Canada’s Most Widely Read Condominium Magazine
August 2020 • Vol. 35 #3
ON THE MOVE
PM#40063056
The new reality of buying and selling condos
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PA R T O F T H E
FINANCE Budgeting the unknown, a condo tax refresher, and how COVID-19 is impacting reserve funds
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V-CON(DO) 2020 September 16th and 17th Canada’s First Virtual Condo Conference and Virtual Exhibit Hall
Join us at Canada’s first Virtual Condo Conference! Wednesday, September 16th and Thursday, September 17th, 2020 V-CON(DO) 2020, hosted by CAI Canada, will be the premier event for Board Members, Professionals, Condominium and Strata Managers, and all interested parties in Canada! CAI Canada is one of 63 CAI Chapters world-wide. V-CON(DO) 2020 will provide attendees with access to practical knowledge and insights from Canadian industry leaders, including best practices, research and tools they can use in our everyday and rapidly changing environment. As well, all attendees will have a chance to meet with each other in our networking lounges, and participate in our Virtual Exhibit Hall.
Registration is Open! Members of CAI Canada can attend this event for free, and non-CAI Canada members are just $35! If you join CAI Canada today, your registration becomes free and you also gain all the other benefits of an annual membership to Canada’s premiere association for board members, professionals, condominium and strata managers across Canada.
Information on Registration, Membership and Sponsorship/Exhibition is available at: caicanada.com CAI Canada thanks the generosity of the following Sponsors & Exhibitors of V-CON(DO) 2020 * Banner Title/Event Sponsor Exhibit Hall Virtual Exhibitors Sponsors Sponsor
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* Sponsors/Exhibitors at August 16, 2020
Contents COVER STORY
DEPARTMENTS
18
23
Investment Can Anything Stop the GTA’s New Condominium Market? By Ben Myers
26
Governance Should Condos Consider Pandemic Rules? By James Davidson and Nancy Houle
28
Legal Contracts in a Post-Covid-19 World By Ashley Winberg
30
Energy Ontario Electricity Rebate Applied Unevenly By Barbara Carss
32
Sustainability Why Benchmarking Small Buildings Still Matters By Jeff Ranson
On the Move By Rebecca Melnyk
FOCUS ON: FINANCE
10
12 14
How is COVID-19 Impacting Reserve Funds? By Sally Thompson A Condo Tax Refresher By Stephen Chesney Budgeting the Unknown By Andreea Dolnicianu
IN EVERY ISSUE
6
Editor's Letter
8
Ask the Expert
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EDITOR’S LETTER
Moving Forward There’s been no shortage of housing market insights in 2020—from condo sales and rising home prices to suburbanization trends. A recent report on Canadian homeownership sentiment is tracking the evolving effects of COVID-19 in six-week increments. The Mortgage Professionals Canada survey found that, for now, the virus has not severely impacted most current home owners with respect to their employment and that home buyers are still very much in the market for a home. But as MPC Chief Economist Will Dunning says, the pandemic “has resulted in extremely volatile shifts in the Canadian housing market.” As economies reopen, mortgage deferral programs expire and COVID-19 evolves, Canadians’ expectations might shift. Realtors across Ontario are experiencing the downs and ups first hand. In this issue, we take a look through their eyes. While just a smidge of the overall picture, they offer personal insights into the homebuying process and peek into the future—in the shadow of a potential second wave. What’s around the corner is hard to guess, which makes financial security ever more important. From reserve fund planning and day-to-day budgeting to important notes on condo taxes, our finance issue brings forth expert insight on spending, saving and managing money, and how COVID-19 is affecting financial planning. Many condo corporations can expect higher electricity costs this fall when hydro accounts tied to the common areas of larger buildings lose eligibility for the Ontario Electricity Rebate. In an article on page 31, Rob Detta Colli, manager of energy and sustainability with Crossbridge Condominium Services, estimates that for a 250-unit condo, it will be an extra $40,000 a year. On the topic of energy consumption, another piece looks at Ontario’s Energy and Water Reporting and Benchmarking regulation. Buildings between 50,000 to 100,000 square feet won’t need to report until 2023; however, benefits to reporting voluntarily as early as possible can be found on page 33. Also in this issue: considering pandemic rules, navigating contracts, running glitch-free virtual meetings and a perspective on the GTA’s new condo market. We hope you enjoy this edition. If you’d like to contribute to a future issue, please don’t hesitate to reach out.
Rebecca Melnyk Editor, CondoBusiness rebeccam@mediaedge.ca
Publisher Robert Hertzman Editor Rebecca Melnyk Advertising Sales Kelly Nicholls Melissa Valentini Senior Designer Annette Carlucci Production Manager Rachel Selbie Contributing Writers Barbara Carss, Stephen Chesney, James Davidson, Andreea Dolnicianu, Nancy Houle, Ben Myers, Jeff Ranson, Sally Thompson, Ashley Winberg Digital Media Director Steven Chester Subscription Rates Canada: 1 year, $60*; 2 years, $110* Single Copy Sales: Canada: $10*. Elsewhere: $12 USA: $85 International: $110 *Plus applicable taxes Reprints: Requests for permission to reprint any portion of this magazine should be sent to info@mediaedge.ca. Circulation Department Taras Kozak circulation@mediaedge.ca (416) 512-8186 ext. 234 CONDOBUSINESS is published six times a year by
President Kevin Brown Director & Group Publisher Sean Foley Accounting Anna Kantor 2001 Sheppard Avenue East Suite 500 | Toronto, Ontario M2J 4Z8 (416) 512-8186 Fax: (416) 512-8344 e-mail: info@mediaedge.ca CONDOBUSINESS welcomes letters but accepts no responsibility for unsolicited manuscripts or photographs. Canadian Publications Mail Product Sales Agreement No. 40063056 ISSN 0849-6714 All contents copyright MediaEdge Communications Inc. Printed in Canada on recycled paper.
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ASK THE EXPERT
Getting to Glitch-Free Virtual meetings are one way condo corporations are able to balance social distancing with the need to conduct ongoing business. Boards are getting the hang of it, but such meetings aren’t without technical glitches. How can boards run smoother virtual meetings? Marko Lindhe of Minutes Solutions addresses some common issues on his radar. Controlling your mute button Over and over people try to speak while they’re microphone is on mute. Sometimes they can speak for a decent period of time before noticing (usually prompted by other meeting attendees that they can’t be heard). Just as frequently, meeting attendees will leave their microphone on while others are speaking/ presenting. Background noise (especially typing, shuffling, talking, music etc.) can register really clearly in the meeting,
8 CONDOBUSINESS | Part of the REMI Network
rendering a very noisy and potentially distracting discussion. We typically advise people to put their microphone on mute while they are not speaking, but emphasize remembering to unmute before contributing to the discussion. Audio distortion Sometimes people log into a meeting on multiple devices (particularly if they have dialed-in through the phone but are
ASK THE EXPERT using the computer to share/see someone’s screen). Furthermore, multiple participants can also be logged onto the same virtual meeting while physically in the same room. This causes a lot of echo and feedback for the other attendees. We recommend logging in on one device, but if you must log in on two, make sure one of the devices is muted at all times which will save your fellow meeting attendees from entering the vortex of echo feedback. Being unfamiliar with the platform It can certainly take a couple of attempts to familiarize oneself with the functionalities of virtual meeting software. This is where the old adage “practice makes perfect” can certainly be applied. All too often, meeting attendees attempt to log-in as the meeting is being called to order, only to realize they need to download an extension and/or restart their computer. This can drastically delay meeting start time, especially if multiple attendees run into the same delay. Log in to the platform earlier that day or the day before to get familiar with the platform and understand what is required prior to using it.
