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New Ontario Condo Act | The Biggest Game-Changers

New Ontario Condo Act | The Biggest Game-Changers

Update: Bill 106 received Royal Assent (approval) on December 3, 2015. This past Wednesday, after three years of research, consultation and planning, the Province released highlights from the updated Ontario Condo Act. While not law yet (the new Act still needs to be passed), we now have a clear picture as to how the law is likely to change and what better protections will be in place soon for Ontario condo owners.

The Process Behind the Updated Ontario Condo Act

Since June 2012, the Province has been leading an in-depth and lengthy study into issues faced by condo homeowners including poor performance by condo boards / management, accountability for builders and the lack of simple and affordable dispute resolution systems.

After two phases of stakeholder consultation, officials had been formulating recommendations as part of stage three of the process for over a year while condo owners and industry professionals waited anxiously. Finally, on May 27th, the Province announced highlights of the plan which included an extensive review and analysis of over 200 recommendations. According to the Province, the process resulted in:

•amendments to the Condominium Act and the Ontario New Home Warranties Plan Act

•enactment of a Condominium Management Services Act

•additional, smaller amendments to other relevant acts

Highlights from the New Ontario Condo Act

toronto-condos

toronto-condos

There is a lot to read through and absorb even in the highlights summary provided by the Province but the biggest game-changers as we see them are as follows:

#1 Creation of Two Independent Bodies to Regulate the Industry

These new authorities will administer various aspects of the Act that require condo boards to be more transparent and accountable as well as providing education and basic training as a mandatory requirement for all condo board directors.

It's also going to be a lot easier for owners to call for their condo board to vote on an issue. As well, and perhaps most importantly, there will be a new forum to bring forth issues and resolve disputes between condo owners and boards without parties having to incur legal fees.

Recommendations had called for the creation of a single Condo Office but the government is instead recommending a split in functions to create two, separate bodies. According to the Province, these bodies will be:

•a Condo Authority that would be responsible for administering condo owner education, dispute resolution and a condo corporation registry

•a separate Licensing Authority to administer licensing of condo managers

David Orazietti, Consumer Services Minister, stated that the costs to establish and run the Condo Authority will be funded out of condo developer fees as well as a small, $1/month levy on individual condo owners.

The Good: We talked a few weeks ago about our hopes for the new Ontario Condo Act . Our top two wishes were to see both training and accountability for condo boards and these changes to the Act will make sure that happens. And the forum for dispute resolution is huge - we've heard stories of condo corporations spending in excess of $50k on a single dispute.

The Questionable: Any time more layers of bureaucracy and administration are added, we fear that consumer confusion and wasteful spending on redundancies will ensue. So while we applaud the creation of a Condo Authority, we question the need to split off the licensing function into a separate body.

That said, the Province has addressed this issue (whether you agree with their position or not). The rationale for splitting the functions is to avoid a conflict of interest so that there is no favouritism given to condo boards as is thought by many to be the case under current systems. And the Province does state that they will strive to ensure there is no waste in terms of operating funds (for example, by sharing an office - but then you have to question if it really does avoid favouritism when you have staff from both sides potentially interacting on a personal level day-to-day).

In terms of the education aspect, we would've liked to see mandatory training for all condo board members and not just directors.

#2 Standardization of Disclosure Statements from Builders

CityPlace-Condos-Under-Construction-2010-JasonParis-Flickr

CityPlace-Condos-Under-Construction-2010-JasonParis-Flickr

One of our other big hopes for the new Act was the prohibition of deferred costs by builders. Doesn't look like this is going to happen but there is some good news. The Province states:

"At present, a condo developer may defer some of a corporation’s operating costs and not include them in the first-year operating budget. A unit’s monthly fees can rise sharply once these costs take effect.

As a result, the proposed act would require developers to disclose any circumstances that they know of, or ought to know of, which may lead to an increase in common expenses within a set period of time after the corporation’s first year (e.g., elevator maintenance contract)."

This should make it a lot clearer to buyers of new Toronto condos what the condominium's true financial position is. In addition, the new Act calls for a standardization in what builders must disclose and how they disclose it.

