director of BCAOMA, I know firsthand that these organizations make a significant contribution to the rental housing industry.” Using technology to manage risk Some risks are more prevalent today than they have been in the past. Health and environmental awareness are much greater than they were 30 years ago, and much more attention is being paid to issues that relate to these areas. As most apartment buildings were constructed prior to 1990, many of them have the potential to contain asbestos, which is a health hazard when not handled correctly. Landlords and property managers have to function with different legislative and monitoring bodies (including government agencies and employee protection groups) when working to reduce asbestos exposure. Gateway employs an online management tool to ensure that the company is in compliance with issues that could cause risk to its clients’ properties. As the company manages a large number of properties, it can be difficult to monitor all of their individual situations. Gateway’s intranet contains information on all of its properties, including copies of asbestos surveys and asbestos management plans. This information is available to employees and applicable government agency personnel. The intranet also provides documentation and instructions on dealing with asbestos (and other environmental matters). “We make sure to document environmental data on all of our properties as part of our role to protect our clients’ interests,” said Scott. “Our Compliance Tool ensures that relevant documents are adequately maintained to prove that environmental issues are being properly monitored and managed.”
12 may / june 2012
Gateway’s employees take training courses to acquire the appropriate licenses and update their knowledge of environmental safety issues. The company employs a full-time environmental risk officer, who ensures that staff members are environmentally compliant across the entire portfolio. The environmental risk officer also reports on green initiatives to ensure that Gateway chooses environmentally friendly products and technology (e.g., green cleaning products, LED lighting). “New employees complete mandatory environmental training within the first three weeks of their employment with the company,” said Scott. “This includes developing an understanding and knowledge of environmental management plans, occupational health and safety requirements, and asbestos awareness. Their certificates of completion must be uploaded to our Compliance Tool and then verified by the Compliance Officer.” Identifying risks to profitability Gateway operates with the mandate that it is incumbent upon property managers to maximize their clients’ profits within legal boundaries. As such, it must be consistently aware of organizational liability issues that can increase risks to profitability. The company ensures that its employees and clients are aware of relevant legislative matters surrounding rent controls and tenants, rights, employment standards and workers compensation, and human rights issues. Gateway recently created the role of Director, Regulatory Compliance, whose responsibilities includes occupational health and safety, risk assessment, management, and environmental stewardship. “Our clients, residents, and staff sleep better at night knowing that we’re doing our best to provide a safe place to live and work and to minimize any liability,” said Scott. “I will also be speaking on the various risks to industry profitability at the CFAA Conference in Vancouver this June.” Utility costs are another challenge facing Gateway and its clients. While electricity is relatively inexpensive in BC, utility rates are increasing, and rents cannot always be increased to offset expenses. To deal with rising utility costs, the company continuously looks for energy efficiencies and ways to reduce utility usage. Pursuing energy efficient solutions contributes to Gateway’s objective of being greener and more environmentally friendly. Gateway works with utilities to take advantage of incentives to implement and install energy efficient products in its managed properties. The company also conducts property assessments so that it can apply for government grants to fund projects (e.g., LED lighting, geothermal heating) that increase energy efficiency and produce reasonable payback for its clients. “At the end of the day, our energy, our time, and our business are entirely focused on our clients’ real estate assets,” said Scott. “Their real estate assets are as important to us as they are to our clients.” RHB
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Rental Housing Business 13
INFILLING ON MULTI-RESIDENTIAL PROPERTY? WATCH OUT! It is generally acknowledged that intensification of residential uses in urban areas and along public transportation corridors constitutes sound land use planning. Owners of multi-residential properties with ample room to expand coverage on existing lands have sought and obtained infill development approvals; however, when implementing development, they may face substantial liability under Provincial Landlord and Tenant laws or common law “nuisance” claims. Most Provinces have Landlord and Tenant statutes prohibiting landlords from “interference with reasonable enjoyment” of the tenant’s occupancy of their rental units, so some recent cases in Ontario should resonate with courts and boards and tribunals across the country. In addition, the common law of nuisance applies across Canada. Statutory and civil liability of owners for infilling on multi-residential properties is not just restricted to Ontario. The Ontario Court of Appeal recently held that lands surrounding a high rise apartment building in downtown Toronto are a “facility” which, if “withdrawn” from use by tenants and used for infill development purposes, can trigger a permanent rent reduction for tenants of the building [First Ontario v. Deng, 2011, ONCA 54]. The Ontario Landlord and Tenant Board (LTB), recently held that infill construction activity by a Landlord warrants the award of a rent abatement for tenants of an adjacent apartment building owned by the same landlord because the construction activity and “loss of view” interfere with the tenants’ “reasonable enjoyment” of their rented premises [First Ontario v. Tenants; LTB file # TST-03202, under appeal to Div. Ct.]. Under the common law of nuisance, activity on adjoining property which unreasonably interferes with a property owner’s use and enjoyment of their own property may form the basis for an action in damages against the developer. The implications of those decisions extend well beyond simple infill situations. In large multi-residential developments, it is common for
14 may / june 2012
By John Hoffer
property to be developed in “phases”: after the first building is built and substantially rented, construction of the next building begins, and so on until all phases of the development are complete. It is clear from the two First Ontario decisions that developers in Ontario are exposed to liability for rent reductions and rent abatements to tenants of existing buildings because of the loss of “facilities”, view, and the inconvenience caused by construction activity. The liability arises because the developer is the “landlord” of the “residential complex”. Ontario legislation authorizes a permanent rent reduction where a facility is withdrawn and a rent abatement where construction activity by a landlord is found to “substantially interfere” with a tenant’s use and enjoyment of their unit. Before infilling or otherwise developing existing residential complexes, landlords need to identify the risk of liability to existing tenants and take measures to avoid those risks. In the case of infilling, landlords should ensure that existing residents are given notice of the municipal planning approval process and that any leases entered into pending redevelopment give notice to tenants of the proposed development. In Provinces where there are no rent controls, there is an opportunity for landlords to “claw back” any awards given to tenants in statutory or civil proceedings but if stricter rent controls are in place any rent loss should be factored into the business plan unless precautions are in place to mitigate against rent reductions. In the Deng case the Court ultimately disallowed a rent reduction because improvements to retained lands made as part of the development approval process were found to offset the value of the facility withdrawn and used for infill development. The LTB decision which awarded abatements for “loss of view” and inconvenience arising from neighbouring construction activity is under appeal to Divisional Court but if the decision stands, landlords will have to factor the cost of abatements into their development costs. Selling the development
[ Legal ]
lands to a third party won’t help because the LTB found the landlord breached the law by choosing to sever and sell the lands, and reasoned that it ought to have known that when construction occurred on the adjoining lands, tenants would be inconvenienced and views from their windows would change.
their buildings. The Federation of Rental Housing Providers of Ontario (FRPO) successfully lobbied for regulations to protect landlords from rent abatements where disruptive maintenance and repair work is undertaken; however, such regulations do not protect landlords where the disruption occurs as a result of infill development.
Ontario legislation gives the LTB the power to prohibit a landlord from interfering with tenants’ reasonable enjoyment of their rental units by engaging in activities which are found to have that effect, such as construction activity. There is also a power to award rent abatements and “administrative fines” for engaging in such activities.
The effect of conflicting Provincial rules on the prospects for continuing development of much needed apartment and residential development in urban areas will remain uncertain until the courts conclusively decide the issues, most likely later this year. Regardless of where your properties are located, before commencing infill development owners should ensure that prudent steps are taken to minimize statutory and civil liability to existing tenants as a result of the disruption, loss of space, and inconvenience associated with the redevelopment on existing residential complexes. RHB
There is a perceived unfairness when one set of Provincial statutes (in Ontario, the Planning Act and related Provincial Policy Statements) encourages intensification of residential uses and another Provincial statute (the Residential Tenancies Act) can seriously inhibit intensification of residential uses on the lands best suited for such development. The proximity of urban infrastructure and institutions to existing multi-residential development and the presence of public transit create optimum conditions for infill development approval; however, the RTA has the opposite effect. At one time Ontario landlords were penalized for disruptions to existing tenants where major work (balconies, garage repair) was undertaken on
Joe Hoffer is a Partner with the London law firm, Cohen Highley LLP, and represents owners of leased properties before Courts, Boards and Tribunals throughout Ontario. If you need services relating to redevelopment of property; condo conversions; or legal issues involving commercial or residential properties contact Joe Hoffer: email@example.com
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Rental Housing Business 15
[ CMHC ]
CMHC reforms likely to raise some interest rates By John Dickie, President, CFAA
Finance Minister Flaherty has said he wants CMHC “to focus on highratio insured lending for home ownership and rental construction and acquisition ….” How will the government’s reforms to CMHC mortgage insurance affect rental housing providers? What will happen to interest rates? Will CMHC mortgage insurance still be available for low ratio financing? For now, the answer to the last question appears to be, yes, at least until CMHC reaches its current total insurance underwriting limit of $600 Billion. The government has no plans to raise the underwriting limit, but is leaving the detail of how to stay within the limit up to CMHC. In February 2012, CMHC began limiting its portfolio insurance underwriting through an allocation process. The government has announced further reforms to that area, which are found in the Budget implementation bill. “Portfolio insurance” is insurance on previously uninsured (low-ratio) loans, usually on single family homes (or buildings of four units or less), which is bought by banks usually to help them sell “covered bonds”.
that clarity, the interest rates to be paid on the covered bonds can be expected to rise. In turn, that will tend to increase the interest rates required on uninsured low-ratio borrowing over what they would have been apart from the reforms. It is hard to predict the effect on CMHC insured borrowing on multifamily properties at low-ratios. A higher cost of capital for the banks would tend to increase those interest rates, but the benefit of the CMHC guarantee (if that is not available through portfolio insurance after the loan is advanced) may tend to reduce the market interest rates, balancing out the first factor. CFAA is in touch with the Finance Minister and the key Finance Department officials to seek to ensure that the changes to CMHC’s operations do not negatively affect rental housing providers. CFAA is advocating strongly for CMHC to remain a back stop for lending for rental housing, both for high-ratio and low-ratio mortgage loans, and that is expected to be the result.