a meeting goes the more difficult it can be to harness the attention of virtual participants. With that said, presentations and documents are typically a lot more captivating when the audience has a visual to follow along with. Most meeting platforms allow for seamless screen sharing, which can certainly encourage participation and lengthen our attention spans, if even just a little bit. Virtual meetings may not be perfect yet, but they are an excellent alternative to meeting in-person, and they are here to stay. When
used properly, we are learning that business continuity is completely possible through a camera, a microphone and a good internet connection. M arko Lind he is VP of sales and m a rke t i n g a t M i n u te s S o l u t i o n s . Minutes Solutions Inc. is a professional third - party minute taking company that provides in- person, and virtual minute taking solutions. He can be reached at 888.570.1149 x 2 or marko@ minutessolutions.com.
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Scheduling When organizing a virtual meeting it is best to have all the attendees included on the original invite rather than creating a link and emailing it afterwards. When attendees are on the original invite, they will automatically be informed of any possible changes and the requisite information will be securely stored on their calendar. Copy and pasting meeting links can cause difficulties on certain platforms especially when updates or changes are made to the meeting. Optimizing capabilities of virtual platforms Overall, it seems that virtual meetings are becoming more and more a part of our daily life, both personal and professional. As many of us return to the office, a combination of physical and virtual meetings seems like the most realistic outlook for many businesses. With that said, it is important to understand how they can differ. What to consider when setting up a virtual meeting? Keep meetings short and share your screen. Long meetings can be strenuous at the best of times, but many of us are more susceptible to distractions when we are on our own. The longer
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How is COVID-19 Impacting Reserve Funds? When considering the impact of COVID-19, we need to consider
BY SALLY THOMPSON
both the here-and-now and the future. In the near term, the impacts are strictly practical. In the long-term,
it is more of an intellectual exercise in evaluating the likely impact on long-term inflation and interest rates. Three Key Near-Term Impacts Impact on Preparation of Studies Financial updates have proceeded throughout the lock-down; however, there have been impacts on the timing of site-visit based studies. For three months, most consultants were not visiting sites at all, and many are still reluctant to enter occupied suites. The good news is that there are fewer corporations with summer year ends, so the number of corporations impacted has been modest. Reserve fund study providers are likely to remain overloaded for the next few months as they attempt to catch up. If your corporation is struggling to finalize the study in time for budgeting for your next fiscal year, the recommendation would be to see what the overall message is in the draft study. If a significant increase is needed, the board should set a contribution level higher than existing. This can be communicated to unit
years. This will necessitate a revised Notice of Future Funding but is a better plan than avoiding an increase until the study is finalized.
owners via a Notice of Future Funding that explains that the study remains incomplete, but that the board is implementing a preliminary increase based on the knowledge that an increase is needed. When the study is finalized mid-way through the following year, it can be based on that new contribution, setting the required contribution for the following two
10 CONDOBUSINESS | Part of the REMI Network
Impact on Spending Many reserve fund projects have not been able to proceed this year. Even now as construction has “opened up,� contractors have backlogs that will allow them to complete only some of the previously planned projects. Corporations should be clear about projects that have true urgency and be willing to accept that non-urgent projects may need to be delayed. They should also consider the impact of projects on stay-at-home workers. This may not be the best year to complete disruptive projects like riser replacements. COVID-19 Related Costs Some corporations that have had COVID-19 positive cases in their buildings have seen
FINANCE significant unplanned costs this year related to cleaning. This may have put their operating fund at risk. Their instinct may be to look to reserve funds as a source of cash. Reserve funds can be used only for the major repair and replacement of the common elements and assets of the corporation, so it is not appropriate to use reserve funds to cover operating shortfalls. However, it may be possible to reduce the amount deposited to the reserve fund in the current year (on a one-time basis). This would allow more of the common expenses already being collected to be allocated to operating costs. It is important that the board work with their reserve fund study provider to model the impact and develop a new board funding plan that reflects this one-time reduction. This must be communicated to unitowners via a new Notice of Future Funding. It is important to make sure that this new low contribution does not become the “base� from which future contributions are calculated. Instead, the following year contribution must increase to the prev iousl y p l anne d level, p lus any additional amount required to ensure that the fund remains adequately funded despite the one-time shortfall.
Long-Term Impacts Are More Challenging To Predict Interest Rates Since the financial crisis of 2008, we have been waiting for interest and inflation rates to return to historic norms. Now, with the financial hardship presented by the pandemic, it is safe to say that interest rates are likely to stay low for the foreseeable future. Low interest rates protect borrowers and penalize savers and are a painful pill to swallow for reserve funds, particularly in new buildings. It will be a long time before new buildings reach their critical years, so the interest earned on their balances becomes a significant contributor to the fund. Reduced interest rates mean that more money has to come from owners’ pockets, which will be reflected in additional increases at future updates. Older condos live more handto-mouth, spending most of what they collect in each year, so low interest rates have a lower impact. Inflation Rates It is very hard at this stage to predict where construction costs will go in the future. If supply chains and global trade break
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down, costs will rise. If spending drops too much, suppliers will be pressured to drop pricing. If governments spend on infrastructure, resources may be strained, and costs may rise. As such, it is difficult to evaluate where inflation rates in reser ve fund studies should be set. A conservative assumption is an increase over what has been used i n re c e nt ye a r s . E a c h c o r p o r a t i o n should consider the impact of these assumptions on their study and proceed with caution. As with interest rates, inflation rates have a stronger impact for new buildings. However, newer condos also have many three-year study cycles before major spending occurs, allowing for course correction over time. We are hopeful that the pain caused by COVID -19 is a one -time event and that the world will return to a more normal order. This will be dependent on Ontarians stepping up and following public health guidelines to help prevent a second wave. Masks on, Ontario. 1 Sally Thompson is a managing principal at Synergy Partners and past-president of CCI Toronto. sthompson@synergypartners.ca
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A Condo Tax Refresher A lthough condominium cor porat ions in Ca nada a re non-profit corporations, there are
BY STEPHEN CHESNEY
still tax implications and annual filings that are quite often being overlooked. This can become a costly omission on behalf of the condominium
