Condo Business

Canada’s Most Widely Read Condominium Magazine

June 2018 • Vol. 33 #2

BALANCING THE BOOKS Will new cost pressures force corporations to revise their budgets this year?

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PA R T O F T H E

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4TH ANNUAL WHO’S WHO A ranking of the Canadian condo industry’s major players and portfolios

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Contents FOCUS ON: FINANCE

22

What will end the investor onslaught?

By Ben Myers

18

Navigating the new records request process

By Sonja Hodis

24

Accounting for change

By Michelle Ervin

42

Legal Status certificates revisited

By David Thiel

30

Maintenance fee myths debunked

By Andrew Harrild and Carl Langschmidt

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38

How to maximize arrears recovery

By Cheryll Wood and James Davidson

Development Specifying the right acoustic solution

By Cathy Gagné

SPECIAL FEATURE DEPARTMENTS

10

Governance Managing owners’ expectations

By Pat Crosscombe

14

A board meeting gone wrong

By David Elmaleh and Gabriela Caracas

35

The 4th Annual Who’s Who survey of the Canadian condo industry’s major players and portfolios

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EDITOR'S LETTER

Balancing the books If condo corporations are looked upon as a

fourth level of government, then their provincial and federal peers may not be the best role models for balancing the books.

Condo corporations are regularly reminded not to unfairly burden future unit owners by putting off the fee increases required to maintain shared assets.

At the same time, both the outgoing provincial government and the feds have been engaged in multi-year deficit spending, allowing them to spend more than they bring in through taxes — in Ontario’s case, after a short-lived return to a balanced budget. However, they are also going into the red when the economy appears to be thriving, which goes against the conventional wisdom that governments should run deficits during lean times and pay down debts during plentiful times.

The province and the feds have the benefit of being able to run series of deficits without running into cash-flow problems. The same is not true of condo corporations, which have to pass borrowing bylaws to take on debt. Condo corporations also happen to be staring down a basket of new fees and other cost pressures right now.

This month’s cover story explores what impact Ontario’s minimum wage hike could have in condo corporations. Notably, rising costs could upend the assumptions built into corporation budgets for the current fiscal year, with repercussions for status certificates, which communicate information about a corporation’s financial health to prospective buyers.

Also in this, CondoBusiness’ annual finance issue, you will find articles debunking maintenance fee myths and forecasting condo investor activity.

Plus, we bring you our fourth annual Who’s Who, a rundown of the major players and portfolios in Canada’s condo industry. If we missed you, please contact Daniel Ross at danielr@mediaedge.ca to be included in our 2019 contact list.

When higher levels of government exercise a lack of fiscal discipline, it produces results similar to those seen in condo corporations that artificially suppress maintenance fees. Future taxpayers will eventually bear the burden of debt amassed through the course of repeated deficit spending, just like future owners in condo corporations will eventually pay for past underfunding of the reserve.

Publisher Maya Merchant Editor Michelle Ervin Advertising Sales Liam Kearney, Melissa Valentini Senior Designer Annette Carlucci Production Manager Rachel Selbie Contributing Writers Gabriela Caracas, Pat Crosscombe, James Davidson, David Elmaleh, Cathy Gagné, Andrew Harrild, Sonja Hodis, Carl Langschmidt, Ben Myers, Mark Stables, David Thiel, Cheryll Wood 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 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 Manager Nadia Piculik, CPA, CMA 5255 Yonge Street, Suite 1000, Toronto, ON M2N 6P4 (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.

Michelle Ervin Editor, CondoBusiness michellee@mediaedge.ca

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How WELL is your building?

A new certification that recognizes buildings designed to promote human health and wellness is expanding to the multi-residential sector after seeing strong uptake in the commercial sector. Mark Stables, founder and CEO of Benchmark Group, answers: What is the WELL Building Standard?

There is a movement to rethink design with a view to its impact on the heath, performance, and well-being of people in the places they work, live, learn, and play.

The WELL Building Standard became the first building rating system to look beyond the planet to the people that occupy the built environment when it was introduced five years ago. WELL explores the intersection between design, human behaviours, and performance within indoor places. Backed by research and verified

8 CONDOBUSINESS | Part of the REMI Network

by a third party, WELL focuses on seven core concepts of health, including air quality and thermal comfort.

The standard first became available to the commercial and institutional building sectors, where early adopters of the standard saw benefits almost immediately. After achieving WELL certification at its Los Angeles headquarters, CBRE released a survey in which 92 per cent of new occupants in the building said that the space was having a positive effect on their health and well-being.

ASK THE EXPERT

With the standard having been wellreceived in workplaces, a pilot addendum for multi-family residential projects soon followed, promising to deliver similar health benefits in the home by embracing many of the same core concepts.

In only a few short years, more than 700 buildings have been registered to pursue WELL, including 112 multi-family residential projects participating in the pilot. Nine of the multi-family projects have been completed and certified, 24 have been pre-certified in the design development process and the rest remain in various stages of construction.

The current excitement about WELL Building C er tific ation echoes what happened when the U.S. Green Building Council launched its LEED certification for leadership in energy and environmental design two decades ago. LEED focuses on the building structure itself to address issues of sustainability such as the quantity of water consumed.

By contrast, WELL focuses on air, water, light, nourishment, fitness, comfort, and mind to address the quality of human performance within built environments.

It looks at factors including hydration, movement and lighting to improve the indoor working and living experience and ultimately promote well-being and longevity of the people in the building.

WELL and LEED standards work together to support human health and environment sustainability. Both certifications are administered by the same organization, so the process of pursuing dual certification may be streamlined as LEED credits and criteria can contribute to efforts to achieve WELL certification and vice versa.

Under WELL, buildings have to be recertified every three years to ensure the building and its occupants continue to benefit from the latest innovations, science, and research. Under LEED, only buildings certified in the existing buildings category have to recertify.

WELL has three different rating levels (silver, gold, platinum) for project types including new construction, building core and shell, and building interiors. Some of the requirements to achieve WELL, called ‘pre-conditions,’ are easiest to adopt at the time of construction, such as reducing the use of toxic materials, and therefore may be more challenging to implement in existing buildings. However, owners and managers

of existing buildings could look into adopting WELL policies and modifying interior elements, such as acoustics, air quality and lighting. (Editor’s note: As CondoBusiness was going to press, WELL v2 was released. Version two introduces customization in an effort to make the certification process more equitable, including for existing buildings.)

As urban populations embrace the benefits of well-being, residential developers will face an increasing demand from

sophisticated, well-educated purchasers and tenants to deliver healthier buildings. Now that WELL certification is within grasp for multi-family residential projects, developers can realize the return on investment it brings to their brand positioning by setting the benchmark for building wellness. 1 Mark J. Stables is founder and CEO of Benchmark Group, a lifestyle, design, and building wellness firm focused on human sustainability within the built environment.

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Managing condo owners’ expectations Picture this: It’s a sunny Saturday morning, and a condo board director has just stepped out to grab

BY PAT CROSSCOMBE

the morning paper before settling in for a relaxing breakfast. As she turns to go back inside, a neighbour starts a long-winded rant about the most recent condo board decision. Sound familiar?

10 CONDOBUSINESS | Part of the REMI Network

GOVERNANCE

For condo board directors, chances are this is a familiar situation. One of the biggest challenges of being on a condo board is finding a way to manage condo owners’ expectations of directors. Condo board directors are owners too, so this can be tricky!

Directors often complain about getting approached by owners in the hallway with a problem. So how can this be dealt with?

Creating job descriptions for directors and owners, including specific roles and responsibilities, can help owners understand the two hats directors wear.

Consider creating and sharing a written document so owners can easily find it.

Educating owners on the different hats directors wear requires excellent and continuous communication; boards need to do everything possible to facilitate that.

