BILL 106 - The Condominium Authority & Informal Dispute Resolution

“What makes the condominium community ripe for creative, non-litigious dispute resolution is the need for healthy, on-going relationships among the stakeholders involved.” – Dispute Resolution Sub-Committee of the Association of Condominium Managers of Ontario and the Toronto & Area Chapter of the Canadian Condominium Institute, November 2012

In September 2013, the Stage 2 Findings Report was released in respect of the provincial government’s interactive review of the Condominium Act, 1998. Amongst the key findings shared in the report was a recognition of common themes that arose across topics analyzed by the working groups assembled in the course of the review process and the feedback provided by various stakeholders in the province’s condominium community. Education and information were two of the common themes identified.

The report suggested that Ontario’s condominiums would benefit from better educated condo communities having access to reliable, timely and relevant information and called for the formation of a new “umbrella organization” to be known as the Condo Office which would, within its 4 primary functions, assist with education, awareness and dispute resolution.

“The dispute-resolution arm of the Condo Office would help owners, directors and managers obtain quick, reliable, impartial, trusted and inexpensive (or free) information about the Condominium Act, the meanings of by-laws, and other important condo-related matters.” – Canada’s Public Policy Forum, Growing Up: Ontario’s Condominium Communities Enter a New Era, Condominium Act Review, Stage Two Solutions Report, September 2013

When it comes to informal dispute resolution and the management of conflict in the early stages, education and awareness are often key. Many times under the current system, conflict escalates and disputes emerge due to a lack of understanding of the law and/or the duties, responsibilities, obligations and tolerances that are associated with condominium life. Bill 106 looks to help with this… 

Condominium Authority – Section 2, Schedule 1 of Bill 106
Section 2 of Schedule 1 of Bill 106 permits the designation of a not-for-profit corporation to be known as the Condominium Authority to function as a separate entity to government yet carry out duties assigned to it by the Minister (who retains control over many aspects of the operation of the authority and the ability to appoint some members to the authority’s Board of Directors, as well as its chair). Not all of the details surrounding the operations of the authority have been released as yet, but it is widely expected that the authority will provide a central resource of information to help educate and enlighten anyone with condominium-related questions or concerns. A tribunal is also anticipated to be formed under this authority to set out more formal dispute resolution processes.

Funding – Section 2, Schedule 1 of Bill 106
The idea is for the Condominium Authority to be a self-sufficient entity. While it is widely believed that the government will fund its initial set-up, the authority is not expected to need to rely upon government funding as it carries out its operations on a go-forward basis. To that end, it is expected to gain its funding through two means: (i) fees paid by all condominium unit owners; and (ii) a pay-per-use system in respect of various services it provides.  Fees payable to the authority by condominiums may be structured to form part of the common expenses of a condominium corporation to allow for ease of collection. Non-payment would be addressed in the same manner as the non-payment of other common expenses, with unit owners risking having a Condominium Lien registered against their unit by the condominium corporation to secure payment with enforcement rights akin to a mortgage.

Condominium Returns – Section 12, Schedule 1 of Bill 106
In a similar manner to the information that for-profit Ontario corporations are required to file - which information is publicly accessible - Bill 106 looks to establish a database for Ontario’s condominiums. A series of mandatory filings will be required from registration to turn-over and annually thereafter (and otherwise when required) to disclose the names of the directors and officers of each condominium corporation, the property manager, etcetera. Certificates not unlike Corporate Profile Reports could be available, presumably for a fee, for anyone wishing to verify such information and late filing fines may be levied against condominium corporations who do not submit their filings on time. The database created through the information provided in these filings would look to fill the void of a lack of centralized records pertaining to Ontario’s condominium communities.

Condominium Guides – Section 59, Schedule 1 of Bill 106
Bill 106 calls for the creation of a series of guides to help prospective condominium purchasers, along with residents, owners and directors to better understand their rights and obligations. The preparation of these guides may be delegated to the Condominium Authority; however, the bill calls for the preparation and circulation of these guides irrespective of if the Condominium Authority is designated.  As with Condominium Returns, this indicates a strong desire to make this information available even in the event that the envisioned Condominium Authority does not ultimately get formed.

Expanded Regulations – Section 140, Schedule 1 of Bill 106
Bill 106 calls for the expansion of the types of items that regulations can be created to address. While the particulars of what is in mind will not be known until the regulations are presented, the items for which regulations could govern include what information a developer must present, deemed provisions to be included in a condominium’s governing documents unless amended by the individual community (i.e. by way of by-law), quorum, what constitutes actual costs that a corporation or owner incurs in obtaining a court order and what qualifies as work necessary to carry out the work done for an owners in respect of maintenance and repair.

Commentary:

I believe that there are many advantages to establishing a central, impartial place for anyone experiencing a condominium issue to obtain information, especially the information that will be collected in the database from Condominium Returns. While Bill 106 provides for penalties to apply in the event that a condominium is late in its filing, in the corporate world, we have found that similar penalties are not often harshly enforced in practice to avoid discouraging late filings. It will be interesting to see how condominium filings are managed and, practically, how the authority will encourage condominiums to provide the updated, accurate information that is desired. Accessing certain details about a condominium corporation - such as the names of the directors and property management - without having to order a Status Certificate should serve to both expedite one obtaining this information and avoid some of the complication that can arise in attempting to obtain a Status Certificate in view of the variant processes utilized by different communities across the province in processing orders for them and other obstacles that can arise when ordering a Status Certificate in a politically charged environment.