corporation or those responsible for preparing and/or filing the required returns. There can be late filing fees as well as interest on taxes that are not reported and remitted to the government as required. It is for that reason that a refresher is needed, and each condominium corporation’s board of directors and management should take some time to ensure that all required taxes are collected and all required tax and information returns have been filed. Although condominium corporations are considered tax exempt corporations under Section 149(1) (L) of the Income Tax Act of Canada, each and every condominium corporation has the obligation to file a T2 corporation income tax return within six months of its fiscal year end. While there are no income taxes payable given the tax-exempt status, the T2 return is required and the government does expect this to be filed each year. There would be a late filing penalty for this tax return; however, it is based on taxes owing and, as mentioned above, a condominium is tax-exempt. There have been many cases where a condominium corporation has not filed this
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tax return for many years and then it has incurred great costs to pay for these returns to be prepared and filed. The takeaway from this is to ensure that the corporation applies for and receives a business number immediately after registration and that the T2 tax return is filed for every year. Another often forgotten requirement is the filing of the T1044 nonprofit organization information return. If a condominium corporation has over $10,000 of ancillary income, such as interest and rents during a fiscal year, or it has assets of more than $200,000 in the previous fiscal year, it must file this information return within six months of its year
FINANCE end. It is also important to note that once the condominium is required to file for a fiscal year, it will have to file this return for each year going forward. This return, as opposed to the T2 tax return, carries a late filing penalty of $25 per day up to a maximum of $2,500 per year for each missing return. This penalty can add up to many thousands of dollars when this return is ignored and not filed on time. There are mechanisms to reduce or eliminate these penalties if it is discovered that the T1044 return has not been filed on time. The Government of Canada has a program called the Voluntary Disclosure Program where an entity can voluntarily approach and disclose the unfiled and missing returns, and in most cases the entity will not be liable for the penalties as described above. That being said, the process is such that a professional should certainly be consulted to ensure that the forms are completed in accordance with the requirements and that specific deadlines are adhered to. There are a tremendous number of condominium corporations that are currently in default of filing this return and their boards and management should look at dealing with this before the government is aware of the missing returns. Once the government is aware that there are T1044 forms that are late and have not been filed, the Voluntary Disclosure Program cannot be used and the corporation will be assessed penalties and interest. The last and possibly greatest tax liability to condominium corporations today in Canada is the Harmonized Sales Tax (HST). While this issue was discussed at length in a 2017 article for CondoBusiness, “HST misconception a sleeping giant,” it is worth revisiting at this time. While “residential” condominium fees are exempt from charging HST, this exemption does not apply to “commercial” condominium fees. So it is incumbent for each board and manager to review all of the sources of revenues in their corporation to determine if they have commercial condominium fees or other “taxable” revenues, such as guest suite and party room rentals as well as income from antennas on their roofs. If the total of the commercial condominium fees and these other taxable revenues exceed $50,000 in a fiscal year, then they will have to register for HST and start to collect it from the commercial owners as well as charge HST on the other sources of revenue. Once again, there have been many condominium corporations that did not register for HST when required and then had to go back and pay the taxes and penalties from its own surplus. Unfortunately, once they discovered this, it was often too late to collect the tax from those who should have paid it initially. Lastly, a condominium can also use the Voluntary Disclosure Program to report HST that was not reported on time; however, in this case the actual tax will have to be paid along with the interest but hopefully they will not be subject to the penalties. So, while all of us think of condominium corporations as non-profit corporations and exempt from tax, it is apparent that there are still quite a few tax implications. Every board should ensure that their particular condominium is fully compliant with the annual T2 tax filing as well as the T1044 non-profit information return and HST returns if applicable. Ignoring these required tax and information returns can easily add up to significant taxes, interest and penalties when most boards are struggling to keep their common element fees under control during these very trying times. 1 Stephen Chesney is a chartered accountant and partner with the firm YalePGC, LLP in Richmond Hill and currently specializes in the auditing of Ontario condominium corporations.
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Budgeting the Unknown Condo corporations are facing
BY ANDREEA DOLNICIANU
new budgeting cha l lenges in 2020. Planning for unexpected and increasing expenses is difficult to anticipate. These include rising costs of contractors, ever-increasing insurance premiums, and reserve fund contributions that are nearing half of an annual budget for older condominiums.
14 CONDOBUSINESS | Part of the REMI Network
FINANCE
How will COVID-19 impact budgeting? It’s hard to predict what we do not k n o w, b u t m o s t c o r p o r a t i o n s a r e incurring new and ongoing expenses, especially for interior common elements with sanitizer stations, disinfectant sprays or ser vices, masks, and perhaps even plexiglass shields. If a corporation did not have a c o ntin g en c y p l an, this w ill likel y interfere with the current budget and should be considered as normal costs for next year’s budget. The pandemic has also created novel b u rd e ns fo r c o nt r a c to r s w h o mu s t protect their employees, as well as the buildings they service. Embedded into their pricing are costs related to personal protective equipment, water and sanitization stations, dealing with shortages of staff who may get sick, having to transpor t employees in separate vehicles, staggering their breaks, and other unk now n fac tors
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FINANCE
“Budgeting is a time to prioritize what is important for the community.”
that will undoubtedly add to their fixed budget unwittingly, causing a deficit the c osts — p aid by the end user. Such following year. measures are unlikely to let up in the near future and should be considered Finding Savings for next year’s budget. A few factors could impact savings Projecting expenses to the end of goals and significantly alter a budget this financial year will be trickier as this year. Insurance premiums have some work may be postponed (window sk yrocketed and continue to do so; c l e a n i n g , fo r i n s t a n c e ), a r t i f i c i a l l y managing an insurance policy has never undervaluing the spending on particular been more important. Corporations still or multiple categories. Special care operate without standard unit bylaws m u s t b e t a ke n f o r t h e s e m i s s e d defining the components which the ex p e n d i t u re s; ot h e r w i s e, yo u m a y corporation is responsible to insure DelProperty_Condo_March_2018_torevise.pdf 2018-04-13 2:44 PM miscalculate and reduce the next year’s within 1a unit.
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18
B ein g specific in the policy— sometimes even going to a “shell unit” definition of the standard unit or simply removing high-value finishes such as flooring and countertops—could impact both the premium and claims should they arise. Condo lawyers have a wealth of knowledge on this topic; sometimes money is well spent exploring options to find long-term savings. While these bylaws are difficult to pass, the recent adoption of virtual owners’ meetings and proxy collection makes it easier to reach people on this important topic.
FINANCE Another hefty expense is contributing to the reserve fund study which is usually fixed for three -year periods— the maximum amount of time in which the study needs to be revised. Doing so prior to the three-year term is beneficial. Some corporations may have saved money on projects compared to the allowance in the study or facilitated maintenance work to prolong the life of an asset listed in need of significant repair. Working with a corporation's reserve fund study engineer to conduct a p ro - fo r m a stu d y c an help c l ar if y achievable savings in the contribution for the following year.
