Are you prepared for the Protecting Condominium Owners Act?
Toronto condo units are in high demand with renters who want prime, downtown locations, and great amenities. Vacancy rates continue to hold low and investment properties fared decent returns over time. But with changes to the condo act coming down the pipes, many tenants and landlords are left wondering how the proposed changes will affect them.
The creation of the condo act back in 1998 led to a construction boom in Ontario and helped establish a new condo industry in the province. 15 years later, there are literally thousands of self-governing condo communities housing over 600,000 units and approximately 1.3 million Ontarians across the province. As with any new industry, there have been some growing pains:
- Buyers have been faced with sudden, substantial increases in maintenance fees or other unexpected costs and expenses.
- Condo ownership is often poorly understood and investors may have insufficient knowledge of their rights and responsibilities.
- Condo boards and property managers may lack vital knowledge and experience and there have been incidents of corruption and fraud.
- Dispute resolution is a costly and time-consuming process and there are complaints of an imbalance of power between owners and the condo board.
- There are concerns about the number of investor-owners who live off site and the emergence of condos as the GTAs fastest growing form of rental accommodation.
Obviously, change is needed to help the industry grow and thrive. In September 2012, the Ministry of Consumer Services partnered with Canada’s Public Policy Forum to launch a review of the condo act and recommend important changes to better serve the condominium community as a whole.
The review process drew upon the expertise of condo owners, board members, property managers, developers, lawyers, and other stakeholders. It concluded in January of this year and we are now awaiting a draft of the new condo act. Over 200 recommendations were made to improve the Condo Act, but here are some key highlights:
- The creation of a Condo Office is recommended to register condo developments, oversee licensing for property managers, provide education and information to owners and stakeholders and act as the first line of defense in dispute resolution processes. The condo office will be funded by user fees and a small levy of $1-$3 per month on each condo unit in the province.
- The dispute resolution branch of the Condo office will provide owners, directors, and managers with quick, reliable, and inexpensive information about the act, the meaning of by-laws, and other condo-related matters. It will house a ‘Quick Decision Maker’ to resolve simple disputes and a Dispute Resolution Office to address more complex issues. This office can resolve disputes between owners and the condo board, but it will have no authority to resolve disputes between tenants and the board or between tenants and landlords.
- Governance issues have been addressed, with recommendations to set minimum time limits for the retention of condo records, ensure the records are easily accessible, and clarify the rules for quorums, the use of proxies, and petitioning meetings. The qualifications for the board of directors will be raised through mandatory training, and the act should define in law a code of ethics for the board and write a charter of rights and responsibilities for unit owners.
- Condo finances need to be more transparent, accountable, fair, and effective. It is recommended that boards write an operating budget and a reserve fund budget each year. Improved communication and disclosure of condo corporation financial data is recommended to help owners and investors understand potential problems in advance. The report suggests an online training course may help owners and investors to understand key financial data.
- Smarter disclosure is recommended, including the publication of an easy to read Condo Guide and standardized disclosure statements. Developers will no longer be allowed to defer first year operating costs or lease-back assets that would normally be considered part of the common elements. This should help prevent sudden increases in the condo fee. While the new condo act cannot mandate changes to the building code to prevent noise transmission, it will recognize an owner’s right to quiet enjoyment of their unit and the board’s responsibility to protect that right.
- It is recommended that all property managers undertake a 2-stage licensing process overseen by the Condo Office to ensure they are qualified and well-educated in their field.
The product of the government’s comprehensive review of the existing Condominium Act was the reform of the Protecting Condominium Owners Act, which was the first reform of the Act in 16 years. The revamp:
- modifies the Condominium Act and the Ontario New Home Warranties Plan Act
- pass the Condominium Management Services Act
- makes small changes to other relevant acts
Many aspects of the changes will be implemented through set regulations and the commencement of new administrative authorities. Regulations are planned to be prepared in consultation with the public, condo owners, and the condo sector, including regulatory registry.
The provisions of the act, the majority, are still not in force. Most provisions will come into effect on a date announced by proclamation of the Lieutenant Governor. Ontario is working fast to speed up the process to develop regulations and implement the key commitments of this act.
Unfortunately, no landlords or tenants were directly involved with the condo act review. The authors have recommended that the government conduct further studies with landlords and tenants, so it remains to be seen exactly what changes will address condo rentals. However, we can expect that the laws governing condo communities will be applied equally to all residents, whether they are owners, tenants, or guests. It will be a landlord’s responsibility to ensure that anyone who occupies their unit abides by the rules.
Fortunately, education is a key aspect of the proposed reforms. As landlords become better informed about their rights and responsibilities and the rules governing their communities, they will be better able to inform their tenants about the realities of life in a condo. This will automatically resolve many of the common problems faced by landlords and tenants.
Investors will know in advance what to expect regarding condo fees. That way, landlords can better plan for condo fee increases, which in turn will contribute to more reasonable rent increases.
Investors and residential tenants are often seen as detrimental to the process of building condo communities. Most tenants do not cause problems with the condo board or their neighbors, but disputes with tenants are increasing simply because of the increasing number of rented units. The new condo act will seek to clarify its relationship with the Residential Tenancies Act and simplify the processes by which condo communities resolve simple disputes with tenants, or address serious problems that landlords have failed to deal with.
At Buttonwood Property Management, we’ll be closely monitoring this situation as it unfolds. We’ll keep you informed of developments and/or changes, so check back with this blog often for updates.