Covered bonds are very secure investments, being backed first by the issuing bank’s promise to pay, and then by the mortgages in the asset pool designated for the bond issue. With CMHC insurance on those mortgages, the bonds were in effect backed by CMHC, and ultimately by the Government of Canada.
Happily, CFAA can report that the recent policy changes were not aimed at reeling in multi-family mortgage insurance or multi-family lending. CFAA will continue to work with the Finance Minister, the Finance Department officials and CMHC to ensure that they do not unintentionally sideswipe rental housing, while they make reforms to address other problems.
Due to those guarantees, CMHC and the government were enabling the banks to issue debt at very low interest rates. The government has decided to get out of that guarantee business, by rules which prohibit the inclusion of CMHC-insured mortgages in the covered bond asset pools. That should reduce the demand for portfolio insurance, and enable CMHC to manage any residual demand for portfolio insurance through its allocation process.
Given the American problems with undue lending on single family homes, and the world wide problem of governments becoming overextended on debt and debt guarantees, we can all agree that avoiding such problems in Canada is extremely important. We can also hope that the government has minimized the negative effect of stepping out of the covered bond market by making the legal status of the asset pools clear at the same time.
The Budget implementation bill will also clarify the legal status of the asset pools, removing any doubt that the bondholders have priority over other creditors of the banks on those assets. However, even with
Avoiding the debt guarantee problem without raising interest rates for rental housing would be an ideal result. Time will tell whether that has been achieved.” RHB
16 may / june 2012
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Rental Housing Business 17
[ Accounting ]
Rental Property and the
Capital Gains Tax By David Gargaro
Capital gains tax (CGT) is a tax on capital gains, which is the profit that occurs from the sale of capital property. The inclusion rate (currently 50%) is the amount of capital gain that is subject to the CGT. For example, if you purchased a property for $100,000 and sell it for $300,000, then the capital gain is $200,000 (the original price minus the selling price). Fifty percent of that amount, or $100,000, is taxable at your specific tax rate.
depreciable equipment (e.g., laundry machines) over a period of several years at specified rates. This deduction is known as capital cost allowance (CCA); the amount you can claim will depend on the type of property.
To calculate the capital gains on the sale of your rental property, you must know three amounts: the proceeds of disposition, adjusted cost base (ACB), and outlays and expenses incurred to sell the property. The basic formula is capital gains = proceeds of disposition – (ACB + outlays and expenses).
When you sell the rental property, you might be required to increase your income by the recaptured capital cost allowance. This can occur when the proceeds from the sale of the building (and other depreciable property) are more than the sum of the property’s various undepreciated capital costs (UCC) (e.g., $80,000 for the building, $5,000 for paving, $5,000 for equipment). The UCC is the total capital cost of the building and additions, less the CCA claimed over the years.
Proceeds of disposition is the sale price of the property. ACB is the actual cost of the capital property, which includes capital expenditures (i.e., additions and improvements to the property) but does not include current expenses (i.e., maintenance and repair costs). Outlays and expenses include amounts incurred to sell the capital property, such as commissions, surveyors’ fees, legal fees, transfer taxes, and advertising costs related to the sale process.
Explained Dennis, “Suppose that you purchased a property for $200,000 and the land was valued at $100,000 while the building portion was valued at $100,000, and the building portion was depreciated (CCA claimed) by $50,000 over ten years. You then sell the property for $400,000. The capital gain is $200,000, and the taxable capital gain is $100,000. Assuming the portion of the proceeds allocated to the building exceed the original cost, the previously claimed CCA of $50,000 must also be included in taxable income.”
“When calculating your capital gains, it is very important to have maintained receipts for capital additions or improvements made to the building and property,” said Dennis Anderson, Partner, Tax Services, Ernst & Young LLP. “Differentiate these expenditures from operating expenses that have been deducted from rental income annually and are not added to the adjusted cost base.” Capital cost allowance When selling a rental property, you must properly allocate the proceeds between the land and building. While you own the rental property, you can deduct the cost of the building (land is not depreciable) and any
18 may / june 2012
Deferring taxes When selling rental property, you can defer a portion of capital gains through a vendor-take-back (VTB) mortgage. The vendor takes back debt when the buyer takes on a mortgage or financing from the vendor to purchase the property. The vendor can elect to spread the capital gains over a period of up to five years through claiming a reserve for proceeds not yet received. The maximum reserve that can be claimed for a year is determined by formula, where the minimum amount of the gain that must be reported each year is 20%. Unless there is a lot of VTB debt, the amount to be reported in the first year would be much higher.
[ Accounting ]
When the seller claims a reserve amount against the capital gain in the first year, that amount is brought into income in the following year. The seller claims a new reserve amount the next year, and the process repeats until the amount is fully paid or the five-year period expires. In a simple example, a rental property sells for $1 million, and the capital gain is $500,000. The deal is financed by a VTB mortgage repaid evenly over five years at $200,000 per year. The reportable capital gain will be $100,000 per year by claiming the available reserve for proceeds not yet received. “A vendor-take-back mortgage allows you to defer payment of the capital gains tax instead of taking full payment for the property’s purchase and paying all the tax at once. You can also earn interest on the VTB mortgage,” said Dennis. “However, there is the risk that the buyer will default on the mortgage.”
prior to the sale. Rental businesses with five or fewer full-time employees are not considered to be active businesses under the Income Tax Act. If the corporation passes the test of running an active business, the shareholders could claim the lifetime capital gains deduction against taxable capital gains by selling the shares of the company, rather than having the company sell the rental properties.
“The LCGE is available to a qualifying corporation that is owned by several family members,” said Dennis. “When they sell the corporation, they can potentially each claim the LCGE of up to $750,000 depending on their ownership.” RHB For more information, contact: Dennis M. Anderson, Partner, Tax Services, Ernst & Young LLP (Dennis.M.Anderson@ca.ey.com)
GAIN THE EDGE!
Capital gains exemption Unlike rental property owners, business owners can defer the capital gains and taxes on the sale of business properties for up to one year, depending on the timing of the sale compared to the business’s taxation year. Under replacement property rules, the individual can defer some or all of the capital gain by acquiring a similar business property. The amount of gain deferred depends on the sale price and price paid for the new building. For example, a person who owns a building with a restaurant can sell the property to move her restaurant to a larger space in a new location, and defer the taxes on the sale. However, owners of rental properties do not qualify for this type of deferral. Owners of corporations that own rental properties might be able to qualify for the $750,000 lifetime capital gains exemption (LCGE), which works out to a $375,000 lifetime capital gains deduction. They must own shares in a qualified small business corporation, which the Income Tax Act defines as a Canadian controlled private corporation that uses at least 90% of its assets to carry on an active business in Canada. The individual or a relative must have owned these shares for at least 24 months prior to the sale, and at least 50% of the corporation’s assets must have been used in the active business for two years
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Rental Housing Business 19
3/27/12 9:11:32 PM
IN THE KNOW Lougheed Village sold
Lougheed Village, one of the largest multi-family properties in British Columbia, was recently sold through David & Mark Goodman (Publishers of The Goodman Report Newsletter) to an unnamed buyer for an asking price of $100 million. Built in 1973, the mixed-use development is located in northeast Burnaby in the Greater Vancouver area. The property sits on 7.5 acres of land, with 528 residential units (one-, two-, and three-bedroom units) in two 24-storey and two 8-storey buildings. The site also includes a 2-storey retail village with 21 commercial units and a multi-level parkade that can accommodate 829 vehicles.
Lougheed Village is located within walking distance of a Millennium SkyTrain station, which provides residents with access to downtown Vancouver via a 30-minute train ride. Local amenities include Lougheed Town Centre, Lake City Business Park, Simon Fraser University, more than 150 retail stores, as well as local schools, community centres, and golf courses. The demographic base of the Lougheed area consists primarily of residents under the age of 30, and includes families with young children and an established immigrant community. Several condo developments are being built around the Town Centre area, which should spur additional growth. In the works is a Burquitlam SkyTrain stain that will connect residents to Port Moody by 2016. Please visit www.goodmanreport.com or call Mark Goodman at 604.714.4790 for more information. Mitigating Smoke Damage
Fire damage is often the most visible result of a fire, but the effects of smoke damage can be far more extensive. Smoke damage can permeate the entire housing complex. It can take weeks to fully mitigate the effects. Contrary to popular belief,
the need for immediate action does not end once the fire is out: steps should be taken to diminish the effects of smoke and fire damage. Time is of the essence to achieve full mitigation. Time
Smoke and harmful off-gases can cause secondary damage. The longer surfaces are exposed to the acid found in smoke damage, the worse the pitting or etching can become. Humidity
With higher moisture content, there is a greater risk of corrosive reactions and subsequent harm. Temperature and Pressure
Air volume doubles every 10 degrees, compressing smoke molecules and dispersing soot further. The greater the pressure, the more smoke is driven into porous surfaces. Type of Combustion Materials
Multi-Residential fires are “complex fires”, fuelled by synthetic rather than natural materials. Complex fires can cause more significant damage.