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Planning for the Future Budgeting is a time to prioritize what is important for the community. This year, boards of directors and managers should consider the unit owners whose lives are irrevocably altered by COVID -19, both financially and the way in which they work. Since many people now work from Call Mike or Kayla @ home, certain issues affect them more drastically, such as noise, HVAC issues, elevator matters and waste services. Understanding this dynamic is integral to planning for next year and finalizing the CBS_Condo_June_1/3squaread_2019v1.indd 1 2019-04-02 budget accordingly. WE OFFER CATCH BASIN CLEANING AND PIT CLEANING! The goal now is to be flexible. By COST EFFECTIVE AND QUICK SERVICE IN THE GTA. the way, budgets can also be revised Diesel Fuel System mid -year if they no longer serve the Compl iance & Upgrade s community well. While managers try to avoid this daunting task, it certainly is an option. Consider whether you have any surplus in the bank. This can help mitigate the unknown factors previously mentioned and those yet to unfold. L astly, decide as a group whether you prefer to keep expenses low and tight and risk possible deficit in the following year if you must go over b u d g et , o r w h et h e r yo u a re m o re conser vative and prefer to have a looser budget, which accounts fo r c o ntin g e n c ie s . N ei t h e r is r i g ht or wrong; it just goes to prove each communit y has its own personalit y, which is what makes this industry so exciting. 1
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MANAGEMENT
ON THE MOVE
18 CONDOBUSINESS | Part of the REMI Network
TECHNOLOGY
BY REBECCA MELNYK
The real estate experience has been far from simple. As Ontario reopens in the shadow of a possible second wave, realtors forge ahead with the new reality of buying and selling condos. www.REMInetwork.com | August 2020 19
COVER STORY
“People are being a lot more selective. Online marketing with 3D virtual tours is of the utmost importance for our future success.”
A downtown Toronto condo unit that had undergone a massive renovation went up for listing in mid-May when Toronto Realty Group Broker Daniel Fleming received a notice from property management saying he couldn’t show the unit in-person, at least, not until the provincial emergency order was lifted. After a series of back-andforth emails, he was finally granted access. “I understand if it’s a building down by the waterfront with an aging population at the height of the pandemic, but now, almost every condo I know is allowing showings and people are wearing masks and being safe,” he says, adding that a handful of condos still ban viewings. The pandemic is creating a different real estate experience for many—realtors, their clients, owners, residents, and managers who field complaints and requests on all matters. As Ontario gradually reopens the province, the odds of a condo corporation preventing in-person showings are likely
low. But with the potential for a second wave and an uncertain trajectory for the virus keeping many on their toes, the go - see - a - condo, move - in, move - out process is not as simple anymore. Like many realtors, Ryan Wykes, senior vice-president of sales at condos.ca, found it impossible to move units in buildings that shut down in-person showings back in March and April. That turned for the better after phase one of reopening, but tenanted units have recently caused a bit of unpredictability. Such was the case with a pregnant tenant who wouldn’t allow anyone inside the unit, despite ramped up safety protocols. “We couldn’t start showing the place until they were out; now my client is sitting with a vacant condo even though he knew for sixty days they were going to be leaving,” he says. Tenants are not allowed to prevent their landlords, or the agent if showing the unit, from entering, as long as reasonable notice
20 CONDOBUSINESS | Part of the REMI Network
is provided and it is in accordance with the lease, says condo lawyer Denise Lash. And if a tenant refuses access, a condo corporation is advised to not get involved in an owner-tenant dispute, unless it affects the corporation, she notes. “Of course if there are health risks, a landlord should be accommodating that tenant,” she says. “That does not mean that they cannot enter the unit to show it. It just means that steps will need to be taken to ensure the tenant is not placed at risk.” Outside the city, showings started smoothing out for Ashley Lamb, sales representative at Keller Williams Experience Realty in Barrie. Up until June, one “hiccup” she found was not being able to access a lock-box; some condos wouldn’t allow them on the premises. Now that offices have opened up again in phase three, some property managers are allowing lock-boxes as a short-term solution and the process isn’t as daunting. Meanwhile, when someone moves into a unit, that brings a whole set of other complications. Eric Plant, director of Brilliant Property Management, is ove r s e e in g e l ev ato r m o d e r niz at i o n projects that started in two separate buildings pre - pandemic. “W henever someone moves, we have no elevator at all,” he says. “To cope, we have had to have them bring everything off the truck and into the lobby, and only put the elevator on service to load it, bring it upstairs, and unload it. After each use, the super would clean the elevator while the movers unload, and then repeat the process as many times as necessary to get all of their stuff moved.” Aside from ensuring additional cleaning of the lobby and elevators, he says the biggest challenge is managing residents' concerns. “Many people are rightfully fearful of getting sick, and seeing movers, furniture, and new people coming and
COVER STORY
going through their lobby can lead to a lot of anxiety,” he says. “We have found that giving notice in advance to residents has helped a great deal, as people can avoid the area if they are concerned.” To Market Fortunately, more buyers are searching for multi-residential homes compared to April, but pandemic uncertainty isn’t helping much, at least not in Toronto some are finding. “Buyer confidence is coming back, but the condo market is soft,” says Fleming. “I haven’t seen it this soft in a long time.” Same goes for Wykes. “There are more people looking to move and buy and sell again, but there are more people selling than buying.” We’ve definitely seen a bounce back in the rental market in the number of transactions, but the number of inventory keeps going up and up and up.” With bylaws on shor t-term rentals and travel restrictions in place, more long-term rentals are sitting empty in Toronto. A report from Urbanation found that the number of furnished condo rental listings of fered for 12- month leases rose 52 per cent in Q2 to 1,877 units. This represented 12 per cent of all condo rental listings in the GTA during the quarter and 21 per cent of the growth in total condo rental listings compared to last year. “If owners can’t afford to let rentals sit empty and mortgage deferrals run out, that’s just going to get pushed to the resale market,” says Wykes. “But we don’t know what will happen with phase three of reopening and how much that will drive consumer confidence and the economy.” An Ipsos survey the Toronto Regional Real Estate Board commissioned in May shows home ownership intentions remain healthy, which suggests buyers may be looking to satisfy pent-up demand when normalcy is restored. This is already the case, to some degree, in Barrie where housing is more affordable (a 1,460 square-foot, three-bedroom condo goes for $500,000). Condo sales in that market were down in April, when Lamb says everything seemed to “just pause.” Since then, sales have doubled every month. She saw confidence come back after stage two of reopening. “I think a lot of first-time buyers are trying to take advantage of the
Shifts in Showcasing Pre-builds To celebrate the launch of 199 Church Condominiums, developers CentreCourt and Parallax swapped a typical swanky indoor venue for an outdoor drive-in—a first in the GTA. In May, cars pulled up to the big screen at City View Drive-In. The event was live-streamed for people who couldn't attend. In bringing this idea to market, CentreCourt wanted to recapture the in-person connection missing since the beginning of the pandemic. “We think that a combination of virtual/drive-in launches will become the new industry standard as it offers the benefit of having an in-person event, while still allowing for the broad reach that is achieved through virtual events,” says CentreCourt Senior Associate Jacob Truglia. At the presentation centre for Canderel and KingSett Capital’s St. Clair Village, face masks are mandatory, floor decals remind visitors to stand two metres apart and glass shields were installed at the signing desk. “We have also circulated traffic flow maps to staff to give them a better understanding of how to move through the sales office, kitchen/bathroom vignette and signing areas while maintaining a twometre distance from visitors,” says Riz Dhanji, president of pre-construction sales and marketing firm Rad Marketing. Virtual tours are a critical tool in the pre-build industry. “Pre-pandemic we had already begun to implement the use of technology and the ability to sell virtually, so come shut-down we were relatively prepared for the dramatic shift that faced us,” says Dhanji. He believes these technologies will be even more integral in the sales process as they evolve. As the first real estate platform to be certified by Cyber Essentials Canada, Salesfish is working with developers and sales agents to guide buyers through virtual contracts and customization options to purchase a condo entirely online. Instead of paper agreements, software scans purchaser IDs and uses facial recognition technology for “100 per cent accuracy of personal data that immediately populates paperwork.” What is the appeal of purchasing online? Salefish says exclusivity in being first to review a property and the convenience of purchasing from anywhere in the world. “There has been a shift in digital real estate sales since the pandemic started,” says Co-Founder and President Rick Haws. “We have seen increased interest and adoption. Although the real estate industry is notoriously slow to adopt new technology, we are confident this interest will continue to grow.”