Two h a t s : R o l e s o f ow n e r s a n d directors Owners • Not likely experts in governance • Attend AGMs • Run for the board • Bring up condo issues • Respect privacy of directors as owners except at AGM or special meetings • Read and understand rules, declaration, and bylaws • Self-serving interests Board of directors • Knowledgeable about governance • Leads AGMs • Listens to issues • Insists on privacy at home • E x p e r t k n o w l e d g e o f r u l e s , declarations, and bylaws • Fiduciary responsibility to the condo corporation How to avoid wearing the wrong hat A condo owner who is also serving on the board of directors must be prepared to wear two hats. During meetings, the director-owners must wear their directors’ hat, making decisions that ensure the well - being of the condo corporation (known as fiduciary responsibility). At all other times, the director-owners must wear their owners’ hat, allowing them to consider their self-interests.

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The next time that director is walking outside and

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Respecting the hat Time spent serving on a condo board offers first-hand lessons in how difficult it can be for directors to fully understand their fiduciar y responsibilit y and for owners to understand the reasons behind the decisions made by the board. For example, imagine the board is debating a $10,000 special assessment for a window replacement project. A director might think, “I don’t have the money for this right now,” and wish to vote against it. In this scenario, the director has taken off his board hat and put his owner hat on — not good practice during a board meeting. If the window replacement is required to ensure the soundness of the building, directors must vote in favour (even if it causes financial hardship for a particular director). It is even harder for the owners to understand why the board needs to implement a special assessment now.

Owners need to understand that directors make decisions in the best interest of the corporation. Communicating the reasons for a special assessment or any fee increase for that matter is necessary and becomes second nature for a board that has internalized the philosophy of openness and transparency, two key aspects of good governance.

In the meantime, the next time that director is walking outside and her neighbour assumes she’s wearing her director hat, the director might consider politely reminding her neighbour that she’s an owner too and suggest that any complaints be forwarded through the appropriate channels. 1 Pat Crosscombe is the founder and CEO of BoardSpace, a company that provides software for condo boards and property managers. She is the president of her condo board for the second time after a three-year break from a first term of five years. She can be reached at 613-790-0225 or pat@boardspace.ca.

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Occupiers’ liability: A board meeting gone wrong Anyone who has ever been to a board meeting (or a partners,

BY DAVID ELMALEH AND GABRIELA CARACAS

shareholders, town hall, or any similar type of meeting) can attest to the tension that often arises. The law is clear that occupiers have a duty to maintain

their premises reasonably safe for those who enter it. But what about when an individual commits assault while at one of these meetings? Should the occupier or organizer of the board meeting be liable for failing to ensure the safety and security of those lawfully on the premises?

14 CONDOBUSINESS | Part of the REMI Network

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Costa advised that he no longer wished to occupy his role as president. The emergency meeting took place at the defendant’s (MTCC 1292’s) premises.

At the emergency meeting, the plaintiff and Mr. Da Costa entered into a heated argument, which led Mr. Da Costa to “lose it” and strike the plaintiff on the head with a chair. Mr. Da Costa was charged by the police and received a conditional discharge for assault with a weapon.

The plaintiff commenced a civil action against Mr. Da Costa for his use of force as well as MTCC 1292 for failing to ensure her safety and failing to employ security measures at board meetings. MTCC 1292 brought a motion for summary judgment to dismiss the plaintiff’s claim against it which was only opposed by Mr. Da Costa given his crossclaim against MTCC 1292 for contribution and indemnity.

In Omotayo v. Da Costa, 2018, the defendant occupier, Metro Toronto Condominium Corporation 1292 (MTCC 1292), was successful in dismissing the plaintiff’s claim and the assailant’s crossclaim when a member in attendance at a condominium board meeting struck another meeting attendee with a chair.

Justice Nishikawa found that the duty the condominium corporation owed to the plaintiff did not include preventing an assault that occurred during their condominium board meeting.

Facts of the case T he plaintif f, J ac queline O mot ayo, was a resident and former chair of the condominium corporation. The defendant, Jose Da Costa, was also a resident and former president of the condominium corporation. An emergency board meeting was held on Oct. 4, 2011, to discuss the future organization of the board as Ms. Omotayo had recently been removed from her position as chair and Mr. Da

Summary judgment motion MTCC took the position that its duty under the law is confined to the physical condition of the premises and foreseeable risks, not the unforeseeable conduct of individuals in attendance. Meanwhile, Mr. Da Costa argued that MTCC 1292’s duty extends to having rules of conduct for meetings, policies relating to abusive l an g u a g e, thre at s an d intimi d atin g behavior, and a duty to hire and supervise competent professionals to oversee its business (including, if appropriate, security personnel). Mr. Da Costa further argued that the assault was foreseeable given the quarrelsome nature of MTCC 1292’s board meetings and a prior unrelated incident involving the plaintiff and another member of MTCC 1292 wherein the police was called.

In reaching her decision, Justice Nishikawa looked to Coleiro v. Premier Fitness Clubs where summary judgment was granted in favour of the defendant

Want to stand out on social media?

Don’t fake it

By Steven Chester Let’s face it, we all want our businesses to be social media rock stars, and we know it ain’t easy.

It’s becoming more prevalent that some of the most popular social media platforms have been infiltrated by those who game the system.

This includes those that buy fake followers and “likes” in order to create the illusion that their social media profile is more popular than it is.

These fake followers are predominantly bots – accounts run by software designed to look and act like real people.

New services are also popping up that allow authentic social media accounts to become part of the bot game. By signing up for the service, the user authorizes their account to automatically like, follow and randomly comment on other users’ posts, and in turn they trade that fake engagement with other users. Sound harmless enough? The thing is you have no say in in the message your account is spreading or where it ends up.

Ask yourself this: What’s more important, having 50,000 cosmetic followers, or having 500 followers who are in your target market that actually want to hear from you?

As a consumer, it’s even simpler, as deceptive tactics are easy to spot. If you’re using underhanded methods to promote your business, this can be viewed as a reflection of your product or service. Your integrity is at stake.

This is one of the more complex topics that can’t be fully covered in this space. As always, I invite you to stay social and continue the conversation on Twitter at @Chestergosocial where I’ll share a link to the full article.

Steven Chester is the Digital Media Director of MediaEdge Communications. With 15 years’ experience in cross-platform communications, Steven helps companies expand their reach through social media and other digital initiatives. To contact him directly, email gosocial@mediaedge.ca.

www.REMInetwork.com | June 2018 15

GOVERNANCE

fitness club when an assault took place involving two club members. Similar to the decision in Coleiro, Justice Nishikawa found that the assault was not reasonably foreseeable and was too remote. MTCC 1292’s duty of care owed to the plaintiff did not extent to preventing potential assaults.

Despite Mr. Da Costa’s evidence that the plaintiff had conducted herself aggressively and unprofessionally at Lionheart_Condo_March_2017_FINAL.pdf

former board meetings, it was insufficient to persuade the judge that MTCC 1292 breached its duty of care. This decision was supported by the fact that there were no prior threats of violence, or actual physical violence during prior meetings, and no one ever raised concern about their physical safety.

Ultimately, the court found that to expand MTCC 1292’s duty of care in the circumstances be excessive as “it 1 2017-02-16 would 10:40 AM

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is reasonable to expect individuals who participate on the boards of condominium corporations to adhere to a standard of conduct that includes, at a minimum, refraining from ass aulting another participant.”

What are the lessons?

While this specific condominium cor p oration avoided liabilit y in the instant case, the court correctly focused on the foreseeability of the assault.

Certainly, someone smacking someone over the head with a chair at a typical board meeting was out of the ordinary.

However, the court left the door open for occupiers to be found liable in instances w here h ar m is in fa c t re as o n a b l y foreseeable.

What about town hall meetings where contentious election issues are debated?

Or annual general meetings where swaths of unit owners or tenants are going to be told they will be evicted or forced to expend significant resources for any number of reasons? What about politicians that hold constituency meetings following salacious accusations that impacted the pocket books of local residents?

The court in this case was clear that the result was dependent on the specific circumstances of the case at bar.

Employers, organizations, insurers and boards alike should review this decision as a cautionary tale and review their policies and procedures along with the circumstances of a particular meeting or event to consider whether security is warranted in the circumstances.