After a fire, first contact your insurance provider and disaster restoration professionals. Thereafter, you may be able to re-enter the affected area - with the permission of the fire department - to start to mitigate the effects of smoke damage, fire damage and more. Fighting the Effects of Smoke Damage
• To materials like metal, glass, tile/grout and marble,. apply a surfactant agent (e.g. cooking oil) to prevent secondary damage. • Open windows and doors to increase the circulation of air.
• Vacuum carpets to prevent soot from becoming ground in.
• Check electrical appliances before use. If the ceiling is wet, do not use fixtures such as lights or fans. Continued on page 21
It’s easy to sub-meter with EnerCare. It’s easy to say ‘yes’ For more information about sub-metering, Call 416-649-1900 or visit EnerCare.ca for complete details.
20 may / june 2012
ENVIRONMENTAL MANAGEMENT REPORT
22 may / june 2012
ENVIRONMENTAL MANAGEMENT REPORT
he Environmental Management Report for 2012 provides Canadian property managers, apartment owners, and investors with information on developing an environmental management plan. Topics include building the plan, challenges, key benefits, getting support, and the economics of sustainability. The information has been compiled from companies that have led the way in environmental management planning, as well as suppliers of environmentally friendly products and services to the multi-residential rental industry.
Ltd. “We also report on greenhouse gas emissions, and plan to implement a third party monitoring service to provide better results.”
ENVIRONMENTAL MANAGEMENT PLANNING
“There is a continual process of upgrading building components to reduce energy and water consumption,” said Krehm. “A utility meter monitoring system allows us to systematically evaluate a vast array of equipment and products.”
Many forward-thinking property management firms and other companies within the rental housing industry have operated under the mandate of sustainability for years (or decades). Some key players have helped to blaze the trail by making environmental responsibility a necessary component of the company’s growth, and central to its commitment to customer and community service. “In 1979, I devised a manual recordkeeping system where daily gas consumption for each of our buildings was recorded and correlated to the consumption with the degree day accumulation for the period in question,” said Adam Krehm, Principal, O’Shanter Development Company Ltd. “Within two years, this system of recordkeeping was being used in a rental apartment portfolio of about 2400 suites.” Creating a comprehensive environmental management plan is a relatively new development. Many organizations have determined to make the process a more integrative part of operations. Environmental management is receiving the same level of thought and preparation as other key aspects of the company’s business planning. Companies can build upon existing policies to support environmentally responsible growth and make it part of all corporate documentation. Getting support from owners and senior management is a good way to start the process, as well as implementing new plans in a controlled fashion to review and assess the impact of changes. Quantifying benefits will make it more feasible to garner support. “We continually monitor building energy use to improve efficiency and complete upgrades where appropriate,” said Jonathan Meads, Sustainability Manager, Concert Properties
When developing an environmental plan, companies should first go after the “lowest hanging fruit.” This includes recording and tracking energy usage, as well as examining and amending the company’s education program. Once companies can demonstrate that small changes are having an impact, they will have a greater chance of gaining acceptance when taking on larger capital costs to make bigger improvements.
Large property management companies face a diversity of environmental practices, such as reducing energy and water usage through regular upgrades. Companies should challenge each team within the organization to address sustainability (e.g., divert construction site waste from landfill). Environmental management is an ongoing process, and even when completing efficiency initiatives, continue to monitor results and find more efficient ways to reduce energy and water usage. “It took quite a few years before the fundamental energy and water efficiency initiatives were completed across our rental portfolio but the work is never really done,” said Alison Minato, Vice President, Sustainability, Minto Group. Challenges Engagement is a common operational challenge. Many people see sustainability as the latest fashion. Greenwashing and over-messaging can negatively impact desired results. After the initial surge, some people are overwhelmed by all the information, as it is difficult to determine what is good practice and what is just green marketing. “Getting everyone in a large company on the same page can be a challenge,” said Martin Zegray, Senior Vice President, Realstar Management. “We have to implement initiatives and monitor results at more than 150 buildings across the country.”
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It is difficult to persuade people that making sustainable challenges will benefit them, as there is often resistance where there is a cost without a quick and visible payback. Sustainability efforts are not always economically justified but this can depend upon the purpose of that element of the building. Components cannot be evaluated individually, as they are part of the function of the whole.
Many sustainable practices result in good payback over their life cycle, such as laminate and vinyl flooring products that have a higher initial cost but longer life than carpeting. Other items tend to be difficult to justify from a financial viewpoint, such as geothermal retrofits in existing buildings, which have a payback of over 20 years. Proper planning of retrofit projects can make payback more attainable.
It can also take time to implement and get people into the routine of specifying and maintaining new products. In some cases, initiatives do not perform as expected. It is important to determine why results do not match expectations, and find ways to correct shortfalls. Also, keep accurate records and regularly interpret data to identify trends that can guide your decisions.
“Other financial impacts could be higher rent, lower vacancy, or lower turnover costs due to the tenant appeal of a green building,” said Zegray. “When you target a building at a green clientele, you get more environmentally conscious residents who have a tendency to consume fewer utilities.”
Another challenge involves finding the next wave of improvements that have a reasonable payback. There are good environmental technologies but it can be difficult to make them economically viable. More sustainable design, and balancing economic, social, and environmental responsibilities, does not always produce solid short-term paybacks. Some good ideas do not necessarily make good economic sense today, and should be delayed until the time or technology is right.
Engage tenants in sustainability efforts because they will be the ones turning down heat or decreasing cooling, recycling rather than throwing away products, turning off lights, etc. Employ tenant green teams and try new engagement programs to keep information current. Focus communication efforts on residents who are willing to change their practices to help the cause. “Tenant awareness and support are critical in our waste management strategy,” said Krehm. “We strive to keep our tenants engaged and aware of issues relating to environmentally responsible building management.” Key benefits Environmental management practices help property managers to promote buildings as more sustainable and offering lower utility bills. Many property management companies compete with each other using marketing that promotes their buildings’ sustainability. Prospective tenants tend to prefer living in buildings where the best environmental practices are in place, which reduces turnover and vacancy rates. “We believe that our environmental initiatives demonstrate our concern for our buildings and the people who live in them,” said Minato. “If we do it right, it will improve vacancy rates, support our reputation as a solid operator, and inspire our tenants to live well and become customers for life.”
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Government programs tend to target specific types of environmental practices, not broader green approaches. Most environmental programs are mandated at the municipal level, while provincial governments are increasing energy efficiency requirements. The federal government is usually slower to get involved; when it does not support more sustainable measures, local and municipal governments tend to lose support for their incentives. This produces a variety of targets and requirements for developers and property managers. Many companies believe that government grants that promote environmental sustainability are lacking. Utility incentives require a lot of hard work to qualify for. Some property managers do not pursue them because the submission requirements are so complex. Establishing a central body to produce and govern a standardized set of submission requirements would improve the level of engagement. “We tend to see current incentives and rebates as a bonus,” said Paul Barton, Manager, Green Buildings, Minto Group. “Almost all projects are viable without this incentive before we implement.” New and emerging innovations LED lighting is on the verge of becoming the next popular environmental innovation, as it uses significantly less electricity than other lighting alternatives. As with any relatively new technology, price is the major stumbling block. Regenerative elevators that use inertia to recharge batteries are another new technology. Combined heat and power (CHP) has the potential to become more popular if property management companies can find opportunities to collaborate with utilities.
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[ 2012 Environmental Management Report ]
“Other interesting technologies to monitor include zeroenergy buildings (which are carbon free in operation), and living buildings that use nature-based technologies, such as leaf-shaped fans,” said Meads.
they are instructed to remove garbage from the building. To take advantage of recycling initiatives and communications that produce increases in recycling diversion, help staff to understand when containers should remain on the compactor until they are full.
“Building managers should implement an operational recycling plan, which describes standard operating procedures for staff involved in waste diversion,” said Grant. “This might include using log sheets to track the number of bins being put out for collection.”
The Federation of Rental-Housing Providers of Ontario (FRPO) offers a Certified Rental Building (CRB) program, which is the only tenant-focused quality assurance program of its type in North America. It helps rental-housing consumers to identify well-run, well-managed apartment buildings with a strong focus on providing good quality service to residents. This fall, the program will introduce new “green” Standards of Practice that will promote property management practices that support environmental-friendly apartment buildings; a continuous learning environment for employees and tenants that supports green-living practices; and prudent consumption management of energy used to run their buildings.