low interest rates now,” she says. “We’re getting multiple offers on any condo under $400,000. It’s definitely strong.” Virtual Showings, Open Houses To keep business moving forward, more real estate professionals are hosting 3D virtual showings so homebuyers can explore every
angle of a new unit through the realtor’s eyes, asking questions in real-time via FaceTime, Facebook or Zoom. In Barrie, Lamb is seeing virtual showings quickly die off. “There was definitely hype back in April, but once the economy opens up, this virtual alternative will be obsolete,” she says. “We didn’t dive into that.”
www.REMInetwork.com | August 2020 21
COVER STORY
The immersive 3D-modeling technology she already had in place proved helpful enough that she hasn’t had to conduct any virtual showings yet. Virtual property tours have existed in various forms over the years—many realtors have stepped up these “dollhouse” versions in the past few months. On the higher end, users can walk through a unit and get a 360-degree perspective by clicking on various points in the rooms. Some programs offer measurement tools and floor plans and the ability to zoom in closely. “When you’re buying a condo, you’re not buying a unit; you’re buying into the whole complex and lifestyle,” says Lamb, who pays for a drone to capture an aerial view of the condo. A potential buyer can fly into the building through the lobby, walk onto the elevators, down the hallway and into the unit. Even though in - person showings have resumed, people are doing more research ahead of time and “being more prudent about which properties they want to go see,” Wykes says. Instead of viewing six properties in person, virtual tours are cutting that number in half.
“People are being a lot more selective. Online marketing with 3D virtual tours is of the utmost importance for our future success.” They might also clamp down on open houses, which can resume during phase three of reopening. Condo corporations can still restrict them if there is a valid reason for doing so, says Lash. She adds that individual showings are fine if proper protocols are in place—mask-wearing, physical distancing, no touching. “We are not recommending banning showings, since a showing is similar to visitors entering to visit with owners— as long as these are not open houses that create a lot of activity and could pose health risks by doing so,” she says. “It also depends on whether the condo has a vulnerable population, which may require more stringent and restrictive measures be taken.” Pre-COVID, many condos didn’t allow open houses due to security risks; Wykes thinks many more will prohibit them going forward.
22 CONDOBUSINESS | Part of the REMI Network
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“Open houses are a dated practice and an old school way of generating leads,” he says. “They were needed way back in the days when the internet didn’t exist. People didn’t have phones; they didn’t have 3D virtual walk-throughs; work plans weren’t online at their fingertips.” As more serious buyers schedule private viewings, protocols are in place to thwart virus transmission—for instance, leaving light switches on and keeping touching to a minimum. Many condos have already implemented a policy for mask usage in common areas such as elevators, lobbies and hallways. In Toronto, this is now mandatory. Some agents, like Lamb, do extra by asking clients to sanitize hands before touching elevators and upon entering a unit. Wykes keeps a box of masks and gloves in his car in case clients show up without them. Even with protocols in place ahead of a potential second wave, there are always gaps. “There are a lot of smaller condos that don’t have commercial hand sanitizers right when you walk into the lobby, and there are a lot of people, especially agents, that unfortunately don’t care and will walk in with no hand sanitizer,” Lamb cautions. It is, however, usually the agent who will make sure protocols are in place during showings, says Lash, who advises that condo corporations not get involved with visitors or units being shown to potential buyers. “It is the unit owners’ responsibility to ensure their visitors and others do not pose a risk to others in their community and the condominium corporation continues to be responsible for keeping the common element areas as safe as reasonably possible.” If a second wave does arrive, with cer tain measures in place and new habits formed, it will be more about reimplementing many real estate procedures learned during the lockdown, says Lamb. “Before it was oh my gosh what do we do,’ she says. “Now, we already know what to do—I think people are going to build on that. I have certain habits now I didn’t have back in March, which makes it a lot easier” 1
2018-03-14 1:51 PM
TECHNOLOGY INVESTMENT
Can Anything Stop the GTA’s New Condominium Market? Depending on your source of data, the average ask ing price
BY BEN MYERS
per-square-foot for new condominiums in the Greater Toronto Area has increased for about 25 consecutive years. When the COVID-19 pandemic hit in March, and new condo sales in the GTA plummeted in April and May, it seemed the streak would finally be over. www.REMInetwork.com | August 2020 23
INVESTMENT
W i t h t h e b o r d e r s s h u t d ow n a n d immigration grinding to a halt, population growth will be considerably lower than in previous years. Job loss has been unprecedented, and the lockdown has bankrupted many small businesses and left their former employees looking for wo rk . D at a fro m Rent als.c a shows that average rent per- square -foot for condominium apartments for lease in the City of Toronto has trended down since the middle of last year, and the $ 3.6 5 per- square -foot figure in June is lower than 2018 rent levels. T his multitude of negative factors should prevent investors from jumping back into the market, right? Let’s review the data and anecdotal evidence. The resale housing market was not hit that hard in terms of a price correction during the early months of the pandemic. Demand clearly plummeted, but so did supply, as sellers held off listing their proper ties due to health concerns. Pricing is always stick y in t h e s h o r t te r m , a s i t o f te n t a ke s sellers several months to realize the market is not as hot as it once was, and the previous comparables for their properties are no longer valid. It is not always easy to evaluate the strength of a market over a two- to three-month period, as homeowners who merely want to sell (as opposed to being forced to sell for financial reasons) can pull back their listings and wait for the market to return. Soft market conditions often result in a
higher share of distressed sales and lower share of luxury home sale during poor markets, making the results look worse than they actually are. The opposite is often the case in a strong market as well, as few $15 million- dollar homes sales pulled the average up. W hen lockdown restrictions were lifted, demand flooded back into the market, and supply has yet to catch up. However, it appears that the single famil y m arket is stron g er th an the condo market, as many prospective buyers are tired of being cooped up in small apartments and are seeking larger homes with more outdoor space. Doctors have strongly advised people to stay six feet apart from each other an d avo i d l arg e g et- to g ether s , an d some major employers have announced that they will continue the work-fromhome setup, potentially permanently. The reduced need to be downtown, the desire for personal and private outdoor space, and a fear of being in crowded dense places may significantly reduce high-rise condo demand. A ll of these factors, coupled with the onslaught of supply coming to the resale market over the next 18 months in the GTA, should be a deterrent for pre - construction condo investors, but it hasn’t. T he first few new c ond o projects to launch during the pandemic were successful, and that has resulted in a number of developers planning to launch this fall.