Meeting adjourned. 1 David Elmaleh is a partner at McCague Borlack LLP. His broad civil and criminal litigation practice involves defending both institutional and individual clients, with an emphasis on insurance defence, commercial litigation, defamation matters and disputes in the energy sector. He can be reached at delmaleh@mccagueborlack.com.

Gabriela Caracas is a student-at-law at McCague Borlack LLP and provides fluent and efficient litigation services in both English and Portuguese. She sits on many committees, including being an executive committee member of Women’s Law Association of Ontario (WLAO) - Articling Chapter.

16 CONDOBUSINESS | Part of the REMI Network

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Navigating the new records request process As of Nov. 1, 2017, there is a new

BY SONJA HODIS process under the Condominium Act, as amended, for making and responding to records requests in condo corporations. Requests for records must now be made in writing using mandatory forms, and people requesting records are no longer required to give the condo corporation a reason for their request.

Section 55 of the Condominium Act, as amended, continues to grant owners, purchasers or mortgagees the right to examine or obtain records. Ontario Regulation 48/01 sets out the new procedure for requesting records. The regulation also defines which records a corporation must keep (in addition to those listed in section 55 of the Condominium Act and the corporation’s bylaws), how the records must be kept, and for how long.

The new process for requesting records can be divided into three steps.

1

The records request The person requesting records must complete the mandatory form entitled Request for Records. This form and others referred to in this article can be found on the Condominium Authority of Ontario’s website: www.condoauthorityontario.ca.

Adobe Reader 8 or higher is needed to open the forms, which can be filled out online or printed and filled in by hand.

The person requesting records must then serve the Request for Records by mail or courier to the address for service of the condo corporation, condo manager or management provider or other person who manages the property. The Request for Records can also be served by depositing it in the mailbox at the address for service or by sending it by email or fax if the board has passed a resolution to accept requests this way.

18 CONDOBUSINESS | Part of the REMI Network

2

The board’s response After reviewing the request, the board must respond within 30 days using the mandatory form entitled Board’s Response to Request for Records. The board must deliver its response to the address for service or alternative method of communication indicated by the person requesting records in the Request for Records form.

In its response, the board must specify for each record requested whether the record is a core or non-core record. Whether a record is classified as core or non-core dictates how much the corporation can charge the person requesting records for costs and how long the board has to produce the records.

If access to a requested record is refused, the board must specify in its response why and which part of section 55(3) of the Condominium Act the board is relying on to deny the request. For example, the board could refuse access to employee records or records relating to litigation or insurance investigations.

Core records include current versions of the declaration, bylaws, rules, shared facility agreements or mutual use agreements, and fiscal year budgets and amendments. Core records also include the most recent financial statements and auditor’s report, record of owners and mortgagees, information certificates sent or required to be sent to owners during the preceding 12 months, minutes of board meetings or owners’ meetings within the last 12 months, the

GOVERNANCE

most recent reserve fund study plan and any other records specified in the corporation’s bylaws as core records.

The board can’t charge a fee for core records if the person requesting records is asking for the record in an electronic format.

If the requester is asking for a paper copy of a core record, the corporation can charge printing fees up to a maximum of 20 cents per page.

If the record is not a core record, it may be possible to charge a reasonable fee to recover the actual labour and delivery costs that the corporation incurs to make the record available, including photocopy charges that don’t exceed 20 cents per page. Labour costs may include reviewing documents that need to be redacted. If the corporation doesn’t actually incur labour costs, it can’t charge any fees for labour.

If the requester and the corporation come to an agreement on the delivery and costs associated with the request that is different than is prescribed in the Condominium Act or the regulation, both parties must complete the form entitled Waiver by Requester of Records.

3

Delivery of records The person requesting records must complete the bottom portion of the Board’s Response to Request for Records form under the heading Confirmation and return the completed form and payment to the condo corporation to receive records.

If the person requesting records asks for paper copies or an in-person examination of core records, the condo corporation must provide the records within seven days of receiving the requester’s confirmation and payment of the estimated fee. If the person requesting records agrees to receive core records in an electronic format, the corporation is required to deliver the records within 30 days of receiving the Request for Records form. Access to non-core records must be provided within 30 days of the corporation receiving the requester’s response along with payment of the estimated fee.

The corporation must clearly identify each document it’s making available for examination or delivering in an accompanying, separate written document (such as a letter) that notes whether any portion is redacted or removed. The statement must also explain in writing

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The penalty for withholding records has increased from $500 to $5,000 under the new provisions of the Condominium Act.

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reasons for any redactions and which part of section 55 of the Condominium Act the corporation is relying on to justify the redaction. For example, minutes of meetings may be redacted to remove references to issues involving units or owners not involved in the records request.

In addition, the corporation must state in writing the actual costs to make available or deliver the record as well as the difference between the actual costs and the estimated costs set out in the Board’s Response. If the actual cost is less, the corporation must pay the person who requested records the difference. If the actual cost is more, the person who requested records has 30 days to pay the difference. However, the cor p oration is not permit ted to charge more than the estimated cost plus 10 p er cent , so it ’s imp or t ant for the board to pay at tention when providing estimates.

Abandoned requests and records disputes If a person who has requested records fails to respond and pay the required fe e o r a p p l y to t h e C o n d o m i n i u m Authorit y Tribunal (CAT ) to resolve a dispute over the records request within 60 days of receiving the board’s response, the request for records is deemed abandoned. The request for rec ords is also deemed ab and oned if the person who requested records doesn’t apply to CAT for help resolving a records - related dispute within six months of delivering the Request for Records.

People who request records can no longer commence a small claims court action to compel the condo corporation

20 CONDOBUSINESS | Part of the REMI Network PremierElevator_Island_2017.indd 1

2017-04-05 2:15 PM

GOVERNANCE to deliver the records when disputes arise over release of records or the associated costs. Now, a person who has requested records must follow the procedures set out in the new provisions of the Condominium Act. All records disputes will now be dealt with by the CAT, an online tribunal.

To initiate the first step in the CAT process, negotiation, the person requesting records must file an application and pay a $25 fee. During the negotiation stage, the parties are provided with information to help them to resolve the dispute on their own.

If the parties are unable to resolve the dispute regarding records, the matter proceeds to the next stage, mediation, at which point a $50 fee is payable by the applicant. The CAT then provides a mediator to help the parties resolve the dispute.

If the mediation stage fails to resolve t h e d i s p u te , t h e m a t te r p r o c e e d s to formal adjudic ation, in which an arbitrator is assigned to make a binding decision. A $125 fee is charged to the applicant for this stage.

Condo corporations should be aware that the penalty for withholding records has increased from $500 to $5,000 under the new provisions of the Condominium Act. Condo corporations should take requests for rec ords seriousl y and shouldn’t deny requests unless they have a valid reason under the Condominium Act to do so.

Section 55(4) of the Condominium Act sets out the types of records that are exempt from disclosure requirements.

Section 13.11 of Ontario Regulation 48/01 further expands and defines the list of records that don’t have to be disclosed.

These records include but are not limited to records related to an owner’s email or fax number, unless the owner consents to having that information shared, and the portion of a ballot or proxy that specifies the unit, unless the corporation’s bylaw states otherwise.

While this new process is still in its infancy, the standardization introduced by mandatory forms, cost recovery and automatic abandoning provisions should make it easier for everyone to deal with records requests and will hopefully reduce many of the records disputes seen in the past. 1

Sonja Hodis is a litigation lawyer based in Barrie that practices condo law in Ontario. She advises condo boards and owners on their rights and responsibilities under the Condominium Act and other legislation that affects condos, such as the Human Rights Code. She represents her clients at all levels of court, various tribunals and in mediation/arbitration proceedings. Sonja has also gained recognition for creativity and tenacity in ground breaking human right case law in the condo industry. Sonja can be reached at (705) 737-4403 or sonja@hodislaw.com. Her website can be found at www.hodislaw.com and her videos can be found at www.condoinmotion.com.