WASTE MANAGEMENT Waste and recycling are daily touchpoints for residents of multi-residential properties, and more visible than electricity, water, or air quality. A building’s waste handling infrastructure affects individual residents’ suites, as well as common areas, entryways, and chute intake rooms. Focusing on these areas can help to produce cleaner properties and a more engaged resident base. Building managers must encourage tenants to become active front-line participants in the process. New tenant interviews and tours can include a welcome gift that contains green cleaning products in a blue box. Provide a reusable recycling bag for tenants to carry recycling. Ensure that residents know where to bring any recyclable or disposable materials through memos and postings in chute intake rooms. “Add an environmental angle to tenant appreciation events or sponsor an ewaste collection event,” said Gerald Grant, President, Spinnaker Recycling Corporation. “You can also endorse and support volunteers in green teams within the building.” Many building owners and managers invest in implementing recycling programs, purchasing containers, posting communications pieces, and circulating to residents. However, they often fail to bring staff into the equation to maximize the capacity of waste containers and compactors. Staff will often put out waste or recycling containers that are half full because
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BUILDING ANALYTICS AND ENERGY AUDITS Sub-metering in multi-residential buildings provides value to building owners because electricity is a significant operating cost. Since rents are often controlled or constrained while electricity costs continue to increase, sub-metering can help to reduce or eliminate operating risk. Sub-metering encourages residents to reduce their consumption. Residents can control their energy bills by monitoring and reducing their energy usage, and building owners benefit by saving on rising energy costs. The decrease in electricity usage across an entire multi-residential building results in lower power demands and reductions in greenhouse gases. “Based on a recent report that we commissioned with Navigant Consulting, sub-metering is expected to reduce electricity consumption in apartment buildings by 27 to 35 percent,” said Barry Zeidenberg, Director of Marketing, EnerCare. Building owners and managers can take advantage of utilities’ programs to fund programs that will help them to improve their buildings’ energy efficiency. Toronto Hydro’s Audit Funding program covers up to 50 percent of the costs for conducting an energy audit, which helps to identify energy saving opportunities. The areas with greatest potential for savings often include common areas, parking garages, stairwells, and hallways. Toronto Hydro’s Retrofit Program provides incentives to cover up to 50 percent of equipment replacement projects, and their respective operational and maintenance costs. The most effective upgrades include lighting retrofits, installation of variable frequency drives on air-handling units, sensors on exhaust fans, and in-suite appliance upgrades.
MECHANICAL Building owners and managers often face issues with aging mechanical equipment and systems. HVAC equipment in older
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[ 2012 Environmental Management Report ]
buildings is often outdated and inefficient, and sometimes not the right size. This results in poor operation and high operating costs, which is when parts are no longer available for vintage equipment. The right time to retrofit or upgrade your building’s mechanical systems and equipment depends on their present operating condition, life expectancy, efficiencies, and service history. Present and forecasted natural utility costs also play a role in decision-making, as costs directly affect the payback of the initial investment required to retrofit a mechanical system or specific component. To maximize mechanical systems’ efficiencies, ensure that equipment and controls operate properly through maintenance and service programs. Understanding a building’s load requirements is critical in determining and selecting proper strategies for installing and maintaining retrofit equipment and control. “Proper site staff training is also imperative in optimizing efficiencies and avoiding major mechanical breakdowns,” said Mike Hervy, Engineering, Rainbow Mechanical Services Limited. “Quick visual inspections can help you to red flag potential breakdowns.” Benefits to installing newly retrofitted mechanical system include energy savings, operational cost savings, and new equipment warranties. Energy savings are a direct reflection of the condition and type of existing mechanical equipment and controls when compared to the replacement equipment type, efficiencies, and control strategies. High efficiency equipment often requires payment of significant premiums. However, when installed in the proper application, they yield the greatest savings opportunities. Savings vary from retrofit to retrofit but can reduce energy usage by up to 30 percent, depending on the mechanical retrofit application. “Rebates can aid owners with the cost of completing mechanical retrofits,” said Hervy. “Programs and details of different rebates can often be found on municipal, provincial, and federal organizations’ websites and should be investigated prior to commencing any retrofit project.”
LANDSCAPING Most buildings have lawns because they are the accepted norm. Grass has an aesthetically pleasing appearance (when compared to parking lots and other paved surfaces), and it provides a uniform surface for people to enjoy.
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However, there are numerous environmental issues associated with grass. Lawns require regular mowing, resulting in either gas-based emissions or electricity usage. They require regular watering, which is costly and wasteful when water levels are low. Caring for lawns also involves weed and pest control; herbicides and pesticides can contaminate the soil and groundwater. Replacing some or all of the grass with different plants is an environmentally friendly solution. Many varieties of plant materials are sustainable, require minimal maintenance, and create an aesthetically pleasing area around the building and grounds. Some combinations of plants will require an irrigation system, but a proper water management system can help to reduce overall water usage. “Plants used as ground cover can decrease the use of grass, reduce the spread of weeds, and help to sustain the climate,” said Steve Mercer, President, Interlock Landscape & Construction Limited. “The proper combination of trees, shrubs, perennials, and other plant materials will require maintenance as little as two to four times a year.” Changes in temperature, wind patterns, precipitation, and insect levels have created disparate growing conditions within local environments. Plants that grow well in one part of a city would falter in another part. Before making any planting decisions, property managers should consult with a qualified landscape architect. He or she will analyze the specific growing conditions around your building, determine what plants would grow best, and then design a garden that is functional, sustainable, and attractive. “Xeniscaping involves choosing regionally appropriate plant materials to create garden areas that are aesthetically pleasing and functional,” said Joanne Dale, President, Home Garden Solutions. “Selecting the appropriate plants, together with appropriate rockery, gravels, and other mulches, helps to discourage weed growth and retain moisture.”
PEST CONTROL Traditional pest control involves the use of potential harmful pesticides. As people are becoming more knowledgeable about the impact of these different chemicals on people and the environment, building owners and managers are looking for new, greener solutions to their specific pest problems. Integrated pest management (IPM) is an environmentally sensitive approach that combines common-sense practices to treat pest problems. IPM programs use different sources of
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[ 2012 Environmental Management Report ]
information on the life cycles of pests and how they interact with the environment, combined with available pest control methods, to manage pest damage effectively, economically, and safely. IPM involves a series of steps to control pests. First, set an action threshold to determine when pest populations or environmental conditions indicate that pest control action must be taken. Second, monitor and identify pests to determine what, if any, action is required with respect to action thresholds. Not all insects and weeds require control, as some are innocuous or even beneficial. Third, agree upon the importance of pest prevention. This often begins by managing lawns, garden areas, and indoor spaces to prevent pests from becoming a threat. Last, agree upon the methods of pest control, which involves evaluating different methods for effectiveness and risk level. Many effective and less risky pest controls can be used before resorting to chemical pesticides, such as pheromones to disrupt pest mating and mechanical controls (e.g., traps for pests, weeding for plants). “An often overlooked solution in multi-dwelling buildings involves changing the pests’ environment,” said Dan McCabe, Vice President, Magical Pest Control. “Heat treatments and cryonite (freezing) are effective methods of changing the pests’ environment into one in which they cannot survive, and help to reduce or eliminate the use of pesticides.”
BUILDING ENVELOPE The building envelope offers a number of greening opportunities, and can improve performance by conserving and returning energy to the building. Including the building envelope in the regular maintenance plan will help to extend its life. Seasonally and regularly check the building façade and components to identify and repair damage caused by freeze/ thaw cycles. New products can reduce a building’s environmental impact. For example, lightweight insulated concrete systems have a much longer serviceable lifespan and become a permanent part of the roof structure, where only the roofing membrane requires replacement. Improve a building’s energy efficiency through proper roof design, incorporation of air/vapour design, and sufficient installation of insulation. Installing a new roof can produce a number of significantly positive results. It can improve drainage to extend the roof’s life expectancy, as well as its R-value to increase energy
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savings. However, installing the best insulation and most environmentally advanced roof could have minimal impact on the building’s energy conservation efforts. Tall buildings with poorly insulated walls and windows will see relatively minor results in energy conservation. “Lower buildings tend to see more significant energy savings, as the percentage of the walls to roof is less than in a tall building,” said Manuel DaCosta, President, Viana Roofing and Sheet Metal Limited. “The greatest savings will be in lowering maintenance costs through reducing leakage, which can produce substantial repair costs.”
PAINTING AND DECORATING Building managers can direct painting and decorating providers to follow best practices that minimize waste and reduce the use of environmentally unfriendly products. They should require painters to employ water-based or low VOC paints, as well as products with low VOC content. They should also ensure that suppliers use less toxic products and longerlasting, high-solid-content paints. “Painters can use painting techniques that involve less waste,” said Steve Manikis, Principal, Arctic Painting. “They can also be more efficient in their use of solvents, as well as in how they use their brushes, rollers, and other equipment.” When completing a painting or decorating project, building managers should require service providers to collect waste materials for recycling. Care should be taken in storing and cleaning materials, and they should follow proper procedures to prevent waste products from entering the stormwater drainage system.
CLEANING AND SANITATION Building owners and managers often require their cleaning contractors to use only certified products in their buildings. However, many current cleaning products that do not have “green” certification are no more harmful to the environment than their “green” counterparts (provided that they are used according to directions). Building owners and managers who use environmentally friendly and green cleaning products help to reduce the quantity of products that enter their buildings. Employees who use the products seem to receive the greatest benefit from using the products, as there are fewer repercussions from accidents involving green cleaning products and fewer adverse reactions to chemicals.
[ 2012 Environmental Management Report ]
“Tenants and residents also display a sense of pride knowing that management is environmentally responsible and looking out for their family’s well being by using non-harmful products in the common areas of the building,” said Jonas Rothenstein, General Manager, Quality Chemical Manufacturing. While demand for green cleaning products seems to be increasing steadily, more customers are interested in knowing more about the different facets of “green cleaning.” When they understand the facts, more people are willing to pay a small premium for properly certified products that do what they are intended to do. Many different cleaning products do the same job. Trying different green products is the best way to determine which works best for specific situations. Some property managers cannot understand why they should increase the budget allowance for maintenance products when there is no discernible difference between green and non-green products. Being “green” is often viewed as a feel-good concept rather than a practice to adopt.