24 CONDOBUSINESS | Part of the REMI Network
A s B a ke r R e a l E s t a te’s B a r b a r a Lawlor mentioned on a Toronto Under C o n s t r u c t i o n p o d c a s t , b u ye r s s e e monthly c ash flow as secondar y to capital appreciation. Investors have had success buying a new condo prior to the start of the build, waiting anywhere from three to six years to take possession. Past experience has shown that prices have been higher when they’ve closed in comparison to when they’ve purchased. The last time it wasn’t the case was the early 1990s. Investors continue to bet on Toronto. They see Toronto and the GTA as a highly desirable region, and with the instability south of the border, politically and socially, there is no doubt that Toronto will continue to attract top talent looking for oppor tunities and a high quality of life. Some volatilit y is expected along the way, maybe even the end of the new condo price streak in 2021, but if a global pandemic can’t kill the Toronto new condo market, what will? 1 Ben Myers is the president of Bullpen Research & Consulting Inc. He produces market demand reports and residential pricing recommendation studies for builders, lenders and landowners in Toronto and Ottawa. He assists in the underwriting and due diligence of real estate development opportunities from a revenue and land value perspective. Find him on Twitter at @BullpenConsult
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Should Condos Consider Pandemic Rules? The pandemic has, undeniably, had a signif icant impact on condominium life. To say the past
BY JAMES DAVIDSON AND NANCY HOULE
few months have been a transition for condo corporations and their residents, and an effort for boards and managers, would be an understatement. From implementing virtual meeting and electronic voting procedures, to finding the safest way to gradually reopen temporarily closed amenities, the list of impacts seems endless. As areas of the province reopen in the midst of an ongoing outbreak, condos may be asking if a specific set of rules, applicable during this sort of health crisis, is helpful. Since the board already has the authority to make decisions during a health crisis, such rules aren’t legally necessary. This authority flows from Sections 17 and 26 of Ontario’s Condominium Act which state: the board is responsible to fulfill the obligations of the
condominium corporation. A condominium corporation “has a duty to control, manage and administer the common elements and the assets of the corporation” (per Section 17). A condominium corporation is also responsible, as occupier, to keep the common elements reasonably safe (per Section 26). These sections, read together, give the board the authority and responsibility to
26 CONDOBUSINESS | Part of the REMI Network
decide how the common elements are to be used during a health crisis. For instance, it is up to the board to decide how to keep the common elements safe and, more generally, how the common elements are to be used and managed so as to comply with directives from public health officials. A condo board can take steps without the need for any rule to authorize such, and could certainly decide to publish one or more
GOVERNANCE
Possible Pandemic Rules 1. A rule to define a “health crisis” or “pandemic” and to say that the “pandemic rules” will apply during any such health crisis or pandemic. 2. A rule stating that, during a health crisis or pandemic, the board may issue one or more directives stating that:
policies detailing their decisions—mainly as a means to inform owners and occupants and to hopefully persuade them to cooperate. However, from a purely legal perspective, the owners and occupants are obligated to follow the board’s instructions in relation to use of the common elements during a health crisis. Again, this flows from provisions of the Condominium Act. Are Pandemic Rules a Good Idea? For some condominiums, the answer to this question may be yes. Rules (like policies) can be an excellent way to record the board’s directives and an effective way to inform owners about these directives; for instance, restrictions or directions on the use of the common elements during a health crisis. In some situations, rules may help with enforcement. All owners understand that rules have the “weight of the law” and can be enforced pursuant to provisions of the Condominium Act. Passing a rule may help persuade owners that compliance is required by law and that non-compliance can have real legal consequences. Rules can contain additional details about the consequences of non-compliance, such
• C ertain indoor or outdoor amenities are not open for use, or are open for use subject to certain restrictions or conditions.
• C ertain procedures or protocols must be followed on the common elements in order to maintain physical distancing among all persons. Without limiting the generality of the foregoing, the board may require that elevators or other areas of the common elements be used only by a limited number of users at a given time.
• U sers of certain areas of the common elements must thoroughly wash their hands with hand sanitizer (available at stations installed by the condominium corporation) before entering those areas.
• U sers of certain areas of the common elements must wear face masks and/or face shields, meeting specifications established by the board, while in those areas. The directive may include exceptions for persons who cannot safely wear a face mask.
• D eliveries of parcels, packages and other items to the building are permitted only in strict compliance with protocols to be established and posted by the board.
• T he board may place limits or restrictions upon persons (including contractors and other invitees of occupants) who can enter onto the common elements. Without limiting the generality of the foregoing, the board may prohibit such persons from entering onto the common elements at any time or times.
• T he board may establish other procedures and protocols for use of the common elements as they deem appropriate, in order to maintain safety on the common elements or to otherwise fulfill the obligations of the condo corporation in relation to the common elements.
• The board will post notices and/or signs setting out the directives described in this rule.
3. A rule stating that the board will take reasonable steps to enforce all of the requirements of pandemic rules. Without limiting the generality of the foregoing, the board may prohibit anyone from entering or remaining on the common elements if he or she is not in full compliance with any of the board’s directives described in the pandemic rules. Furthermore, if any person is not in compliance with the board’s directives, that noncompliance will constitute a trespass for purposes of Ontario’s Trespass to Property Act, entitling the condo corporation to pursue all remedies under the Trespass to Property Act as against that trespasser.
as the possibility that the corporation may refuse access to the common elements (or to parts of the common elements) to occupants and/or their invitees who don’t comply. Again, this may also help owners and occupants to better understand the potential consequences of non-compliance. Some condos may like the added “enforcement momentum” of rules that embody the board’s decisions, but there is a potential drawback. The rule-making process requires the involvement of the owners who have the right to challenge any proposed rule at an owners’ meeting, which means that the board’s right to impose the particular directive under the terms of the
Condominium Act could very possibly be defeated. In other words, if a board decides to pass a rule (rather than a policy), the board is risking the possibility that owners may vote it down, thereby preventing the board from fulfilling its mandates in relation to safety and management of the common elements. The bottom line is that a policy, or simply a board directive, may be the better way to go if the board is not prepared to risk a “no” vote from the owners. A proposed rule can make sense when the board considers it to be truly optional, so that a “no” vote would be acceptable and would not prevent the board from doing what it feels is necessary to keep common elements safe. 1
James Davidson and Nancy Houle are partners at DavidsonHouleAllen, Condominium Law
www.REMInetwork.com | August 2020 27
MANAGEMENT
Contracts In A Post-COVID-19 World The effects of COVID-19 have been immense and widespread.