Note: This article is provided as an information service and is a summary of current legal issues. The article is not meant as legal opinions and readers are cautioned to not act on the information provided without seeking legal advice with respect to their specific unique circumstances.

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FINANCE MANAGEMENT

What will end the investor onslaught in Toronto’s new condo market?

22 CONDOBUSINESS | Part of the REMI Network

FINANCE

A study released by CIBC and

BY BEN MYERS Urbanation in 2018 revealed that a significant portion of investors who are renting out their new

condominium apartment units in the GTA are cash-flow negative,

and people are questioning whether investing in new condos still makes sense. With unprecedented new condo price growth, a record number of new high-rise apartments under construction, rising interest rates, a foreign buyers’ tax, rent control, and a higher minimum wage putting upward pressure on monthly condo fees, what will be the straw that breaks the investor’s back?

First, some context. Condo investment activit y in the Greater Toronto Area (GTA) has been on the rise for well over a decade. In 20 0 6, it was estimated that about 20 per cent of units in many new projects were being purchased for investment purposes, and not by buyers looking to live in the suites themselves.

The reasons that developers, sales a n d m a r ke t i n g m a n a g e r s , o n - s i t e presentation centre staff, and VIP brokers gave then for why condo investment activity was increasing are very similar to the ones given today: the Greenbelt and Places to Grow Act will restrict single - family development, pushing buyers and tenants into ownership and rental apar tments; longer commutes will force people downtown; a desire to be more environmentally friendly, coupled with high automobile -related costs, will cause young people to ditch their cars and live closer to work; the downtown’s revitalization will bring new restaurants, bars, cultural institutions, and entertainment venues, which are all attractive amenities that people want to be close to.

Many investors simply viewed themselves as middle men, willing to tie up their money for several years, accept the pre - construction risk, and take advantage of real estate market appreciation (without having a mortgage).

The younger generation, with its desire for instant gratification, didn’t want to put 15 per cent to 20 per cent down on a new condo and wait three to four years

to take occupancy, they’d rather buy a resale condo with five per cent down and move in less than 60 days.

A major correction in the financial markets in 2008 and 2009 was another c at alyst that imp ac ted the market.

Private investors, upset with stock market volatilit y, doubled down on hard assets. With low interest rates, a lack of purpose-built rental apartment construction, and high tenant demand, the “private landlord” market exploded, with many investors purchasing with the intent of renting the units out at completion.

By 2011, investors were purchasing 60 per cent to 70 per cent of all new condos in the GTA, and up to 90 per cent of units in many prime downtown locations.

Nearly 28,000 new condo suites sold that year, more than double the total from two years earlier.

However, by the middle of 2012, investor sentiment had soured due to the constant media focus on the sector, the ubiquitous talk of oversupply, overvaluation, and foreign money, plus the habitually repeated theory that investors would all cash out at the same time and crash the market. As a result, new condo sales were very slow in 2013 and 2014 (and the market felt the delayed impact of fewer pre-construction sales in those years with a major lack of supply in 2017).

The 2015 market showed that the GTA could survive a major increase in new condo supply, as prices still increased (albeit more moderately), condo rents

went up slightly, and the forecasted major speculative sell-off was avoided.

Investors have not looked back since that time, setting new condo sales records in both 2016 and 2017.

A lthough a signific ant p or tion of investors who are renting out new condo units in the GTA are cash-flow negative as of 2018, it will likely take a major decline in resale condo prices to halt condo investor’s bullish outlook on Toronto real estate. Given that average GTA resale condo prices are even higher in 2018 in comparison to values in the bubbly 2017 market, this real estate consultant is willing to guess that major downward price pressure won’t be felt until at least late 2020, when investors start closing on the higher-priced suites bought in 2016.

By 2021, it will be clear whether the condo investor window has closed.

When it does, it could mark the end of the unique set of circumstances that led to one of the longest and most successful high - rise markets in the history of North American real estate. 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 at www.bullpenconsulting.ca or on Twitter at @BullpenConsult

www.REMInetwork.com | June 2018 23

COVER STORY

ACCOUNT FOR CHA The minimum wage hike is just one of the cost pressures

BY MICHELLE ERVIN to converge on condo corporations in recent months.

Its impact may not be felt immediately, but if financial forecasts for the current fiscal year start to shift, that information needs to be reflected in the status certificate

COVER STORY

NTING ANGE www.REMInetwork.com | June 2018 25

COVER STORY

The minimum wage hike may sting more in condo communities than other types of households as they face new costs and fees associated with recent changes to Ontario’s condo laws.

Last year, the province passed the Fair Workplaces, Better Jobs Act, which was set to raise the minimum wage $3.40 per hour over the span of a year. Ontario’s minimum wage climbed to $14 in 2018 and was due to increase to $15 in 2019, but premier-designate Doug Ford has since said he would scrap the $1-an-hour pay bump scheduled for next year.

Meanwhile, the minimum wage hike of $2.40 per hour on Jan. 1, 2018, landed the day after the first payment to the newly established Condominium Authority of Ontario (CAO) came due on Dec. 31, 2017.

Cost pressures converge on condos concurrently Created under the recent changes to Ontario’s condo laws, the CAO has been tasked with providing services including director education and dispute resolution on an operating budget based on a fee of roughly $1 per unit per month, to be remitted by condo corporations on behalf of owners. Corporations may see savings elsewhere as, for example, the new path for dispute resolution is designed to divert common condo conflicts from more expensive court proceedings.

The recent changes to Ontario’s condo laws also introduced requirements for condo corporations to communicate more frequently with owners, which comes with increased costs that clients are expected to shoulder as condo management companies look to recover these expenses. Management companies and their managers are simultaneously staring down new licensing fees as related legislation brings the profession under regulation.

“It’s unfortunate that it all is kind of coming together at the same time,” said Jeff Lack, director of internal operations at Wilson Blanchard.

Lack said it’s hard to predict the precise impact of the minimum wage hike on condo communities. Its impact may be felt directly in communities where third-party contractors, such as cleaning service

26 CONDOBUSINESS | Part of the REMI Network

providers, pay their employees minimum wage or just a few dollars more. Its impact may also be felt indirectly in households of all types, as employers who rely on minimum-wage workers, such as grocers, adjust their prices to reflect this increased expense. And price inflation could put upward pressure on salaries and wages across income brackets as they lose some of their purchasing power, said Lack.

With the impact of the minimum wage hike murky, it’s difficult to account for any increase in costs in condo corporation budgets for the coming fiscal year, he said.

Changes in fiscal outlook affect status certificates However, as the impact of the minimum wage hike becomes clearer, boards may have to update their status certificates, condo lawyer Denise Lash confirmed via email. Status certificates, which help prospective unit purchasers evaluate the financial health of a community, speak to the accuracy of a condo corporation’s budget, she said. They must reflect any projected budget shortfalls as soon as they materialize, whether caused by the minimum wage hike or other events.

“There is also a requirement to indicate whether or not common expenses have gone up since the date of the budget for the current fiscal year if, for example, the board decides to do a revised budget to take into account additional costs,” said Lash. “This could be minimum wage impact on various contracts and may also include the Condo Authority fees and increased management fees.”

In the absence of a budget revision, the condo corporation would need to alert prospective unit purchasers to foreseeable common expense increases and special assessments via the status certificate.

“This is where I think that condo managers/board members who are preparing their status certificates need to be careful and determine what, if any, impact the recent changes will have on common expenses,” said Lash.

For his part, Lack suggested that cash-flow challenges and special

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2017-10-04 12:39 PM www.REMInetwork.com | June 2018 27

COVER STORY

“It’s a bit like there was an unknown for a

long time with the new legislation, and condos kind of sat in the dark. Now they’re sitting in the dark with the minimum wage hike.” assessments are unlikely as he anticipates several months will pass before the impact of the minimum wage hike is felt. He said he didn’t expect to see these additional expenses reflected in corporation budgets until the following fiscal year at least.