“There is so much ‘greenwashing’ when it comes to being environmentally friendly that even the most savvy consumer can be confused by the many claims being touted by different manufacturers,” said Rothenstein. “Educating the customer as to which old products need to be replaced, along with a proper site evaluation, will ensure that building operators get the correct products.”
CONCLUSION Environmental management planning should be a part of every company’s business plans. While it will take time, effort, and resources to prepare and implement a proper plan, it will produce tangible benefits over the long term. Getting buy-in from management, employees, tenants, and suppliers requires education, communication, and cooperation. Begin the process with small steps, so that each effort combines to produce measurable results in improving sustainability and environmental impact.
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Benefits of Tree and Shrub Fertilization
In an urban environment, fertilization is an essential part of tree and shrub care. Landscape plants have high requirements for nitrogen, phosphorus, and potassium, which are provided by the decomposition of plant leaves and animal matter in a natural environment. However, the urban landscape is a groomed environment where these materials are not allowed to accumulate, so tree and shrub fertilization helps your trees to grow as healthily as they would out in nature. Also, the process of urban construction can damage the natural soil structure by removing organic matter and top soil, creating compaction. With regular feeding, trees and shrubs will recover more quickly from injury. This type of tree and shrub care also allows them to be able to better resist drought, insect and disease attack, and the stresses imposed by harsh winters and poor growing conditions. Spring & Fall
Timing of your tree and shrub fertilization is critical to achieve the best results. From April to June, the soil is warm and root growth is very active. Roots continue to absorb nutrients effectively until the soil temperatures reach about 5º C.
Plants stressed from nutrient deficiencies, pest attack or cultural problems are more likely to experience winter injury, which requires intensive tree and shrub care. In addition, plants such as beech, pine and spruce (whose amount of Spring growth is determined by the moisture and nutrient availability the previous Fall) are much more responsive when they receive fertilization, at the time they can best absorb it. Landlord WEBCON 2012
Landlord WEBCON 2012, an apartment industry conference focused around Internet marketing, held its annual show in Toronto, Ontario on May 10, 2012. The full-day event was very well attended with over 170 landlords.
Keynote speaker Mitch Joel, the author of Six Pixels of Separation, kicked off the day by educating the audience about mobile marketing and how it will have an impact on every business including that of the rental industry.
The planning committee would like to thank all of the session speakers for taking the time to come out and share their knowledge and expertise. The positive response from the attendees is a true reflection of the caliber and quality of content that was shared.
We would also like to thank all of the event sponsors for their continued support: Gottarent, First National, Yardi, My Ideal Home, Manaya, Neighbourhood Buzz, Landlord Web Solutions, Rent Check, Rent Compass, Phelps, Apartment Video, 4Rent, Renters guide, Rhino Media Group, CFAA, and the event media sponsor, Rental Housing Business Magazine. For more information on the show or to inquire about Landlord WEBCON 2013, contact; Jason Leonard, President, 905.397.5088 or visit www.landlordwebsolutions.com. Protecting Your Trees from the Emerald Ash Borer
Emerald Ash Borer, known as EAB, is an invasive insect that attacks ash trees. This wood-boring insect, native to China, feeds under the bark of ash destroying the tree’s vascular system, resulting in the decline of your tree’s health and death within a few years. First found under the bark of an ash tree in the Detroit area in 2002, EAB has moved into Canada through Windsor and has been detected across southern Ontario and as far East as the Montreal area.
The Emerald Ash Borer is an extremely mobile and aggressive feeding insect. Experts agree that all ash trees in Ontario are at serious risk of EAB infestation and elimination within the next 10 years. In Canada, a natural insect control product has been developed showing success in protecting ash trees from the EAB and controlling early stages of infestation. The product is produced from extracts of Neem tree seeds and is injected into the trunk area of the tree using contained capsules which is then taken in by the tree’s conductive tissues. This application must be repeated every two years. The product cannot be purchased in stores and is only available by licensed professionals. Given the spread of EAB, it is widely accepted that all who have ash trees will eventually have to pay for removal or treatment of an EAB infection. Your decision to either save your tree or remove it must take into account the value a majestic ash has to you, your property and the overall environment.
Treatment to control Emerald Ash Borer infestations depends on the size of the tree. The cost of treating an ash tree over the course of an Emerald Ash Borer outbreak can be less than the cost of removing, disposing and replacing it. Removal and replacement of an established ash tree on a commercial landscape can require 30 years before the replacement tree reaches the same size and contribution to the environment and your landscape value.
Rental Housing Business 21
[ Finance ]
Interest Rates and
By Barrie Battley
The current economic situation has delivered historic low interest rates resulting in many apartment owners opting for mortgage loans with 10 year terms or longer, to mitigate the very real risk of rising interest rates. However, the freedom to access built up equity in the future, through refinancing, can be severely limited by prepayment penalties. Today’s borrowers do have an option available to access additional capital under these circumstances. No one can predict precisely when interest rates will attain their lowest level during this current economic cycle. The competing factors are much too varied for even the most sophisticated forecasters to pinpoint when this will occur. All we can do is look at the past and try to determine the future. Mortgage interest rates for terms ranging from one to 10 years have been relatively stable for the past 5 or 6 months; during that period they have only varied by a total of about 50 basis points (1/2 of 1%). Interest rates have not yet risen significantly because central bankers from around the world are still very much concerned about lackluster global economic performance. Economic and political troubles still abound in Europe, especially in Greece, and there has been a definite slowdown in China. However if we assume that we are not facing an economic Armageddon, then there is only one direction in which interest rates can go and that answer is UP! When rates eventually do increase, the move will most likely be quite rapid and without much or any forewarning. In past economic cycles, interest rates have quite often risen by as much as 50 basis points at one time, only to be followed by another similar increase in as little as 60 days.
22 may / june 2012
Investment Conference Building Innovation Tour
Breakfast with Your DelegatesA larg Discussion Group
Facilities Management Conference Dinner Boat Cruise
Your Thoughts Matter! Conversations start June 13 to 15, 2012 in Vancouver. Join the industry as we discuss key issues that affect you and your buildings. Hear from other landlords and industry experts on what matters to you. Network with colleagues and help shape the future of the rental housing industry.
CFAA RENTAL HOUSING CONFERENCE 2012 Register now and attend June 13 - Building Innovation Tour
June 14 â€“ Dinner Boat Cruise
June 14 - Investment Conference
June 15 - Facilities Management Conference
Here is what delegates said about last yearâ€™s Conference: Practical speakers with relevant experience! Topics relevant to any landlord, regardless of size or location. Great networking opportunities!
For information about topics, speakers and registration: www.cfaa-fcapi.org T 613-235-0101 Rental Housing Business 23
[ Finance ]
With a long term mortgage, the apartment owner could enjoy another huge future benefit. In order to mitigate this risk, apartment owners may consider opting for a 10 year term mortgage. By doing so, they will be protecting themselves from one of the most important components making up cash flow risk. With a long term mortgage, the apartment owner could enjoy another huge future benefit. If the owner decides to sell his property during the loan term and the interest rate on his mortgage is considerably lower than prevailing market rates, the landlord could achieve a higher than normal selling price provided the purchaser qualifies to assume the existing charge. In other words, there is embedded value in assuming a mortgage with a lower-than-market rate of interest. However, some longer term mortgages may not provide the landlord with the flexibility to re-finance mid-term. Many conventional mortgages do not permit prepayment and none of them offer an increase under the existing charge. Some longer term loans have clauses in the mortgage document prohibiting any additional second mortgage financing. Because property values usually increase over time, borrowers who think they may require increased leverage in the future need to discuss their requirements prior to signing the mortgage. Some conventional lenders and most CMHC lenders are now providing “yield maintenance “clauses in the mortgage documentation. The “yield maintenance” clause allows the borrower to prepay his mortgage prior to maturity by discounting the sum of all the remaining mortgage payments by the current Government of Canada bond yield having similar maturity. Since conventional mortgage rates for most multi-family properties are determined as a spread over a similar Government of Canada bond in a range of 150 to 250 basis points, any resulting prepayment could become quite costly to the landlord. Borrowers seeking increased leverage through re-financing need to rethink this option. One significant option for an apartment owner requiring increased leverage is to select a mortgage which does permit second mortgage financing. The future secondary lender will usually require a new appraisal and an environmental site assessment update, as well as recent financial and operating statements in order to make the assessment of value for the property under consideration for mortgage purposes. Conventional second mortgages are restricted to 75% of value and a 1.20 times debt service coverage. Most often the interest rates on a conventional second mortgage are several hundred basis points higher than first mortgage rates at the time of refinancing.