BY ASHLEY WINBERG
COVID-19 has changed how we communicate with one another and the ways in which we do business. It has also made us realize that pandemics and events, once only conceivable in the movies, can significantly impact every aspect of our daily lives. COVID-19 has also taught me the importance of well-drafted comprehensive force majeure clauses and opened my eyes to other standard contractual clauses, which should now be scrutinized more than ever and redrafted to provide greater certainty in the event of a second wave arising or another unimaginable event becoming a reality. Price and Payment Terms Pandemics negatively impact supply chains and the availability of labour, which, in turn, increase operating costs. As operating costs rise, contractors and suppliers will want to pass these additional costs onto their customers. Accordingly, clauses pertaining to price and payment terms should be carefully reviewed going forward. Given these uncertain times, fixed-price contracts, which are preferable for condominium corporations,
28 CONDOBUSINESS | Part of the REMI Network
may be less common and if a fixed-price contract is proposed, the same should be carefully reviewed by a solicitor prior to a condominium corporation entering into the same. In a fixed-price contract, it is essential that the clauses pertaining to the contract price, scope of work, supplies, exclusions and payment terms be carefully scrutinized. As it is imperative that a condominium corporation that is a party to a proposed fixed-price contract has a clear understanding of what work and what supplies are included in the fixed price and if there are exclusions, the circumstances giving rise to the exclusions are clearly stated and are reasonable. Alternative Dispute Resolution During the height of COVID-19 this past spring, the court system largely shut down. Accordingly, dispute resolution clauses in
LEGAL
“Force majeure clauses should be carefully reviewed and redrafted in future contracts.”
a post-COVID-19 world should be redrafted to ensure that the same contain alternative dispute resolution mechanisms such as referring the dispute to a predetermined neutral third-party expert for determination as well as mediation and/or arbitration. COVID-19 Clause Force majeure clauses in any contract entered into going forward will likely not apply to any future consequences of COVID-19 or to any future waves of COVID-19 since those consequences and waves are now foreseeable. Until there is a widespread vaccine and COVID-19 is no longer a global pandemic, it is advised that any future contracts include a COVID-19 clause. It should address the current and future consequences of COVID19 on the performance of the parties’ respective obligations, and advise how COVID-19 and the measures implemented in response to the same may impact the parties’ respective rights and obligations. Force Majeure Clauses Although it is presumed that force majeure clauses in contracts entered into going forward will not apply to any future consequences or waves of COVID-19, the pandemic has significantly impacted contractual performance. Force majeure clauses should be carefully reviewed and redrafted in future contracts. Condominium corporations should have their solicitors carefully review the force majeure clause in any proposed contract to ensure that the same applies to any future health emergencies, pandemics, geopolitical events, nuclear, chemical or biological contaminations, contagions and measures required to comply with any laws or government orders. Solicitors should also ensure that force majeure clauses specify the consequences of a force majeure event in detail, and delineate the termination rights in the case of an extended force majeure event as well as the resulting consequences of the same. The foregoing is just a snapshot of some of the contractual clauses which should now be carefully scrutinized and redrafted. Additional contractual clauses that should be carefully examined post COVID-19 include those that pertain to insurance coverage, disease prevention, workplace safety, performance standards and termination. However, the power to instruct solicitors to review and redraft these now critical contractual terms rests in the hands of condominium corporations, many of whom are now suffering from operating deficients due to unanticipated increase in cleaning costs and common expense arrears.
Some condominium corporations that see the value of reviewing and redrafting these key contractual clauses will significantly reduce the likelihood of a dispute arising as well as the time and money spent resolving a dispute should one arise, which in a post-COVID-19 world is now uncertain. 1 Ashley Winberg is a corporate lawyer specializing in condominium law at Elia Associates. She assists a diverse array of condominium boards and management companies throughout Ontario on all matters relating to condominium governance and management. She is also the chair of CCI Huronia's Communication Committee, a director on CCI Huronia’s Board of Directors, and a member of CCI Toronto's Volunteer Committee and CCI Toronto’s By-Law SubCommittee.
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Ontario Electricity Rebate Applied Unevenly Many condominium corporations and owners of multi-
BY BARBARA CARSS
residential rental buildings can expect higher electricity costs this fall when hydro accounts specifically tied to the common areas of larger buildings lose eligibility for the Ontario Electricity Rebate (OER).
Late last year, the Ontario Energy Board (OEB) determined that the nearly 32 per cent rebate could be applied on all common area accounts during a transitional period that is slated to end October 31, 2020. After that, only accounts reflecting less than 50 kilowatts (kW) of demand or 250,000 kilowatt-hours (kWh) of annual consumption will qualify.
30 CONDOBUSINESS | Part of the REMI Network
ENERGY
In practical terms, energy managers advise that most common area accounts serving multi-residential buildings with more than about 70 units will no longer receive the rebate. That will equate to a 31.8 per cent premium on the pre-tax costs for electricity consumption and regulated transmission/distribution charges. Common area accounts typically encompass many of the building’s most power-intensive services, including: elevators; lighting in corridors, stairwells and parking areas; ventilation systems; delivery of heating and cooling in buildings with centrally located boilers and chillers; and pumps for the delivery of water. “For a 250-unit condo, it will be an extra $40,000 a year,” estimates Rob Detta Colli, manager of energy and sustainability with Crossbridge Condominium Services. “This will impact about 30 per cent of our client base. What makes this worse is condo residents who are paying directly for their own in-suite consumption are being penalized, while condo corporations that chose to remain bulk-metered, meaning the suites have no individual accountability for consumption, will continue to get a 31.8 per cent break on their common area bills.” The OER is targeted to residential households, small businesses and farms covered in the provincial Regulated Price Plan (RPP), and began showing up on hydro bills in November 2019 to replace the previous 8 per cent Provincial Rebate. Multi-residential buildings enjoyed blanket eligibility for that rebate, but a two-sentence decree in the OEB’s December 2019 memo creates a new distinction to exclude some accounts from the OER. “There have been questions regarding the treatment of the common area account in multi-unit complexes where the distributor directly meters the individual units and the common area account has its own meter. In this case, the common area would not qualify for the OER unless it has a demand of less than 50 kW or uses less than 250,000 kWh a year,” it states. Detta Colli and other knowledgeable observers suggest there should be further explanation of how that decision was reached. “It treats similar buildings differently, giving some an advantage or others a disadvantage, based on how the building is wired, metered and sub-metered,” observes Andrew Pride, an Ontario-based consultant specializing in energy management and strategic conservation planning. “That seems unfair, particularly since it relates to a wiring choice that was often made years ago.” Differing interpretations of regulatory intent Detta Colli argues the guidance contradicts the intent of the enabling regulation — under the Ontario Rebate for Electricity Consumers Act (ORECA) — which generally states that a common area account is eligible provided a multi-unit complex contains at least two “qualifying” units and at least 50 per cent of all units within the complex are also “qualifying” units. “The wording of the regulation states that it (the rebate) is to be applied to the account that is ‘solely in respect of a multi-unit complex’ and common area accounts are absolutely in respect to a multi-unit complex. Before the OEB interpretation came out, the LDCs (local distribution companies) had actually concluded that a condo’s common area account would get the rebate,” he reasons. “However, after failing to get the ruling changed, we have moved on to explaining to our clients what will be happening.” In addition to informing affected condo boards that they will need to budget for a jump in hydro costs, Detta Colli and his peers have reached out to Members of Provincial Parliament. Notably, although oversight of
the rules generally rests with the OEB, the enabling legislation does give the Minister of Energy, Northern Development and Mines the authority to prescribe eligibility for the rebate. “The MPPs seem confused as to why the OER won’t be applied to common area accounts in condos,” Detta Colli reports. “It might be easier to administer, but it’s clearly not equitable with the treatment of bulk-metered buildings.” “The old rules treated multi-residential buildings as a whole property, which required more administration to apply the rebate. This interpretation drills down to the metered account, which streamlines the process,” Pride concurs. “Now it appears common areas are being treated like businesses that are either above or below the 250,000 kWh threshold.” He speculates that could lead to some create manoeuvring. “What if building owners start breaking their common elements into more than one separately metered account so they can qualify for the 31.8 per cent rebate? It’s an absurd premise, but it could have a good payback,” Pride muses. As with other sometimes baffling billing formulas — such as for the allocation of the global adjustment to Class A and Class B consumers — using less electricity remains one certain way to lower costs. “Regardless, this policy encourages owners and managers of large apartment buildings and condominiums to implement deep efficiency retrofits to drive down demand and consumption,” Pride says. 1 Barbara Carss is editor-in-chief of Canadian Property Management.