Currently, there's a lot of grey area when it comes to what developers must disclose to buyers of new Toronto condos and what they can keep under wraps. Not to mention the lack of a standard structure to the documentation makes it difficult, in some cases even for trained professionals, to make heads or tails of.

If passed, the new Act will set rules for standard disclosure statements and declarations, both in terms of their content (what information must be released to buyers) and their form (how they are communicated, to ensure clarity).

The Good: This isn't rocket science but it's actually a huge move to regulate the industry and make it easier for buyers to understand what they're getting into. Currently, a lot of buyers get overwhelmed by the complexity and "industry speak" of builder documentation and we have to wonder if this is often the point - make things so confusing that people can't spot the holes. And so anything that leads to clear and simple communication during the buying process is a major win for consumers.

The Questionable: We hoped the Act would outright prohibit deferred costs rather than enforce disclosure and while standardization will go a long way to shedding light in the industry, it's not a guarantee that unscrupulous behavior won't still occur. Even if you're confident that you understand all of the documentation you're reading when purchasing a pre-con condo, we cannot hammer this home enough - ALWAYS consult a lawyer who specializes in real estate law, preferably condo law specifically, before signing on the dotted line.

And remember, you have the right to bring in your own Realtor to represent you during negotiations with the sales office for the condo. As a pre-con buyer, you'll be paying Realtor fees anyway (you only pay Realtor fees to buy pre-construction, not re-sale) and typically your fees will stay the same whether you bring in your own Realtor or not (your Realtor will negotiate a split or percentage take from the original amount).

#3 A New "New" Home Warranties Act That Protects Buyers of Converted Condos

robert-watson-lofts

robert-watson-lofts

Toronto in particular has a ton of condo and hard loft conversions where older buildings such as churches, warehouses and factories are converted to condominiums. Under the current Act, these converted units don't qualify for Tarion protection (Tarion being the body who administers the Act) which is ridiculous when you think about it.

While not all aspects of the proposed Ontario New Home Plan Warranties Act that apply to new condos will apply to conversions (for example, that pre-existing elements are deemed to have been "constructed in a workmanlike manner and are free from defects in materials"), most elements whether new or pre-existing will be covered under either a one-year, two-year or seven-year warranty depending on the element and the defect in question.

The Good: It's about time Ontario, bravo! Not only is there currently a total lack of equality in consumer protection law that exposes buyers of newly converted buildings to a lot of risk, it says to developers that they may have a get out of jail free card for less than stellar work. As a buyer, you shouldn't have to assume more risk because you buy into an historic conversion versus a brand new building. We're thrilled that the law has finally caught up with common sense.

The Questionable: What exactly is the process be for determining which pre-existing elements are exempt from some protections? And what about elements like shared interior walls that have both new construction (e.g. additional supports, drywall) and old, pre-existing elements (e.g. brickwork)? Some issues (e.g. structural) may involve defects with both new and old materials/structures/workmanship and so are these only partially covered? If so, how do you determine a fair split? So while the proposal is fantastic, administering it may be challenging.

As well, sadly, the big wave of historic, residential conversions is over in Toronto and the law presumably won't be retroactive so when we really needed this was 10-15 years ago. But we're very glad to see it coming into play now to protect future purchasers.

All in all, some really great stuff happening here. As to be expected though, there's been a lot of debate over the proposed changes these past few days. Concerns are often over what's missing versus what's been covered, particularly around a lack of accountability for property management companies as discussed in the Globe and Mail .

Are some of the recommendations imperfect, a little too convoluted to be practical in their application? Yes. Others don't go nearly far enough in our opinion. And will there be challenges in setting up these new systems and enforcing the laws once passed? Absolutely. There's bound to be. But we can't improve the industry without doing the hard work.

When you look at the big picture, condo owners have a heck of a lot to celebrate this week. The new Act, while not perfect, will go a long way in protecting consumers.

Photo of Ontario Legislative Building, © Roberto Robles used via Creative Commons from flickr. Photo of CityPlace condos under construction back in 2010 © Jason Paris used via Creative Commons from flickr.