24 may / june 2012
Any landlord who may require increased leverage in the future should consider obtaining a CMHC insured first mortgage at the outset, allowing a possible conventional second or CMHC insured second refinancing at a future date. Although obtaining CMHC insured financing can be time consuming and has an upfront cost, it can be worthwhile in the long run because CMHC insured mortgage rates can range from 50 to 150 basis points lower than conventional rates. With a CMHC insured first mortgage, the borrower has the option to obtain CMHC insured second mortgage financing when their cash flow increases during the 10 year term. Most CMHC mortgage Special Conditions to Funding will state the following, “The borrower will not register any subsequent encumbrances without the prior written approval of the Approved Lender. Such approval will not be unreasonably withheld.” The advantage of CMHC insured second mortgages is twofold – the borrower can obtain financing up to 85% of value, and also enjoy second mortgage rates very close to those of a first mortgage. The only real disadvantage of proceeding with CMHC insured first and second mortgage financing is the mortgage insurance premiums that a borrower will be required to pay. CMHC will require a premium for both loans. However, the premium on the first mortgage is usually more than offset by the interest rate savings, and a premium rebate is available to those borrowers requiring second mortgage financing within the first seven years of funding of the first charge. In summary, borrowers, especially those who consider themselves as investors and acquirers, should consider opting for 10 year or even longer term financing rather than shorter term loans. They should insist that the mortgage terms provide for yield maintenance and allow for second mortgage financing. Borrowers looking to obtain long term mortgages should definitely consider CMHC insured mortgages. If they qualify for insured financing, the cost of the mortgage premiums is usually more than compensated through lower mortgage rates on both the new first and the possible future second mortgage borrowing. RHB Barrie Battley is Senior Vice President of Business Development for Peoples Trust Company. Peoples Trust is a federally chartered financial institution headquartered in Vancouver with branch offices in Toronto, Calgary and Vancouver. You can learn more about us at: www.peoplestrust.comi.
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Rental Housing Business 25
Marg Gordon [ Vince Brescia ]
26 may / june 2012
arg Gordon has spent a significant portion of her life learning about issues that are important to her and her community, and then trying to find solutions to those issues. Marg is CEO of the British Columbia Apartment Owners & Managers Association (BCAOMA), a provincial industry advocacy and education association located in Vancouver that represents and educates apartment owners and managers. She is also a founding member (and co-chair) of the Canadian Rental Housing Coalition and a director with the Canadian Federation of Apartment Associations (CFAA). Marg was born and raised in Burnaby in the Lower Mainland of British Columbia. She attended Burnaby South High School, where she participated in a school-to-work program that led to a postgraduate position with the Fire Commissioners Office. She started out as a statistician and later moved into arson investigation. It was the dawn of the computer era, and the Fire Commissioners Office began using technology to evaluate causes of fires and when they were created. They would also examine the statistics to develop strategies that would help them to deal with potential fire situations (such as installing sprinklers in seniorsâ€™ homes).
Rental Housing Business 27
[ Marg Gordon ]
“I was very impressed with this field, as I’ve always been interested in identifying and solving problems,” said Marg. “I learned a lot about how investigations were performed, and developing strategies to address issues based on predicting behaviour, profiling, and statistical analysis.” Marg left the Fire Commissioners Office after ten years of service. She married and moved to Port Coquitlam to raise her family. She also did some contracting work and ran a small business while she cared for her children. Getting involved in the community Marg planned to return to the workforce when her children started school. As a parent, she became aware of a number of issues that affected her children’s school, as well as their education. She was elected to the position of School Trustee in District #43 of Port Coquitlam, where she remained for a three-year term. Marg wanted to address issues that affected her local community, so she ran for and was elected to a position as City Councillor with Port Coquitlam. During her two terms in office, she was Chair of the planning and zoning committee, and head of the committee of the police and fire services. Marg worked with the mayor and council members to address
that they would not have to rely on government funding. The marketing plan was a success, and I ended up staying on for nine years.” BC Apartment Owners & Managers Association In 2008, the BC Apartment Owners & Managers Association (BCAOMA) hired Marg to fill the position of Chief Executive Officer (CEO). When she initially learned of the vacancy, she did some research on matters facing the apartment industry, and determined that she had to get involved with the association. She already had an understanding of rental housing, and learning about the specific issues facing the private market apartment industry encouraged her to take on the role and work toward overcoming these serious challenges. BCAOMA is one of the two main member associations for British Columbia’s apartment and rental housing industry. Its members include owners, managers, and developers of apartments and rental housing; associate members include vendors of products and services to the rental housing industry. The association’s primary mandate is to represent and advocate the interests of rental property owners and managers across British Columbia. The BCAOMA actively presents its members’ concerns and issues to politicians, government officials, and stakeholder groups.
“ Also of great concern is the elimination of federal and
provincial government programs that made it more attractive to invest in rentals....”
budgets, staffing, and resources for fire and police services (and the city as a whole). She also enjoyed dealing with “smaller” issues, such as encouraging Canada Post to move a mailbox closer to a seniors’ home to make it easier for residents to pick up their mail. She also helped to get a small bridge built over a creek so that a child could use her wheelchair to get to school. “I truly enjoyed my council experience, as it allowed me to fulfill my purpose of serving the community,” said Marg. “I wanted council to understand the pressures faced by people throughout the city. “ Marg left city council after her second term to spend time with her family. Her desire to resolve community issues eventually led her to become member services coordinator with the BC Non-Profit Housing Association (BCNPHA). The association works with non-profit housing providers and their supporters to create and support high standards of affordable housing throughout British Columbia. Marg’s role involved promoting member engagement through educational and community advocacy building programs. “I helped to create a marketing plan that would match their business plan,” said Marg. “My goal was to make them more self-sufficient so
28 may / june 2012
“During my time with the BCAOMA, I believe that I’ve met every member of the legislative assembly, every Assistant Deputy Minister, and every relevant government staff person in my battle to inform the government and every relevant government staff person about the serious impact of rent controls,” said Marg. “Also of great concern is the elimination of federal and provincial government programs that made it more attractive to invest in rentals, which has led to fewer purpose-built rentals being constructed in BC.” The lack of available and affordable rental housing is a constant concern for the association. According to the data, about one third of people living in BC are renters. In the Greater Vancouver area, 52 percent of residents are renters, while they constitute almost 80 percent of West End residents. Most new construction involves condominiums (as opposed to purposebuilt rental construction). While some condo units are made available for rent, most are in higher-end buildings, making them unaffordable for young couples and people in search of affordable rent. Marg serves as the voice of the association and the rental housing sector. She also acts as a lobbyist and advocate for the industry. She and her staff provide support services for their members, which include
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[ Marg Gordon ]
education, guidance, and advice to landlords who have tenant issues (e.g., delinquent payments, breach of rules). The BCAOMA provides its members with forms, signs, and other materials that help them to perform their fiduciary duties. The association also runs education programs for novice and experienced landlords, which include biweekly workshops and customized programs for property managers.
capital gains can be deferred for up to a year and indefinitely if you purchase a similar business). Since people who have inherited buildings cannot afford to sell them, and are not interested in running the business, buildings do not receive the attention and care of an involved owner, which negatively affects the rental housing stock.
Marg is a member of several task forces and other groups, which serves to raise the profile of the BCAOMA and apartment owners with the government and within the industry. She currently sits on the Vancouver Mayor’s Affordable Housing Task Force, which examines conditions that might act as barriers to the creation of affordable housing, and is Chair of its Government Relations and Partnership SubGroup. Marg is a member of the Housing Justice: Public Engagement, Policy Development, and Legal Rights Project with UBC Law Facility. She is also founder and co-chair (with New Westminster mayor, Wayne Wright) of the Canadian Rental Housing Coalition, and a Director of the Canadian Federation of Apartment Associations (CFAA).
“We are also looking for ways to incent developers to build new rental units,” said Marg. “We have to find a way to overcome various stumbling blocks, such as zero-rate-of-change bylaws, which means that you cannot tear down a building unless you replace it with the same type of building. This makes very little financial sense and has essentially crippled redevelopment.”
“I’m also the only business member of the Fire Services Leadership Group for BC, which is a task group that is attempting to identify what changes need to be made to the Fire Services Act,” said Marg. “My life has come full circle, as I am again involved with the Fire Commissioners Office, and working with people I knew from my early days with the organization.”
According to Marg, mitigating the impact of rent controls would help to maintain existing rental housing, encourage the development of new, purpose-built rental housing, and achieve the sustainability of rental housing. Neutralizing the impact of rent control on the rental housing industry would help to support the viability of the sustainable rental housing market in British Columbia, and ensure the continued provision of safe, secure, and well-maintained rental properties.
Marg is also investigating the development of a certified rental building program. The BCAOMA currently has a code of ethics for its members, and acts on complaints about its landlords. The association runs new landlord education and re-education programs to help them improve their skills, and has refused membership to landlords that have not met its standards. The program will address best practices for landlords, and will certify those that meet the standards. The goal is to raise the standards within the industry and increase its members’ visibility. Apartment industry issues and challenges Marg is involved with a number of BCAOMA projects and initiatives to evaluate and improve the condition of rental buildings. Many rental buildings in Vancouver and other cities throughout BC are more than 50 years old, and require significant expenditures to bring them up to standard. The association led a capital expenditure study to determine what buildings require to make them more modern and sustainable (as well as more energy efficient). It also performed an analysis of apartment building income and expenses to measure actual costs and compare them to permitted rental increases.
Rent control is another significant issue, as it damages viability and sustainability for the majority of renters. Rent control prevents apartment owners from making reasonable profits, as their incomes are restricted while their expenses are not. They end up cutting back on customer service and maintenance, which hurts tenants.
“Existing rental housing stock is declining in quality and will continue to do so unless there are policy changes,” said Marg. “Current policies affecting rental housing provide no incentives to undertake capital expenditures.” Special interests The BCAOMA’s “Charity of Choice” is Covenant House Vancouver, which provides community support services, a crisis shelter, and transitional living program to homeless youth. The association raises funds for the charitable group through an annual golf tournament, where proceeds help at least one youth each year go through Covenant House’s transitional living program (Rights of Passage).
“The rent control formula, which is CPI plus 2 percent, is based on the CPI basket of goods,” said Marg. “According to our research, 91.4% of landlord costs are not reflected in the CPI.”
