Bill 106 - Owners' Meetings

One of the functions of the Condominium Act, 1998 (the “Act”) is to allow for the governance of condominium corporations in a way which takes into account the interests of the ownership. It also empowers Boards of Directors, elected by the ownership, to make decisions on behalf of the ownership. The Act accordingly addresses the following issues, which are currently under review as the Legislative Assembly of Ontario debates Bill 106, Protecting Condominium Owners Act:

1. Preliminary notice of owners’ meeting
2. Owner-requisitioned meetings
3. Voting
4. Service of notice to owners and electronic delivery of notices
5. Achieving owner quorum
6. Proxies
7. Director terms
8. Board meetings
9. Non-leased voting units
10. Director qualifications and education

Preliminary Notice of Owners’ Meeting

When a board calls an owners’ meeting at which there will be a vote, notice must be sent to all owners with information about the business to be voted on. The current section 45 requires the Board to provide notice of a meeting to owners. In order to be effected, notice must comply with the requirements in section 47 of the Act. Section 45 is amended so that additional materials may be included in the notice package as required by regulations. Section 45.1 introduces a new requirement that corporations distribute a “preliminary notice of meeting” 20 days before a corporation sends the notice of meeting package. The purpose of the “preliminary notice of meeting” is two-fold – to solicit candidates for elections, as well as documents that owners would like to have included in the notice of meeting package. The Board is not required to provide owner-proposed documents unless required by regulation.

Preliminary notices will allow the names and information of owners (who respond that they want to run for the Board) to be included in the notice of meeting. Because their names are circulated in the subsequent notice, owners not attending can vote for these candidates by proxy. However, additional notice requirements may be onerous for condominium corporations. Permissive rather than mandatory provisions would offer more flexibility in this regard.

Owner-Requisitioned Meetings

Under section 46, owners of 15% of the units may requisition a meeting if they have matters or questions for the ownership to discuss or vote on. The owners can, of course, only vote on business within the limits of the Act. The new section 46 requires that meetings requisitioned by owners shall only be requisitioned for specific purposes as permitted by the Act. What is also new is that the board must, within 10 days, respond to the requisition in writing stating that 1) the board will call the meeting or 2) the board will not call the meeting and say “why”. If the Board refuses to call a meeting, the owners may revise their requisition or apply to the Condominium Authority Tribunal (“CAT”), or if not established, the court, to determine if the meeting should be called.

The changes appear to limit the scope of why owner-requisitioned meetings may be called, though regulations may extend this scope. Additionally, the new section 46 will require Boards to respond to requisitions rather than implicitly refusing to call meetings through silence. If they respond that the requisition is not compliant with the Act, the requisitioners can use that feedback to revise the requisition. If a requisition is a sign of rumblings in a condominium community, perhaps this new process will help build dialogue between Boards and requisitioners.

Voting

An owners’ meeting arrives at decisions “as a result of a vote of a sufficient majority of those members present who are qualified” which in turn provides direction to the Corporation and the Board (Nathan’s Company Meetings, Glossary, subverbo “vote”). The issue of who is qualified to vote is therefore set out in the Act. Owners are not permitted to vote at an owners’ meeting if on the date of the meeting, they are 30 days or more in arrears with respect to the common expenses payable for their unit. By and large, section 49 remains unchanged in this respect.

The new section 49 requires that owners provide the Corporation with notice that they have become the legally registered owner of their unit in order to vote at an owners’ meeting. This is very similar to the current Act as only those owners listed on a corporation’s owners list are entitled to receive notice of the meeting, and only owners entitled to receive notice may vote at the meeting, provided that they are otherwise eligible to vote under the Act. However, this change makes explicit that only owners who provide the Corporation with their information are entitled to vote.

Service of notice to owners and electronic delivery of notices

Section 47 governs the records of owners maintained by the Corporation and the manner in which owners are served with notice of a meeting. When calling a meeting, a corporation must send notice of a meeting to owners at their units or addresses for service as shown in its records, pursuant to current section 47. This section also allows owners to agree to receive electronic notice (by fax, email or other). The current section 47 requires the Corporation to maintain a record of names of owners and their addresses for service when provided, but does not expressly require owners to provide this information. The new section 46.1 requires owners to notify the corporation of their name and address for service within 30 days of purchasing a unit.

Owners in breach of this requirement may provide their contact information at any time, though in order to be entitled to receive notice of and vote at a meeting, it must be no later than 15 days before the meeting (as is required by current section 47). This new time limit (30 days from purchase) allows the Corporation to take compliance steps where it becomes aware that an owner has failed to provide information. Additionally, the breach may be the basis for recovering from the owner damages suffered by the Corporation due to the delay or failure to provide the owner’s information.

Corporations must continue to maintain addresses for service, as required by current section 47. According to new section 47, owners must agree in writing to electronic notice, though this requirement may be changed by regulation. Additionally, a statement of the method of service agreed to by the owner must be included in the Corporation’s records.

Achieving owner quorum

The current section 50 provides that quorum at any owners’ meeting must be the owners of 25% of the units within the corporation, unless this requirement is increased to 33 1/3 % by by-law that was registered after current section 50 came into force. The new section 50 provides that at the first and second attempts to hold an owners’ meeting, quorum shall be the owners of 25% of the units. If quorum is not achieved at first and second attempts to hold an owners’ meeting, the quorum requirement at the third and subsequent attempts to hold the meeting shall be the owners of 15% of the units at the corporation (this is subject to certain exceptions, such as for the turnover meeting). The new section 50 does not provide for increases to quorum by by-law.