Contracts to influence community-specific impact The impact of the minimum wage hike will vary from condo corporation to condo corporation, depending largely on their service agreements, Lack added. He said he foresees low-rise and townhouse communities being somewhat insulated from the impact compared to high-rise communities, where security — one of the services that stands to be most affected by the minimum wage hike — represents a major budget line item.

Security consultant David Hyde echoed Lack, predicting that rising hourly rates will have a sizeable impact on security service providers in condo communities. Hyde said guards working in this industry are generally compensated at a rate a little bit above

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minimum wage, so the hike could play out in one of two ways, both with their downsides.

“There’s pressure on the condo security companies to either bring the rates up accordingly, and the condo boards have to swallow that additional cost, or if they leave the rates right at the new minimum wage, then they’re risking a much higher turnover and lower service levels,” he said.

Not surprisingly, the risk of maintaining low pay rates outweighs the additional cost in Hyde’s assessment. He pointed to the importance of the role guards have in protecting people and property.

“Overnight, the security person is the only one that’s there on duty on behalf of the condo corporation, protecting hundreds of millions of dollars in assets,” said Hyde. “If they don’t patrol properly, if they don’t go and check those rooms properly and there’s a leak or problem, it could lead to a significant damage of property.”

Mitigating factors depend on terms of agreement Many condo communities already underinvest in security, the security consultant said, scheduling to have on hand only one person, who often gets grief from residents for leaving the concierge desk to complete their other critical duties. With existing security resources stretched, few communities can afford to shave more hours off of the security schedule in hopes of offsetting the increase in costs expected to come with the minimum wage hike, he said.

Multi-year contracts for services such as security could buffer some condo communities from seeing an impact from the minimum wage hike for a while, said Lack, depending on the terms of the contract, such as escalation clauses. However, Hyde pointed out that these contracts are usually subject to renegotiation or termination with notice, which can be initiated by either party.

It depends on the specifics of a contract, which can also include provisions for fee increases if the minimum wage rises, said Lash, which gave corporations a compelling reason to review their service agreements as the hike in hourly rates loomed.

In the meantime, condo communities will have to wait for the effects of the rising minimum wage to work their way through the economy to gauge its actual impact.

“It’s a bit like there was an unknown for a long time with the new legislation, and condos kind of sat in the dark,” said Lack. “Now they’re sitting in the dark with the minimum wage hike.” 1

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FINANCE

Maintenance fee myths debunked Ever y homeow ner w i l l pay maintenance fees in one form or another.

BY ANDREW HARRILD AND CARL LANGSCHMIDT

Whether they own a freehold house or a condo apartment, a homeowner will face costs for a wide range of home upkeep, from lawn care to roof repair.

For a freehold house, the ever yd ay upkeep costs will var y from year to year, depending on the condition of the house and whether there’s a need for sudden repairs. Unexpected costs are the most common worry with owning a freehold house. When a pipe bursts or

the furnace quits, a homeowner can be hit with a sizable bill.

For condos, maintenance fees tend to follow the rate of inflation, acting as a fund for the ongoing building and unit upkeep.

That fund, if managed well, can minimize unexpected costs.

30 CONDOBUSINESS | Part of the REMI Network

It’s not surprising that there are a l ot of m i s c o n c e p t i o n s s u r ro u n d i n g condo maintenance fees. This repor t addresses the most common concerns that condo professionals hear from clients and breaks them down into true or false answers.

McGregorAllsop_GTA_June_2016_FINAL.pdf

1

Maintenance fees have no legal increase limit Technically true There is no legal regulation regarding the amount that a condo building’s maintenance fees can be increased annually. There is a general rule that maintenance fees increase to adjust with C inflation and/or the needs of the building.

Condo corporations are non-profit entities M made up of unit owners within the building, not Y an outside group. The cost of operation adjusts CM for the true cost of maintaining the building. The MY condo board members who may vote to raise maintenance fees are usually also unit owners CY and so are in the same boat as all other owners CMY in the building.

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Lower maintenance fees mean lower monthly costs False Maintenance fees cover different elements from building to building. Some buildings include the cost of water, heat, hydro, insurance, and other elements in the maintenance fees. Others may not.

If those elements are not included in the maintenance fees, unit owners will have to pay them separately. That’s why it’s important to know exactly what maintenance fees cover. A low maintenance fee does not necessarily mean low monthly costs.

The maintenance fee that includes water, heat, hydro, and A /C is obviously more expensive, but these elements must be paid regardless. If unit owners are paying for these elements separately, the total monthly costs could be much higher than if they were included in the maintenance fees.

1 Concorde Gate, Suite 808 Toronto, Ontario 416.443.9499 mcgregor-allsop.com

3

Smaller boutique buildings are less expensive than high-rise towers False Condo building maintenance fees depend on a lot of factors. At the top of the list is the building’s footprint and the number of units. Between two buildings of a similar footprint, it doesn’t matter if the buildings are five storeys or 40. It will cost the same amount to maintain and repair the roof. That cost is dispersed across the units. The more units, the broader the dispersal; and the lower the fee for each individual unit.

Building amenities are another key contributor with a range of factors. But it still has to do

www.REMInetwork.com | June 2018 31

with the number of units. A concierge service shared across 10 boutique units will be more expensive per unit compared to a concierge shared across 400 units.

Between two buildings of a similar footprint and similar amenities, the one with more units will tend to have lower maintenance fees. However, the building with more units will have a higher opportunity for wear and tear of common elements, which might in the long run cost more to maintain.

GTA MAINTENANCE FEES

BY THE NUMBERS Maintenance fees may be highly specific to condo buildings, but it’s hard not to be curious about what neighbouring condo buildings are paying.

Earlier this year, Condos.ca produced a follow-up to its first report in 2015 on maintenance fees in the GTA. The goal of its reports, which will come out annually going forward, is to shed light on poorly understood maintenance fees.

Condo boards may be able to glean lessons from these stats, as long as they bear in mind some of the reasons maintenance fees can vary so widely — building size, number of units, amenity types, service levels.

“If you’re in a building where you’ve just taken it for granted that your maintenance fees are higher than what we’ve determined to be an average, then perhaps it’s time to reach out to other condo boards in the area, other people in different buildings, to find out what they’re doing,” said Andrew Harrild, partner at Condos.ca.

Here are some key figures from Condos.ca’s 2017 report on maintenance fees in the GTA:

65¢ The average maintenance fee per square foot in GTA condo buildings in 2017.

2.52% The increase in average maintenance fees per square foot in GTA condo buildings from 2016 to 2017.

22¢ The lowest maintenance fee per square foot in GTA condo buildings in 2017.

$1.35 The highest maintenance fee per square foot in GTA condo buildings in 2017.

32 CONDOBUSINESS | Part of the REMI Network

4

Maintenance fees always spike within three to five years for new buildings True and false Every building is managed differently.

Builders often market new buildings with low maintenance fees to make them more appealing to buyers. Once the condo board takes over, it is common to see fees undergo slight increases as the board fills out the reserve fund. After an initial increase, however, fees should stabilize. In the case of wellmanaged properties, maintenance fees can even come down. For instance, Minto 775 saw a nearly 20-per-cent decrease in fees from 2015 to 2017.

5

Low maintenance fees are a sign of value False Maintenance fees should be priced in accordance with the true cost of operating and maintaining the condo building. If that true cost is low, and the maintenance fee is low, then great.

But if maintenance fees are low for the sake of attracting buyers, and are not adjusted to the true costs, then there’s a risk of mismanaging the reserve fund.

A better sign of value is smart building management: The maintenance fees fill the reserve fund and are used for big repairs and upgrades as they arise. If a building is poorly managed, the reserve fund can get depleted, at which point the condo board will have to issue special assessments, asking owners to pay their share of necessarily, sizeable expenditures in short order.

When condo boards have to issue special assessments because they’ve kept maintenance fees artificially low, they fail to capture the key benefit of the structure of condo maintenance fees over freehold: the potential to remove sudden, unexpected costs. 1 The preceding article has been adapted and reprinted with permission from Condos.ca’s Toronto Condo Maintenance Fee Study 2017.