The aims of Bill 106 in respect of the items referenced above seem structured to address many of the education and information deficiencies of our current system. Many of the details have purposely been left for the regulations to clarify, allowing for greater flexibility moving forward and the eventual revelation of such details should help answer many of the lingering questions that Bill 106 leaves us with.

Making Condo Guides available to the public could be very helpful; however, the distribution systems that will be utilized to proactively help educate people such that they receive information at the most opportune time will ultimately determine the role that such will have in helping to manage conflict.

Finally, it appears that the most pressing concern amongst condominium unit owners surrounding the above referenced sections of Bill 106 pertain to funding. Even before the Stage 2 Findings Report suggested a $1-$3 per unit per month fee being charged to each condominium unit owner, many owners viewed any cost as a tax and had concern that such would quickly escalate. We have heard that the government is very concerned about this cost and is committed to keeping it low. While I like to joke that a 99 cent per unit per month cost may have been more marketable, the belief is that the cost will be $1 per unit per month. Bill 106 is structured to allow the Minister to retain the power to watch closely over the Condominium Authority and help avoid increases, including requiring regular reporting by the authority to the government surrounding its finances.

Overall, the intention of Bill 106 and the way that it looks to approach various shortcomings of our existing legislation to improve access to information and education appear to be steps in the right direction. Of course, the sections above are not the only efforts being made to address these two key areas of concern.

As Bill 106 proceeds onto the Standing Committee on Finance and Economic Affairs for further discussion and debate, I think that the following should be kept in mind:

1. Information Delivery. A point that I have regularly made when discussing communication in condominiums is that it is one thing for a Board of Directors to draft and circulate a newsletter, another entirely for residents to read it. The series of guides and availability of information that Bill 106 proposes are only half the battle; ensuring that the information is obtained by those who need it when they need it will be key to ensure that the new legislation accomplishes what it aims to. Current practice is for purchasers of re-sale condominium units to include a Status Certificate review condition in an offer to purchase; however, it is widely believed that only a small percentage of Ontario condominium purchasers invest into the due diligence required to have a full understanding of what they are buying into. After closing is too late and, particularly in a hot market, it is often even too late when a prospective purchaser is at the end of the condo hunting journey, having endured a roller coaster of emotions to finally find a unit that they like and a vendor willing to sell it at a price they can afford. Much attention has been given to Tarion and new developments, but the re-sale condominium market cannot be overlooked. We may end up seeing real estate lawyers taking on responsibility for providing condominium purchasers with certain information; however, I would personally prefer to see this information being delivered earlier on in the process - perhaps by realtors upon being retained to help a prospective purchaser look for a condo and before any actual viewings take place.
2. Information Database. As mentioned earlier, Bill 106 calls for condominium corporations to attend to annual filings, permitting a database of information to accumulate for public access. This notion was included in the 2012 recommendations of the Dispute Resolution Sub-Committee of the Association of Condominium Managers of Ontario and the Toronto & Area Chapter of the Canadian Condominium Institute, which also envisioned a condo equivalent of a Corporate Profile Report being available through a neutral party to provide information to those wishing to obtain it. However, as the corporate world has shown us, maintaining the accuracy of this information can be a challenge. To achieve what Condominium Returns are intended, condominium corporations across the province must be “motivated” to attend to filings on a timely basis. Perhaps the levying of fines for late or absent filings may work. Condominium directors and unit owners will surely not want to see additional funds being provided to the government, increasing the community’s common expenses, when such can be avoided. Condominium auditing could evolve to include the status of the community’s filings in reports. Though condominium communities that do not have the auditor attend the Annual General Meeting may not even realize a lack of compliance and communities that are in unfortunate financial positions may have bigger concerns than the amount of the fine for non-filing, transparency on this issue could equip the market to encourage compliance.
3. Dispute Guidance or Escalation? While they say that ignorance is bliss, having only a little bit of enlightenment can be dangerous. Over the course of my career in the condominium industry, I have come across cases involving self-represented unit owners applying misguided homemade interpretations of the law and costing themselves – and their communities – thousands of dollars. I have seen condominium residents who are experiencing issues cut question and answer columns out of newspapers and attempt to skew the facts to match their situation exactly. The services proposed to be provided through the Condominium Authority cannot be considered all that is needed to resolve every condominium conflict that arises. There are definitely times when additional information can help someone understand the reality of their situation. There are also times when it is appropriate for a condominium corporation or unit owner to get legal advice, as the complexities and uniqueness of the situation are best addressed with professional guidance. Similarly, there are situations when proceeding to mediation is the best way to address a conflict as such can provide fast, sustainable resolution and preserve relationships in a way that an imposed resolution cannot. As people are often forced to have ongoing relationships in the condominium environment, this is important.

Informing people as to their options and suggesting appropriate paths for addressing an issue can help but the Condominium Authority should not hold itself out as being a one stop shop to completely address all issues. If it did, the backlog that would develop would result in doing more harm than good.  In my view, the best role for the Condominium Authority will be to help enlighten people as to the reality of their predicaments and provide them with guidance as to the appropriate next steps to take – helping them help themselves.

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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