As with decreasing voter turnout, some condominium communities are facing the challenge of owner apathy, and achieving quorum at meetings. Calling several meetings is resource intensive and slow down corporate business when owner approval is required. Reducing the quorum requirements will allow the Corporation to proceed with its business without compromising the rights of owners to participate in meetings if they wish. Reducing the quorum requirements for the second meeting would also assist corporations in proceeding with its meeting business while still affording reasonable opportunity to owners to participate in person or by proxy at either or both meetings. Although this may result in a small number of owners voting on behalf of the ownership, there are safeguards elsewhere in the Act, including notice requirements and the right to participate by proxy, to protect those owners who do wish to participate at meetings.

One issue which is not addressed by these amendments is whether there is any requirement to call a fourth meeting if the 15% quorum is not satisfied on the third attempt. The bill could be amended to clarify this.

Proxies

An owner who cannot attend an owners’ meetings can appoint a proxy to attend, speak and vote on their behalf by submitting a completed proxy form to the corporation. The current section 52 allows votes to be cast by show of hands or by recorded vote, whether personally or by proxy. The new section 52 distinguishes between votes by show of hands and recorded votes:

1. Votes by show of hands may be cast personally or by proxy.
2. Recorded votes may be cast on a ballot, on the proxy itself, or, if the by-laws permit, by electronic means (including by telephone or email).

The new section 52 provides that a proxy form can be prepared so that it can be used at more than one meeting, although the proxy form must specify the specific meetings for which it is intended to be used. In other words, proxies cannot be open-ended.

Clarification that recorded votes can be cast by electronic means is welcome. However, when votes are cast in this fashion, security measure should be put in place to verify the identity of the owner casting the vote. Corporations may also choose not to adopt voting by electronic means.

Director Terms

The current section 31 provides that the term of any director must not be longer than 3 years. The term length is set out in the by-laws, but in any event cannot be longer than 3 years. New section 31 provides that a director elected by non-leased voting units may continue his or her term as a director upon the expiration of their term until a successor is elected, or the AGM following the end of the 3-year limit.

Board Meetings

The current section 35(5) provided that Board meetings may be held by way of teleconference or other “concurrent” means of communication that allows for participation provided that the Board members consent and same is authorised by by-law. New section 35(5) removes the requirement that the teleconferencing must be authorized by by-law, and allows for Board meetings to be held by means of communication prescribed in the regulations.

Given that by-laws are no longer required to authorize meetings by teleconference, there will be more flexibility for Boards to determine how to meet. However, it remains to be seen what type of communication will be permitted under the regulations.

Non-Leased Voting Units

The current section 51 requires that, if at least 15% of the units are owner-occupied, the owners of owner-occupied units can elect a director to one of the positions on the Board and remove that director. New section 51 creates a new non-leased voting unit position on the board of a condominium corporation. A “non-leased voting unit” is defined as a unit used for residential purposes that is not leased within the 60-day period before the preliminary notice of meeting is sent out and/or is not leased within the 60-day period before the corporation receives a requisition.

This change clarifies that the owner’s right to vote where the owner does not lease the unit and does not reside at the unit as the primary residence (such as “snow birds”). So the owner no longer needs to be a resident to be able to vote for or remove the respective Board member.

Director Qualifications and Education

Directors direct the corporation in its objects, which are to manage the property and the assets of the Corporation on behalf of the owners. Directors must accordingly be qualified for their position, but the qualifications cannot be so onerous that they discourage candidates from running. The current section 29(1) provides that persons have to be at least 18 years of age, not be undischarged bankrupts, and have legal capacity in order to be eligible to be Directors.

New section 29(1) introduces new director qualifications by requiring that directors be individuals and that directors satisfy the disclosure of information requirements, which will be prescribed in the regulations. New section 29(1) also provides that a director can be disqualified if she or he fails to complete the required director training, or fails to comply with the requirements regarding the disclosure of information.

The changes introduced by new section 29(1) are intended to promote good governance through education and accountability. This in part mirrors legislative provisions that apply to business corporations. For example, the requirement that Board members be individuals is already a requirement under the Ontario Business Corporations Act. This is because corporate governance relies on Board members being personally liable for their decisions and the related incentive to exercise due diligence in their decision-making. Additional requirements in new section 29(1) for training and disclosure of interests will also promote good governance.

As Bill 106 proceeds through the Reading and Committee stages of the legislative process, we hope that the Members of the Legislative Assembly will continue to recognize the importance of balancing the consumer protection elements of the Bill with the necessity for condominium corporations to be an economically viable form of housing. After all, condominium legislation is meant to protect those condominium owners who comply with their Declaration, By-laws and Rules, pay their condominium fees, and who expect the same from the other owners and residents that they share the condominium property with.

All of the information contained in this article is of a general nature for informational purposes only, and is not intended to represent the definitive opinion of the firm of Elia Associates on any particular matter. Although every effort is made to ensure that the information contained in this newsletter is accurate and up-to-date, the reader should not act upon it without obtaining appropriate professional advice and assistance.

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