Andrew Harrild is a partner at Condos.ca and Property.ca. Carl Langschmidt is founder of Condos.ca and Property.ca.

Condos.ca is a comprehensive online condominium guide which combines consumer-oriented search tools with expert guidance and insight to educate buyers, sellers and investors and help them interpret and navigate the marketplace. Condos.ca & Property.ca are powered by licensed brokerage Property.ca Realty Inc.

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TEN

IN THE CONDO BUSINESS INDUSTRY

CONDO BUILDINGS

TOTAL

CONDO UNITS

FirstService Residential Management Canada

1,371

FirstService Residential Management Canada

TOTAL 129,160

Wilson Blanchard Management Inc.

512

Crossbridge Condominium Services Ltd.

78,225

Pacific Quorum Properties Inc.

421

Del Property Management Inc.

65,500

Crossbridge Condominium Services Ltd.

393

Rancho Management Services

38,354

Rancho Management Services

340

Wilson Blanchard Management Inc.

36,697

Gateway Property Management Corporation

263

Pacific Quorum Properties Inc.

27,189

Del Property Management Inc.

254

AWM-Alliance Real Estate Group

23,750

AWM-Alliance Real Estate Group

238

Gateway Property Management Corporation

21,885

ICC Property Management Ltd.

170

ICC Property Management Ltd.

19,346

Apollo Property Management Ltd

136

Apollo Property Management Ltd

13,290

OTTAWA TORONTO

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2018-03-26 4:10 PM www.REMInetwork.com | June 2018 35 2017-11-14 12:34 PM

CONDOBUSINESS WHO’S WHO 2018

MANAGEMENT

RANK

UNITS

BUILDINGS

UNITS

BUILDINGS

7

AWM-Alliance Real Estate Group

23,750

238

8

Gateway Property Management Corporation

21,885

263

254

9

ICC Property Management Ltd.

19,346

170

38,354

340

10

Apollo Property Management Ltd

13,290

136

Wilson Blanchard Management Inc.

36,697

512

11

Icon Property Management

13,000

70

Pacific Quorum Properties Inc.

27,189

421

12

KDM Management Inc.

11,420

118

13

GPM Property Management Inc.

11,025

65

14

Vero Property Management

10,000

60

15

Percel Inc.

8,100

85

The number of companies that, as of Jan. 29, 2018, had applied for the licence that is now mandatory to provide condo management services in Ontario, according to the Condominium Management Regulatory Authority of Ontario (CMRAO).

16

MF Property Management

6,703

93

17

Nadlan-Harris Property Management Inc.

6,235

62

18

Canlight Management Inc

6,000

60

19

A.A Property Management

6,000

40

2,432

20

Times Property Management Inc.

6,000

40

21

Shelter Canadian Properties Limited

5,422

29

22

Royal Property Management

5,000

60

1

FirstService Residential Management Canada

129,160

1,371

2

Crossbridge Condominium Services Ltd.

78,225

393

3

Del Property Management Inc.

65,500

4

Rancho Management Services

5 6

320

The number of individuals that, as of Jan. 29, 2018 had applied for the licence that is now mandatory to provide condo management services in Ontario, according to the CMRAO.

RANK

23

BayShore Property Management

4,986

95

24

Menres Property Management Inc.

4,089

13

25

CitiGroup Properties Limited

3,026

43

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36 CONDOBUSINESS | Part of the REMI Network

CONDOBUSINESS WHO’S WHO 2018

TECHNOLOGY

RANK

UNITS

BUILDINGS

RANK

UNITS

BUILDINGS

26

Skywater Property Management

2,700

42

45

Summa Property Management

207

14

27

The Enfield Group

2,471

45

46

Devon Properties Ltd.

190

28

Colliers International

2,394

48

47

Southwest Properties Ltd.

151

1

29

Meritus Group Management Inc.

1,983

17

48

Landmark Properties Inc.

86

1

30

Berkley Property Management Inc.

1,950

18

31

Downing Street Property Management Inc.

1,878

36

49

Richmond Community Management Services Corp.

76

2

32

Around The Lakes Property Management Limited

1,687

54

50

Ronmor Holdings Inc.

65

33

Lionheart Property Management Inc.

1,115

32

51

Lanesborough Real Estate Investment Trust

45

34

Dove Square Property Management Inc.

1,050

13

52

CBRE Limited

19

35

HighPoint Property Management

900

19

53

Warrington PCI Management

36

Richmond Property Group Ltd.

800

60

37

Taft Management Inc.

633

21

38

Condominium Living Management Inc.

576

39

Provincial Property Management Limited

555

33

40

WestCorp Property Management Inc.

526

1

41

Huntington Properties Ltd.

465

13

42

Prospero International Realty Inc.

330

3

43

Sterling Karamar Property Management

281

3

44

Arnon Corp.

218

3

1

10

400

The number of additional licence applications that the CMRAO received after extending the deadline from Jan. 29 to March 30. A searchable public registry of licenced condo managers and condo management companies is now available on the CMRAO website: www.cmrao.ca.

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www.REMInetwork.com | June 2018 37

How to maximize arrears recovery A recent court ruling reaffirmed that when unit owners are behind on their monthly contributions to common

BY CHERYLL WOOD AND JAMES DAVIDSON

expenses, condo corporations can apply late payments from owners

to their oldest outstanding payment. What’s more, this practice has the effect of rolling forward the deadline on the time-limited power of the condo corporation to put a lien on an owner’s unit, which ultimately sets the corporation up to recover the money it’s owed through a forced sale.

38 CONDOBUSINESS | Part of the REMI Network

FINANCE

Section 84 of the Condominium Act entitles condo corporations to collect monthly fees from owners to pay for common expenses.

The condo’s declaration sets out what items are considered common expenses as well as each unit’s proportionate share.

If owners fail to pay their share of common expenses, it can have a significant impact on the condo’s ability to operate. In order to protect the condo, the Condominium Act empowers condo corporations to lien the units of defaulting owners for outstanding payments, called arrears, arising in the previous three months.

In order to secure the arrears (and all arrears going forward), the condo corporation must register a certificate of lien on title. This lien right offers very strong security for the condominium corporation as it takes priority over a mortgage and many other encumbrances.

T here are tim e s w hen a c o n d o corporation does not take steps to register the lien within three months. This raises the question of whether a condo corporation can apply payments to earlier arrears in order to bring forward the default.

In the rec e n t c a s e o f To r o n t o Condominium Corp. 1462 v. Dangubic, the condo corporation registered a lien against an owner’s unit for recovery of legal costs incurred by the corporation in relation to “compliance letters” sent by the corporation’s legal counsel to the owner. The court confirmed that the condo corporation was entitled to recover these amounts as additional common expenses pursuant to indemnification provisions contained in the corporation’s declaration and bylaws.

However, the owner argued that the lien was registered “out of time” — that is, beyond the three-month period following the date on which the owner was required to pay the legal costs (i.e. the “date of default”).

The court disagreed with the owner and upheld the lien. The court said that the lien was not out of time because payments made by the owner (towards monthly common expenses) had been properly applied to the earliest arrears (including the particular legal costs) so that the lien rights had “rolled forward” as a result, and this had created a more recent date of default.

This principle has been expressed in previous court decisions, but this is another helpful decision on the point. Furthermore,

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FINANCE

Condo boards and managers should take care to ensure that any payments from owners are always applied to the earliest (oldest) arrears.

courts have confirmed that payment by preauthorized payments can be applied to the earliest arrears. As a result, condo boards and managers should take care to ensure that any payments from owners are always applied to the earliest (oldest) arrears, and that this is reflected on the unit ledger.

As a note of caution, the various court decisions have not clearly confirmed whether payments can be applied to the earliest arrears if an owner makes a notation on their cheque specifying how the payment is to be applied. In the view of these condo lawyers, if a corporation’s declaration or bylaws confirm that payments are applied to the earliest arrears, that t ype of provision likely cannot be overcome by a notation on a cheque. For that reason, a bylaw provision stating that payments are applied to the earliest arrears is recommended to avoid arguments on the point.