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2016-06-24 8:59 AM
Why Benchmarking Small Buildings Still Matters Ontario introduced its Energy a nd Wat e r R e p or t i n g a nd Benchmarking (EWRB) regulation
BY JEFF RANSON
in 2017, becoming the f irst prov ince to make information on building utility consumption more accessible.
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SUSTAINABILITY
In the beginning, EWRB only targeted buildings more than 250,000 square feet with an eye to include smaller buildings more than 50,000 square feet. Since COVID -19 struck, the reporting deadline has been extended to October 1, 2020 for large buildings and with buildings between 50,000 -100,000 square feet not needing to report until 2023. However, the roughly 10,000 Ontario buildings in this lowest bracket should consider reporting voluntarily as early as possible, especially at a time when stimulus money is expected to flow toward green recovery. The provincial government had originally proposed exempting this tier of buildings altogether (and still might), thinking the change would lower compliance costs on businesses by about $300 per building annually. But this number dips well below the utility costs savings that the program could actually achieve. Data from other North American jurisdictions shows the average building in this size class would save between $1000 and $1500 per building after only one year of benchmarking. It is a move that runs counter to the industry’s own need for data transparency. Buildings contribute up to 17 per cent of Canada’s greenhouse gas (GHG) emissions and up to half in large cities like Toronto. EWRB is an environmental regulation, but it is also good economic policy. While building codes and standards help regulate efficiency in new buildings, existing buildings have been operating with little oversight and, in fact, no insight at all into how energy and water was being used in our cities. This not only makes regulation impossible and utility planning difficult; it costs building owners a lot of money. Utility benchmarking—the practice of comparing performance against a standard or peer group—is the best indicator of when a building is underperforming and wasting money. Making building performance data widely available provides valuable intelligence to condo corporations. Missed Opportunities There is a learning curve for both condo corporations required to report and the utilities providing the data. But it will be better to start learning now, rather than in several years when it becomes mandatory and the data becomes public. The information generated can provide condo boards with the ability to track utility consumption over time and flag opportunities for improved energy and water efficiency sooner rather than later. With the potential for stimulus funds directed at shovel-worthy building projects, including energy retrofits, this intelligence can help ensure that smaller building owners don’t lose ground competitively. Large building portfolios have a strategic advantage when it comes to deploying energy efficiency programs. They typically have more resources and access to capital and are already benchmarking and seeing the benefit to the bottom line. Individually owned buildings like condos are already less likely to participate in voluntary programs like Leadership in Energy and Environmental Design (LEED), Race to Reduce, BOMA BEST, and Utility DSM and CDM programs. With four years of voluntary reporting for smaller buildings, it is likely Ontario will see much lower compliance rates and lower uptake of conservation opportunities. These buildings will fall even further behind.
Next Steps T he C an a d a G reen Buil d ing C ounc il h as p rov id e d r e c o m m e n d a t i o n s f o r t h e O n t a r i o g o v e r n m e n t ’s consideration. Continued roll-out of EWRB to buildings under 100,000 square feet. To minimize the cost of implementation, the government could consider a one-year delay for the third phase of EWRB to allow for further program refinement or delay until reaching a specific threshold, such as when 75 per cent of buildings over 100,000 square feet are reporting. Invest in capacity building and training for smaller buildings. Minor investments in training could unlock huge economic opportunity and potential energy cost savings, while helping support the development of skills training needed for Ontario’s construction workforce to take advantage of the low-carbon economy. Ensure the availability of whole - building utility data (including unit meters) to any building owners who wish to voluntarily participate in EWRB.
One critical issue still to be addressed is that those condo corporations that do choose to participate on a voluntary basis will be hindered because utilities won’t be required to provide individual unit meter data for the purpose of benchmarking, which they must do for buildings in the mandatory group. This will leave some buildings with separate meters at the mercy of the local utilities willingness to comply. Cities across Canada are declaring climate emergencies. The federal government wants the country to become carbon neutral in 30 years. Buildings are expected to lead the way, and those buildings with good data are far less likely to be caught unprepared when the market or regulation demands lower emissions. As Ontario—and indeed, all of Canada—looks ahead to this critical decade of climate action, there is no reason that buildings under 100,000 square feet should wait to participate in the EWRB and reaping the benefits inherent in data transparency. 1 Jeff Ranson is GTA regional director at the Canada Green Building Council. He supports green building market transformation in southern Ontario, consulting for numerous private and public sector organizations around capacity building and strategic planning for sustainable development and climate change mitigation.
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NEW AND NOTABLE
Concert Properties Pioneers First Green Loan Vancouver-based Concert Properties is the first to gain access to a new lending product that supports sustainable projects with strong environmental benefits, including combatting climate change. The $71.5-million construction loan the company had acquired for the Tapestry at Victoria Harbour development was converted to a green loan based on the strong green attributes of the project, including its expected lower carbon and energy footprint versus a comparable building. Tapestry at Victoria Harbour is an active living community with for-sale condominiums, residential rental suites, amenity and service space, and a small retail component. The development is projected to use 33 per cent less energy than a comparable building and have an overall energy use intensity of 118 Kwh/ sqm/yr. This intensity is commensurate with Step Three of the BC Energy Step Code. The Step Code is part of the BC Building Code, and is intended to make new construction in the province net-zero energy ready by 2032. The building is also targeting LEED Gold certification from the Canada Green Building Council. Concert recently developed a sustainability framework that lays out its plan for the next 30 years, including aggressive carbon emissions reductions. More than 20 of its buildings have achieved LEED certification and/ 34 CONDOBUSINESS | Part of the REMI Network
or Tier-2 under the Toronto Green Standard, or Step 3 under the Energy Step Code. “We are dedicated to making a positive contribution to the economy, society and the environment,” says Brian McCauley, president and CEO, Concert Properties. “We are pleased to be selected for HSBC’s Green Loan program. It recognizes Concert’s commitment to achieving greater sustainability in our portfolio.” This first Green Loan Principles-aligned green loan in Canada follows HSBC Bank Canada’s launch of a green finance proposition in late 2019. HSBC is the top underwriter of green, social and sustainable bonds globally. In 2017, the bank committed to provide and facilitate $100bn of sustainable financing by 2025 to clients to develop or install clean energy and lower-carbon technologies. “We are proud to help our long-standing client, Concert Properties, extend their sustainability leadership into the area of finance and pioneer the first green loan in Canada,” said Linda Seymour, head of commercial banking, HSBC Bank Canada. “Our customers are becoming increasingly focused on ESG issues, and we are committed to offering them products that help them invest in creating a lower carbon economy.”
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