The BCAOMA received an award for its work with the At Home/Chez Soi Project (funded by the Mental Housing Commission of Canada), which helps homeless people living with mental illness to get back into community life. It also provides support services while they are being housed. The project is helping more than 2,000 homeless people to find housing and get support in Moncton, Montreal, Toronto, Winnipeg, and Vancouver. With BCAOMA’s support, Vancouver was able to house every client in the program.
Older buildings also mean older owners, and buildings being passed down through families. Many people are inheriting rental properties but have no interest in this type of business. However, selling buildings often results in onerous capital gains taxes, which must be paid at the time of sale (unlike selling a business, when
“Our landlords have also won awards for embracing the program,” said Marg. “We’ve encouraged them to get involved in the program, and now I receive phone calls from landlords who want to participate by housing people. Everyone feels really good about the results, as we’ve helped to get people who’ve been marginalized back on their feet.” RHB
30 may / june 2012
WHO WOULD YOU RENT TO? #1 - Approved? Denied?
#2 - Approved? Denied?
LET RENT CHECK SHOW YOU WHY THE “OBVIOUS” CHOICE MAY NOT BE THE RIGHT ONE!
Applicant # 1, Ms. Tattoo Lady Standard background check shows credit cards overdue, student loan in arrears, income $3,800/mo, and a recent past bankruptcy, resulting in a low credit score of 380. Rent Check’s Information reveals a long rental history of consistent on-time payments, approved by all past landlords, no evictions, giving her a high RentScore® of 804.
Applicant # 2, Mr. Clean Cut Guy Standard background check shows no evictions, income $5,400/mo, and high credit score of 810 because he pays the minimum within 30 days and never had a bankruptcy. Rent Check’s Information reveals rental history of chronic late payment, $1,300 in arrears debt owing, denied by last 2 landlords, giving him a RentScore® of only 437.
HOW WELL DO YOU KNOW YOUR PROSPECTIVE TENANT? Brenda Maxwell, VP Sales
T. 1-800-661-7312 x221 email@example.com
Now can you see why Rent Check is BCAOMA’s choice for rental history and credit information.
Develop industry relationships at CFAA Rental Housing Conference At the CFAA Rental Housing Conference 2012 in Vancouver, delegates will learn from leading rental housing experts during two days of education sessions related to Investment (June 14) and Facilities Management (June 15). Delegates are also invited to take part in social activities that will help build relationships with new and current contacts and foster new business deals. Here’s a look at the conference’s social events for 2012 Building Innovations Bus Tour – June 13 Kicking off this year’s conference is CFAA’s Building Innovations Bus Tour. It provides tour-goers with a look at some of Vancouver’s most innovative rental buildings, both new and established. Three buildings have now been selected for this year’s tour. Below is a brief introduction to the buildings. Metropolitan Towers – Gateway Property Management This premier mixed-use residential rental property is located in the heart of downtown Vancouver. It includes 430 luxury suites, all of which boast 7 full-size appliances, granite counter tops, in-suite storage/office space and either a balcony or solarium. Residents also enjoy a 3,600-squarefoot fitness facility, 18-seat theatre, library and meeting room. 600 Drake Street – Concert Properties This 12-storey high-rise offers a variety of contemporary studios and onebedroom suites, totaling 192 rental apartments. The units make efficient use of space. Each unit comes equipped with an EnergyStar fridge, stove, colour coordinated window blinds, carpeting in the primary living spaces, and resilient flooring in the kitchens and bathrooms. Some of the homes also include balconies and space-saving murphy beds. Nicola Place – Hollyburn Properties This building features completely renovated suites, with mountain and ocean views. The units come complete with new appliances, hardwood floors, contemporary cabinetry, mirrored closets, large windows and stylish faucets and fixtures. Tenants at Nicola Place enjoy gated, underground parking, onsite resident managers and 24-hour laundry. Dinner Boat Cruise – June 14 Following Thursday’s Investment Conference, delegates are welcome to come aboard the M.V. Queen of Diamonds for a dinner boat cruise that will provide stunning views of Vancouver’s coastline.
32 may / june 2012
As one of the city’s largest charter boats, the Queen of Diamonds will offer sight-seeing opportunities from three large decks, including a 3,000-square foot open deck on the top level, which presents 360-degree views. Guests will enjoy a buffet dinner with B.C. salmon or roast beef, bar, prizes and music. This year’s cruise is being held in partnership with the British Columbia Apartment Owners and Manager as BCAOMA’s annual boat cruise. Come join the fun! Topics for the CFAA Investment Conference June 14 • Cross
Canada Reports – what may come to your city next
rental housing sales Canada wide
update for 2012 and 2013
• Population • Risks
trends in rental markets across Canada
to industry profitability
housing as a growing niche – developments & operations
• Innovations • Student
in creating value
housing – design, operations, marketing & CMHC financing
Topics for the CFAA Facilities Management Conference on June 15 • High-rise
repairs, including leaky building solutions
tenants – how to help them, other tenants & yourself
• Cost-effective • Employee
building repairs (low-rise)
motivation & compensation
in facilities management & tenant relations
• Landlord-tenant dispute resolution – what’s new & what’s done
across Canada • Bed bug extermination – biology and preventative, targeted &
heat treatments • Green
issues, including waste diversion & disposal
For more information about the education topics and speakers, see the enclosed Conference flyer. For full conference details, or to register, visit www.cfaa-fcapi.org immediately. For more information, contact firstname.lastname@example.org or call 613-235-0101.
[ Yardi ]
Rental Housing Business 33
[ Elevators ]
Elevator Responsibility and Liability By David Gargaro
Older elevators are prone to a wide range of issues, such as improper levelling, doors closing too soon, mechanical and electrical malfunctions, and occasional catastrophic failure (such as an unexpected upfall on cable elevators). These events can cause serious injuries and lead to litigation against the building owner. Many buildings owners believe that elevator malfunctions are the responsibility of their maintenance contractors. According to Chris Morrison, President of Morrison Risk Services, “Building owners are required to fulfill their obligations with respect to the elevators and to retain a competent and licensed elevator maintenance contractor. They must also supervise the process to ensure that the maintenance contracted for meets or exceeds the maintenance contract and regulations of the Authority Having Jurisdiction (AHJ)/ manufacturer recommendations and/or the CSA B44 Code.” Many older elevators cannot meet current code requirements or performance expectations. Modern elevators have safety and operational features that are not found on older elevators, which creates a legal expectation. Building owners cannot claim that they are ignorant or unaware of an elevator’s age or condition. Also, elevator maintenance contractors are not risk advisors, and cannot be held legally responsible when aging equipment malfunctions. Subject to being indemnified by their liability insurance, building owners can be held liable for an injury if they (or their staff) know that there is a problem with the elevator and they do not take reasonable efforts to protect against injury. For example, suppose that the superintendent knows that an elevator is not level when the door is open. If he or she fails to put up a warning sign and someone trips when entering the elevator, then the owner will be held responsible for not making sufficient efforts to protect against injury. By following due diligence, building owners (and staff) can mitigate any potential liability that results from elevator malfunctions that lead to injury. If the superintendent discovers and reports a problem within a
34 may / june 2012
reasonable timeframe, and the contractor properly tests and repairs the component, then there should be no liability if the component fails and causes an injury. “In one particular instance, an optic safety edge was not detecting properly, and the elevator maintenance contractor fixed the problem, and tested the device several times,” said Chris. “It failed the next day, leading to a minor injury. The contractor returned to remove the defective component and installed a new optic safety edge. Since the superintendent and the contractor followed the proper course of conduct, there was no liability.” Protecting against liability As a building owner, the first step in protecting yourself against liability is to ensure that you are fully aware and up to date on your elevators’ performance. Establish a written plan for superintendents to physically check the elevators at the building each day (or as required by code or as recommended by your elevator consultant). Create a checklist to document these attendances. Notify your elevator maintenance company when your elevators require repairs or maintenance, and contact your elevator safety authority about any serious issues or accidents. “The superintendent should note any unusual noises or erratic behaviour, as well as all elevator issues that fall outside normal operation, and contact the elevator contractor immediately,” said Phil Staite, Vice President, Quality Allied Elevator. “He or she should also follow up on tenant complaints to verify their legitimacy, and make note of complaints in a log book that is accessible to the superintendent and elevator technician.” Ensure that you are fully educated on the contents of your elevator maintenance contract, and what is involved in the maintenance control program. The contract should meet or exceed the requirements as set out by the Elevator Code. Understand and execute your responsibilities as stated in the contract (e.g., maintaining elevator sills), and ensure that
[ Elevators ]
the elevator contractor fulfills the requirements of the contract, such as providing regularly scheduled maintenance and recording service calls in the log book. Perform major upgrades when necessary, or when recommended by your elevator consultant. Major upgrades are required when elevators experience unacceptable out-of-service time, which can occur due to scarcity of replacement parts or recurrence of significant problems, such as shorting relays. A building owner could request a major upgrade based on in-service performance issues (e.g., speed, noise, levelling). Some elevator repairs can trigger a major upgrade when that repair exceeds the threshold of the Elevator Code at the time the system was installed. The owner should make the elevator upgrade part of the building’s capital plan so that it covers the future cost.