What follows are some tips on how to help preserve and maximize a condo corporation’s collection rights.

Before the lien process • Review common expense arrears regularly to ensure their timely and cost-effective collection.

• Remember that there is a three month deadline for registering a lien against a unit that is in arrears. The condo corporation may still be able to c o ll e c t ar re ar s th at we re n ot secured by lien within the three-month deadline, but the other processes for doing so are normally more costly and time consuming. This scenario can be avoided by starting the lien process fairly early in the third month to satisfy

statutor y notice requirements. The Condominium Act requires the condo corporation to provide a notice of the lien to the owner at least 10 days before the registration of the certificate of lien.

• M ake sure that the corporation’s ledgers reflect that all payments are being applied to the earliest arrears. To be safe, corporations can state this in a bylaw or at least notify all owners that this is how all payments are applied.

• Contact the corporation’s law yer in advance of the lien deadline if any questions arise about chargebacks or other amounts that can be collected by lien.

During the lien process • Once the lien process has begun, condos should generally continue to accept all payments from the owner, with a few caveats. The corporation may not wish to accept the payment if the ow ner pur p or ts to make a partial payment in “full satisfaction o f a l l a r re a r s .” F u r t h e r, i f l e g a l counsel is involved, the corporation may want to direct that all payments be made through the legal counsel.

Alternatively, if payments are made directly to the corporation, contact legal counsel to obtain an update of the outstanding arrears, including legal costs and interest. It’s important to keep the unit ledger up to date.

• Remember that Section 49(1) generally precludes owners from exercising their right to vote until their arrears are paid.

This can be an incentive for owners to pay the outstanding arrears.

• I f t h e l i e n i s n o t p a i d o f f, t h e

40 CONDOBUSINESS | Part of the REMI Network

corporation will need to consider whether it will enforce the lien by way of power of sale. Section 85(6) of the Condominium Act states that the lien may be enforced in the same manner as a mortgage. Accordingly, the corporation may wish to follow the procedures outlined in the Mortgages Act and the Land Registration Reform Act for sale of the unit. In some cases, foreclosure may also be worth considering. The Limitations Act stipulates that the lien must be enforced within 10 years of the date of its registration.

• If there are any unsecured arrears, the corporation will need to consider whether to pursue them through the cour ts. In these cases, a two -year general limitation period likely applies.

• A l s o r e m e m b e r t h a t i f t h e u n i t is rented, Section 87 of the Condominium Act allows the corporation to direct a tenant to pay rents directly to the corporation. This right, which can help the corporation collect arrears faster, also applies to unsecured arrears. 1 James Davidson is a partner at Davidson Houle Allen LLP, and has been practicing condominium law for more than 34 years. He rep resents c ond ominium corporations, their directors, owners and insurers throughout eastern Ontario.

Cheryll Wood is an associate at Davidson Houle Allen LLP, and has been practicing condominium law for six years. She represents condominium corporations, their directors, owners and insurers throughout eastern Ontario.

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LEGAL

Status certificates revisited: How can you disclose what you don’t know?

A recent Ontario Court of Appeal decision sheds some more light on the effect of the failure to disclose

violations in a status certificate issued

BY DAVID THIEL

certain declaration

by a condominium corporation.

Unfortunately, as discussed below, the decision also raises a number of difficult questions for condominiums, managers and unit owners, which can be summarized as “how can you disclose what you do not know?”

In the case of Metropolitan Toronto Condominium Corporation No. 723 v. Reino, released in March 2018, the Court of Appeal decided that a status certificate bound the condominium with respect to the party who requested it (the current owner), but not necessarily any future owner.

The facts are essentially as follows. In 2013, respondent Dante Reino purchased the subject residential condominium unit from his mother. A status certificate was requested from the condominium, and a ‘clean’ certificate was issued. A ‘clean’ certificate had also been issued in 2004 when Mr. Reino’s mother purchased the unit from an undisclosed third party.

Subsequently, Mr. Reino sought to sell his unit in 2016, and requested a new status certificate. At this point, the condominium disclosed in the new status certificate that the unit was in breach of the declaration due to unauthorized alterations to the unit, being the addition of a second bedroom and relocation of the kitchen. The status certificate stated that the condominium was not willing to allow the alterations to remain and that the condominium may require the removal of same, with the costs of removal to be added to the common expenses.

It appears that the unapproved alterations were made sometime before the issuance of the 2004 status certificate, by a previous owner.

Mr. Reino then applied to the Ontario Superior Court for relief.

The trial level judge agreed with Mr. Reino’s position that the condominium was bound by the earlier certificates and that the condominium could not now make such a reference in the status certificate. That is, the court decided that the condominium was estopped from issuing anything but a ‘clean’ status certificate going forward.

42 CONDOBUSINESS | Part of the REMI Network

The Cour t of A ppeal over turned the Superior Cour t’s findings. The Court of Appeal’s key findings in this case were as follows: The 2013 status certificate binds the condominium with respect to the party who requested it and relied upon it (the current owner). That is, the condominium cannot require Mr. Reino to remove the unapproved alterations.

However, the condominium can (and in fact has a duty) to include the corrected information in the 2016 status certificate such that the condominium can enforce the removal of the alterations against a subsequent owner of the unit.

If Mr. Reino considers that the unit has lost monetary value due to the omission of the reference to any unapproved alterations in the 2013 status certificate, he may have a claim for damages against the condominium if there was a negligent misrepresentation.

The Court of Appeal did not rule one way or another concerning any negligence of the condominium or manager. There was brief mention, however, that condominium representatives had been in the unit on numerous occasions over the years.

This decision raises a few questions: In the absence of any finding that the condominium was negligent in failing to mention the unapproved alterations, is it really reasonable that the current owner cannot be held responsible for compliance with the declaration? This does seem open to dispute if, for example, the corporation was completely unaware of the renovations when the 2013 status certificate was issued.

Does this decision then, in effect, make a unit inspection prior to issuing the status certificate advisable or mandatory? Is the court stating that the condominium in issuing a ‘clean’ status certificate

LEGAL

essentially certifies that there are no breaches of the declaration (or bylaws or rules) with respect to the unit?

Was there some underlying assumption that the condominium ought to have included a reference or that the condominium may have been negligent? Maybe, but not in so many words.

The Reino decision differs from the earlier 2014 Court of Appeal decision of Orr v. Metropolitan Toronto Condominium Corporation No. 1056. This case also involved the failure to identify an unauthorized alteration in a status certificate. In Orr, a previous owner had without authorization built a living space into a common element attic.

Ultimately, the condominium was essentially not successful in seeking that the current owner remove the renovations at her expense (and the parties incurred much more than $1 million combined on legal costs of the litigation).

However, the condominium in Orr actually made a statement in the subject status certificate to the effect that ‘there are no continuing violations of the declaration.’ In the absence of such a statement in a status certificate (which should essentially never be made in any event), it is unclear why a condominium should be held accountable to disclose violations of which it is not aware since “you can’t disclose what you don’t know!”

The Orr decision indicated that performing a unit inspection may not be advisable as this could provide grounds for a dispute, should any violation not be identified during an inspection. That is, the fact an inspection may create a presumption of no violations. Reino would appear to create a presumption that no violations exist with a ‘clean’ certificate, even without an inspection.

It’s now a matter of wait and see how the case law develops and how these situations are resolved in practice. For example, if there was a hidden declaration violation of which the condominium could not possibly be aware, and no mention in the status certificate as a result, could the condominium enforce against the party who requested the certificate? The decision in Reino seems to say no, but perhaps there will be some further judicial interpretation in the future based upon different facts. What if such an unauthorized alteration in the future begins to affect other units or the common elements?

Would there still be no recourse to enforce against the owner?

