Keeping Up With Trends

Wait, You’re Just Going to Leave Me Hanging Like That?

Relax – the content of these forms has not changed, at least not as of the date of this writing. Rather, the Ontario legislature has removed the forms from the regulations to the Act and changed the wording of the regulations such that the prescribed form is whatever form is set out on the Government of Ontario website at any given time. It should be noted, however, that the form numbers that were previously used ( e.g., Form 14 ) are no longer being used.

This provides an easy example of the need for property managers to keep themselves up-to-date as to changes in the law. Knowing that these forms have been removed from the regulations to the Act, a prudent property manager would be well-advised to bookmark the Government of Ontario website where the forms can be found (www.serviceontario.ca/landregistration as of the date of this article) and check for updates whenever the manager is asked, for example, to prepare a status certificate.

Okay, So All I Have To Do Is Read The Updated Act and Regulations?

Not so fast. Although the Act is the backbone of condominium law in Ontario, it does not tell a complete story. This is, in large part, because the courts in Ontario have taken it upon themselves from time to time to nterpret certain provisions of the Act. It is important for property managers to be aware of these decisions (by, for example, reading the regular case law updates in CM Magazine) so that they can recognize legal issues that may arise in given situations. What follows are a few examples from recent cases where the court has, to a greater or lesser extent, affected the interpretation of parts of the Act.

The Standard Unit

As all property managers are aware, or ought to be aware, a condominium corporation is obligated to maintain insurance for damage to the standard units, and the unit owners are responsible to maintain insurance for damage to improvements made to their units. The question of whether an item is an “improvement” is determined by reference to either a schedule provided by the declarant or to the corporation’s standard unit bylaw.

The question, then, is what happens when a corporation has neither a schedule nor a standard unit bylaw? In 2005 , a decision of the court in D’Alessandro v. Carleton Condominium Corp. No. 43 indicated that, in the absence of a standard unit bylaw, anything installed in the unit could be considered part of the standard unit for the purpose of the corporation’s obligation to insure same. In D’Alessandro, the unit owner had installed hardwood flooring, which was damaged by a water leak. Despite evidence that the hardwood flooring was an upgrade, the court held that, in the absence of a standard unit bylaw, the corporation remained responsible for the repair.

Although we disagreed with the court’s decision in D’Alessandro, as a result of this decision, our office (among others) adopted the practice of advising condominium corporations that, in the absence of a standard unit bylaw, they should assume that anything installed in the unit could be considered part of the standard unit. However, earlier this year, the court in Suttie v. Metropolitan Toronto Condominium Corp. No. 683 revisited this scenario. After considering facts similar (although not identical) to those in D’Alessandro, the court in Suttie stated that the question of whether an item was an “improvement” should be determined on a broader factual basis rather than applying a strict reading to the meaning of “improvement” as set out in the Act. That is, the determination of whether an item was an “improvement” should be considered using factors in addition to whether the corporation has either a standard unit bylaw or a schedule provided by the declarant.

Although the court’s decision in Suttie has changed the advice that we give our clients with respect to whether an item would necessarily be considered a part of the standard unit, this decision reinforces the importance for a condominium corporation of having a standard unit bylaw. After all, if the court in Suttie felt free to disagree with the court in D’Alessandro, a court hearing a third similar case could very well disagree with either or both of those decisions. The only way for a condominium corporation to have certainty about whether an item will be considered a part of the standard unit is to have a standard unit bylaw. Knowing this will help property managers explain to boards the importance of having a standard unit bylaw.

Amending the Declaration

The courts have also had the opportunity to consider two very different cases in which they were asked to make an order that would have the effect of amending a condominium corporation’s declaration. One of these cases was Orr v. Metropolitan Toronto Condominium Corp. No. 1056. The court’s decision in Orr was the culmination of a series of events that began with the purchase by the plaintiff of a condominium townhouse. At the time of her purchase, the plaintiff believed that the townhouse was a three-storey unit, but after her purchase she discovered that the previous owner had built the third storey into common element attic space. Twelve years of litigation ensued.

The court’s decision in Orr is some 422 paragraphs in length, and contains discussion on a broad number of issues that are both too numerous and too complex to detail in their entirety in this space. However, one of the issues that was raised by the plaintiff was an argument that the court should amend the corporation’s declaration to effectively legalize the third storey of the plaintiff’s townhouse. As most managers will be aware, customarily, a condominium corporation’s declaration can only be amended pursuant to section 107 of the Act by a vote of either 80% or 90% of the unit owners in favour of the amendment, depending on the nature of the amendment. The court has discretion under section 109 of the Act to amend the declaration, but only in circumstances where the court is “satisfied that the amendment is necessary or desirable to correct an error or inconsistency that appears in the declaration or description or that arises out of the carrying out of the intent and purpose of the declaration or description”.

In Orr, the third storey had been built by the previous owner of the townhouse (who was a principal of the developer) before the corporation’s declaration had been registered. On that basis, the plaintiff argued that the registration of the declaration without taking this into account amounted to an error. However, the court held that there was insufficient evidence to support this argument, and, in fact, the evidence indicated that the previous owner of the townhouse had built the third storey despite knowing that same did not conform to the declaration.

Although situations like that in Orr are very rare, it appears that, in these situations, the court will not be willing to provide itself with more discretion to amend a declaration than that set out in the Act. Property managers should take note of this, so as to be able to inform a board that may want to try to apply to the court to amend a declaration rather than obtain the necessary number of votes. (Note: the author has been advised that the court’s decision in Orr is currently being appealed.)

A second case considered section 112 of the Act, which permits a condominium corporation to terminate certain agreements entered into by the corporation prior to the turnover meeting within a certain time period after the turnover meeting. In Lexington on the Green Inc. v. Toronto Standard Condominium Corp. No. 1930 , the court considered whether a condominium corporation was entitled to terminate its obligation, set out in the declaration, to purchase a residence manager unit. Following the turnover meeting, the respondent’s board of directors elected not to purchase the residence manager unit, and instead offered to lease it from the developer for $1,000 per month.

In response, the developer brought an application for an order that the corporation purchase the residence manager unit on the terms set out in the declaration. The corporation took the position that the obligation to purchase the residence manager unit was, in essence, a pre-turnover agreement, and that the corporation was entitled to terminate same in accordance with section 112. The application judge agreed with the corporation’s position.

However, on appeal, the Court of Appeal overturned the decision of the application judge. The court held that a declaration was not an “agreement” within the meaning of section 112, and, as such, section 112 could not be used to terminate an obligation of a condominium corporation arising from the declaration. To do so would give the corporation the power to effectively bypass the high threshold set out in section 107 of the Act for amending the declaration.

The reasoning of the Court of Appeal in Lexington will be most helpful to property managers of newer condominium corporations. However, the underlying principle has broader application: when exercising a power set out in the Act, a condominium corporation needs to be wary that it is not running afoul of another section of the Act.

How Can I Keep On Top of this Stuff?

As previously mentioned, be sure to read the regular case law updates in CM Magazine, along with other articles that may discuss some of these issues. Doing so will help a
property manager to be alert to legal issues as they may arise. Of course, a property manager should not hesitate to refer any legal questions to the corporation’s solicitor. Better to be safe than sorry.