“An elevator consultant will help to protect both your business and legal interests by ensuring that the elevator maintenance company is doing the work as contracted, and doing it properly,” said Dave MacKenzie, Elevator Consultant, Rooney, Irving & Associates Limited. “They will also arrange performance tests, create a deficiency list, and evaluate the elevator on behalf of the owner,
which will help to ensure that elevators are maintained according to code.” RHB For more information, contact: Phil Staite, Vice President, Quality Allied Elevator (905-305-0195); Chris Morrison, President, Morrison Risk Services (416-848-0877); Dave MacKenzie, Elevator Consultatn, Rooney, Irving & Associates Limited (905- 637-2049)
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BLA bla BLABLA bla BLA bla Bla BLA bla bla Bla Bla BLA bla BLA Bla bla bla bla bla Bla bla Bla bla Bla bla Bla BLA Bla BLA bla Bla BlaBla blabla bla Bla BLA BLA bla Bla Bla bla bla bla bla Bla bla BLA BLA BLA bla BLA Bla bla Bla bla Bla Bla BLA BLA BLA Bla Bla Bla BLA bla bla bla BlaBLA bla BLA bla bla BLA BLABla bla BLA BLA bla Bla bla BLA bla Bla BLA bla Bla BLABla bla bla bla Bla Bla Bla bla “A major upgrade can cost approximately BLA bla Bla BLA bla bla $125,000 per elevator,” said Phil. “It also BLA Bla BLA BLA bla BLA Bla bla produces a number of significant financial Bla Bla Bla bla Bla bla Bla Bla bla Bla bla benefits. For example, we have been able BLA blaBLA Bla BLA Bla bla bla Bla BLA Bla to lower electrical usage by as much as BlaBLA bla BLA bla bla bla 35 percent, reduce wait times by 20 to 30 Bla Bla bla Bla Bla percent, and significantly decrease downtime Bla BLA BLA BLA Bla BLA bla Bla Bla caused by breakdowns. Upgraded elevators BLA Bla bla Bla Bla Bla blaBLA Bla bla BLA bla BLA blaBla also contain the latest safety features, which BLA BLA Bla bla Bla Bla Bla bla Bla Bla BLA can help to demonstrate the building owner’s Bla Bla Bla bla BLA BLA due diligence with respect to maintaining bla BLA bla BLA BLA bla BLA elevator operations.” bla BLA bla bla Bla Bla Bla bla BLA BLABla BLA Install video surveillance in all elevators BLA Bla bla bla Bla bla Bla Bla to record the building’s attendances, service bla Bla BLA bla Bla bla BLA calls, and operational issues. This will enable BLA BLA BLA bla bla BLA
Bla bla bla Bla
Hire an elevator consultant to provide you with the requisite experience and knowledge when you plan to renew your elevator maintenance contract or conduct a significant upgrade. A consultant can also perform an audit to assess your elevator’s current condition, estimate the remaining life of the elevator and its components, and recommend repairs or upgrades.
you to corroborate or dispute tenants’ reports of accidents caused by levelling problems or other elevator issues. Building owners can also provide video evidence to demonstrate that they and the elevator contractors fulfilled their legal requirements with respect to elevator maintenance and repair.
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Rental Housing Business 35
COAST TO COAST Awards Gala – June 7 Calgary, Alberta
telephone 613-235-0101 by 4:30 pm Eastern time (1:30 pm BC time). You need to register immediately in order not to miss out!
The Calgary Residential Rental Association’s 9th Awards Gala will take place on June 7. The evening of industry recognition for excellence is being held at the Carriage House in Calgary. For more details, call 403-265-6055.
Property Management 201 Seminar – June 14 London, Ontario
Charity Golf Tournament – June 8 Victoria, British Columbia Property owners and managers are invited to take part in a charity golf tournament hosted by the Rental Owners and Managers Society of BC. The annual tournament will be held at a unique nine-hole course set on the beautiful shores of Prospect Lake. Proceeds from the event will support the Victoria Cool Aid Society’s Next Steps Transitional Shelter, which provides resources to assist 15 clients with employment, finances, life skills and housing. Advanced registration is required. Cost is $379 per foursome, or $95 per person (including green fees, dinner and charitable tax receipt). Participants must be a member of an apartment association in Canada. The tournament will commence at 3 p.m. and take place at the Prospect Lake Golf Course, at 4633 Prospect Lake Road in Victoria. For more information, contact ROMS BC at 1.888.330.6707 or email@example.com. CFAA Rental Housing Conference 2012 – June 13, 14 & 15 Vancouver, British Columbia The CFAA 2012 Canadian Rental Housing Conference will be held from June 13 to 15 in downtown Vancouver. Leading rental housing executives and other professionals will share their knowledge, advice and expertise on topics relating to Rental Housing Investment (on June 14), and Facilities Management and Tenant Relations (on June 15). The 2012 Conference will begin with a Building Innovations Bus Tour (on June 13). The British Columbia Apartment Owners and Managers Association (BCAOMA) is combining its annual Dinner Boat Cruise with the CFAA Conference to provide an enhanced networking experience on June 14. For a description of the social events and education topics see page 32, or the enclosed brochure. For more information, visit www.cfaa-fcapi.org or
This dinner seminar is designed for past attendees of the Property Management 101 seminars or for property managers with extensive experience. Topics covered will include budgeting and finances, tax tips and advantages, buying and selling rental property and mortgages. Participants will receive a binder with valuable course material. The event will be held on June 14 at the Mocha Shrine Centre, 468 Colborne Street in London from 5 p.m. to 9 p.m. Cost is $79 for members of the London Property Management Association and $99 for non-members. For more event information, visit www.lpma.ca. Best Practices for Landlords 102 – June 19 or August 14 Vancouver, British Columbia The end of the tenancy can be a complex situation for both landlords and tenants. In this seminar, participants will learn how to perform a successful vacate for their tenants, including strategies for eviction. They will also learn the requirements for these processes under the Residential Tenancy Act. Topics covered will include, how tenancies end, giving notice to end a tenancy, how move outs should happen, frustrated tenancies, serving notices, over holding tenants, orders for possession, abandonment of property, move-out inspections and dispute resolution. Cost is $45 for members of the British Columbia Apartment Owners and Managers Association and $90 for nonmembers. Visit www.bcaoma.com for information. Annual Charity Golf Tournament – June 20 Winnipeg, Manitoba The Professional Property Managers Association of Manitoba will host its 14th Annual Golf Tournament at the Pineridge Golf & Country Club, an 18-hole golf course in Winnipeg. The event, which begins at 9 a.m. will
http://www.cfaa-fcapi.org/ Tel: (613) 235-0101 | Fax: (613) 238-0101 Email: firstname.lastname@example.org 36 may / june 2012
include prizes and a dinner. Proceeds will go to the Winnipeg Harvest, a local food bank charity. To register, call 204-957-1224. 2012 Golf Tournament – June 25 Hamilton, Ontario The Hamilton and District Apartment Association will host its annual golf tournament on June 25. Registration will begin at 11:30 a.m. at the Century Pines Golf Course at 592 Westover Road in Flamborough. Raffle tickets for prizes and mulligans will be available for purchase. A mini put 50/50 game will also be available ($5 for 3 balls). Awards and raffle draw will commence at the 6 p.m. dinner. To register, visit www. hamiltonapartmentassociation.ca. BCAOMA Landlord Regional ToolBox Series – July 2 and 3 Kelowna, British Columbia Rental housing providers are invited to enjoy a two-day, interactive workshop on tenant selection, tenancy management and dispute resolution. Cost is $45 for members of the British Columbia Apartment Owners and Managers Association and $90 for non-members. For more details, visit www.bcaoma.com. BCAOMA Landlord Regional ToolBox Series – July 5 and 6 Prince George, British Columbia See description for July 2 and 3 in Kelowna. Seminar Series – July 10 Vancouver, British Columbia Who do you contact when a tenant dies in your building? Do you have a personal “exit strategy”? What can “Writs of Possession” assist you with? During this seminar, participants will receive legal advice about what to in circumstances of sudden death. Cost is $45 for members of the British Columbia Apartment Owners and Managers Association and $90 for non-members. For more, visit www.bcaoma.com.
Charitable Golf Tournament – July 16 Milton, Ontario The Greater Toronto Apartment Association will host its annual Charitable Golf Tournament at the Rattlesnake Point Golf Club in Milton on July 16. Proceeds from this members’ only event will go toward the GTAA Charitable Foundation. Registration includes a continental breakfast, 18-holes of golf, dinner and raffle prizes. For information, email email@example.com. Best Practices for Landlords 101 – July 24 Vancouver, British Columbia Designed from the experience of countless landlords and managers, this seminar will show how the pros screen tenants, and how to have a successful tenancy. Topics covered will include, establishing tenant criteria, showing your rental units, taking applications, conducting due diligence, privacy and information protection, checking references, credit checks, avoiding discrimination, completing a tenancy agreement, rules and regulations during a tenancy, and pets in tenancies. Cost is $45 for members of the British Columbia Apartment Owners and Managers Association and $90 for non-members. Visit www.bcaoma.com for information. Labour Standards Seminar – August 7 Vancouver, British Columbia This seminar will educate owners and managers of their rights and responsibilities under the Employment Standards Act and help them meet compliance with the act when dealing with employees. Knowledge and prevention are the keys to avoiding complaints, disputes, or penalties. Topics covered include, hiring employees and contractors, work wages, wage statements and record keeping, terminations, quits and protected leaves, and dispute resolution through employment standards. For more information, visit www.bcaoma.com. Best Practices for Landlords 102 – August 14 Vancouver, British Columbia See description at June 19.
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