Condominiums might consider a ‘disclaimer’ in the status certificate to the effect that no unit inspection has been performed and that any subsequent owner shall be responsible for addressing any violations relating to the unit which may subsequently be discovered. It is unclear what the legal effect of taking such a step may be, but it might conceivably be helpful for a condominium if a dispute were to arise. Would such a provision have affected the outcome in Reino?

The Reino decision is relatively brief, but creates a lengthy list of questions, which again may require further judicial interpretation based on various fact scenarios that may arise. 1 David Thiel is a partner in the condominium law group at Fogler, Rubinoff LLP. He can be contacted at dthiel@foglers.comor 416864-9700. BrownBeattie_GTA_March_2017_FINAL.pdf 1 2017-02-01 10:36

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AM

Sound check: Specifying the right acoustic solution Many different people have reasons

BY CATHY GAGNÉ to seek out acoustic solutions over the lifespan of a condo building. Developers, architects and

builders look for products to meet building code guidelines in new construction, property managers and boards of directors look to solve or prevent

noise transmission problems in existing condo buildings, and owners have to follow their condo’s regulation chart when renovating floors.

Noise transmission problems come mainly from the floor/ceiling assemblies (the complete structure between floor and ceiling of the unit above) and through the parti walls (the walls between adjacent units). The noise problems associated with these assemblies come mainly from the transmission of airborne or impact noises.

Airborne noises are caused by televisions, voices and music, while impact noises are caused by moving furniture and walking occupants. These are all noises that, when the unit is poorly soundproofed, disrupt the comfort of occupants. This article will focus on impact noises.

Shopping for acoustic solutions demands a look at soundproofing ratings, which can be difficult to make sense of. But understanding the basics of sound insulation in condo buildings makes it possible to compare apples with apples and choose the proper solution, based on specific needs.

44 CONDOBUSINESS | Part of the REMI Network

Decoding soundproofing ratings Some acoustic solutions will advertise IIC results while others will advertise FIIC or AIIC results, all of which are measures of impact noises in a floor/ceiling assembly. Impact noises are transmitted by vibrating through the structure, such as floors and walls. So, what’s the difference between IIC, FIIC and AIIC? IIC stands for Impact Insulation Class, which represents results from laboratory tests.

FIIC stands for Field Impact Insulation Class, which measures the degree of soundproofing a product has on the impact noise of a floor/ ceiling assembly on site. The higher the FIIC, the better the acoustic insulation. Because an FIIC test is carried out on site, in real buildings, it can be argued that this rating is more representative of reality than an IIC laboratory test.

However, going forward, tests carried out on site will advertise AIIC, or Apparent Impact Insulation Class, results. New standards

DEVELOPMENT

COMPARISON SHOPPING A hypothetical case study shows how an acoustic solution with a higher soundproofing rating can underperform a product with a lower soundproofing rating when the specific conditions of a condo building are taken into account

introduced a few years ago, ASTM E1007-14 and ASTM E336-14, provided direction on how to measure and present the results of acoustic tests carried out on site. Other than designating the unit of measurement for acoustic efficiency, these changes more accurately represent the reality of an on-site test, with its characteristics and weaknesses.

Building code requirements The National Building Code of Canada contains no requirements for mitigating impact noise through construction, but it recommends an IIC of more than 55 is for hard floor coverings such as wood, laminate and vinyl. Complying with these recommendations will likely provide an acceptable level of comfort for occupants.

What’s normal noise?

It is normal to hear some noises, depending on the sound insulation quality of a given building. Based on experience and depending on an individual’s auditory acuity and tolerance towards noise, here is what noise can be expected to be like at different levels of soundproofing: below AIIC 55, every step through the assembly can be clearly heard and a person’s movements can be easily traced. Between AIIC 55 and AIIC 60, steps can be heard when it’s calmer (low background noise, for example in the late evening). It’s also possible to trace a person’s movements when it’s calm, but it mainly wouldn’t be noticed.

Between AIIC 60 and 65, someone walking can hardly be heard unless he is not cautious at all and it’s very hard to trace a person’s movements. Over AIIC 65, a person can’t be heard unless the person is trying to be heard or is not cautious at all.

Specifying acoustic membranes Some acoustic membranes available on the market advertise very high acoustic ratings. Some will truly deliver decent acoustic efficiency in a building, while others will rate below expectations and even below the National Building Code recommendation. The same product can perform at AIIC 70, 60 or even 42.

Here's why the acoustic performance of a membrane can vary significantly: The building structure, quality of construction and installation methods, type of flooring to be installed overtop, room volume, etc. are all elements that play a significant role in the acoustic efficiency of the building. The membrane does not do all the work of attenuating noise; it’s actually a small contributor to the overall rating of an assembly.

Each building is a little different. No acoustical barrier on the marketplace can arbitrarily claim to provide every home with the same

ANALYSIS & FACTS:

• Product A is tested in a controlled lab, without windows or furniture, and all materials are installed in perfect conditions. A suspended ceiling, including acoustic insulation, wires and gypsum board ceiling, was added to the assembly.

• Product B is tested in a real-life environment and takes the flanking into consideration. There is no suspended ceiling.

• Most condos made of concrete don’t have a suspended ceiling (they have a gypsum ceiling finish or visible concrete).

• A suspended ceiling can add up to 14 points to the performance.

• Buyers think that product A is better and will meet their board’s requirements • Boards of directors and property managers often require a rating of IIC 70 or higher for the replacement of floor covering, without knowing the efficiency of their building’s structure.

• The available space/thickness between baseboards and the structure is neglected. For instance, some products or combination of products can bring ceramic tiles to AIIC 70 but with the consequence of cutting doors, baseboards and even cabinets. This is something that usually can’t be done.

sound absorbance. What they are claiming, though, is that under very specific test situations, the product and substrate, when tested together, achieved certain IIC levels. If in doubt, ask how a product was tested when it achieved its advertised result.

Only by knowing the test parameters is it possible for developers, condo boards and property managers to understand what it is that they are specifying and make sure this is the proper acoustic solution to meet their requirements. 1 Cathy Gagné, sales and development coordinator at AcoustiTECH, has worked for the Finitec Group for more than eight years.

Passionate about the world of acoustics, Cathy moved to the AcoustiTECH division of the company in 2013. AcoustiTECH specializes in the sound insulation of multi-family concrete, steel and wood-frame buildings. Cathy can be reached at cathy@acousti-tech. com or 1-888-838-4449 ext.235.

www.REMInetwork.com | June 2018 45

NEW AND NOTABLE

ENTER E-VOTING With electronic voting now allowed in Ontario condos, a U.S.-based company has brought technology that digitizes the ballot box for board elections and owner votes north of the border As Ontario prepared to digitize aspects of the voting process in the recent provincial election, a U.S.-based company paved the way for condo corporations to make a similar move. Vote HOA Now, which serves clients in Mexico and close to half of the U.S. states, is bringing electronic voting, or e-voting, to Canadian condos through a new company called CondoVoter.

Last fall, changes to Ontario’s condo laws gave condo boards the ability to introduce electronic voting to their communities through the passage of a bylaw by a majority vote at a meeting where at least 25 per cent of owners are present.

Electronic voting is predated by electronic proxies, which basically digitized the form that owners who have to miss meetings can use to send someone else in their stead, either for quorum or voting purposes. By contrast, electronic voting basically digitizes the entire voting process, allowing owners to cast ballots directly through a secure website.

“We are doing electronic voting now in Ontario — not proxy voting, but actual voting,” said condo lawyer Denise Lash, who has partnered with the electronic voting company. “This eliminates the need for proxies — the one major complaint by owners, boards and managers.”

Proxy manipulation, and the accompanying questions about the integrity of condo board election results, are a recurring concern in the condo world.

In addition to taking proxies out of the equation, electronic voting is touted for its potential to save time, money and trees as well as make it easier for owners to weigh in on the affairs of their condo corporation.

“It solves the problem of owner apathy in getting participation, especially with the younger condo owner,” said Scott McKeel, co-owner of CondoVoter.

For more information, visit www.condovoter.com.

46 CONDOBUSINESS | Part of the REMI Network

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