Deemed Declaration Provisions
(proposed section 6.1 of Ont.Reg. 48/01)
Although the time has passed for submitting official comments to the Ministry, there is still lots of opportunity to analyze the most recent proposed regulatory amendments under the Condominium Act, 1998, before they come into force (between July 1 and Fall, 2017, according to the Ministry website) with whatever changes the government might make in the meantime.
In our brief comments to Ministry staff, we raised concerns regarding that part of the regulations (proposed section 6.1(1) of Ont. Reg. 48/01) that deems the following provisions to be part of every declaration:
Despite anything in the declaration, as soon as reasonably possible and, in any event, by no later than the 15th day after the declarant transfers the first unit in the corporation, the declarant shall give written notice to the first board mentioned in subsection 42 (1) of the Condominium Act, 1998 of the day that the declarant transferred that unit.
Despite anything in the declaration, as soon as reasonably possible and, in any event, no later than five days before the day that, according to the declarant’s anticipation, is the day on which the declarant will cease to be the registered owner of the majority of the units, the declarant shall give written notice to the first board mentioned in subsection 42 (1) of the Condominium Act, 1998 of the anticipated day.
Despite anything in the declaration, as soon as reasonably possible and, in any event, by no later than five days after the declarant ceases to be the registered owner of the majority of the units, the declarant shall give written notice to the first board mentioned in subsection 42 (1) of the Condominium Act, 1998 of the day that the declarant ceased to be the registered owner of the majority of the units.
First, we question the point of these deemed provisions. Sure, we understand what they mean, and what their effects are:
- The first means that, within the stated time period, a declarant is required to give written notice to the pre-turnover appointed board of directors of the date on which the first unit sold is transferred;
- the second means that, within the stated time period, the declarant must notify the pre-turnover appointed board of directors of the date on which it is anticipated the declarant will cease to own a majority of units; and
- the third means that, within the stated time period, the declarant must notify the pre-turnover appointed board of directors of the date on which it actually ceases to own a majority of the units.
This sounds pretty good, right? This sounds like we’re holding the declarant accountable to make sure that the timing for turnover doesn’t come as a surprise to (or get missed by) that first board of directors that is responsible for calling and holding the turnover meeting. It’s a great idea, except, of course, that it’s really, kind of, sort of, pointless (at least, in any case that we can think of without straining our imagination too much).
To consider why we say this, consider the answer to this question: Who appoints the pre-turnover appointed board of directors? Answer: the declarant.
Then consider who the declarant normally appoints to this board. Answer: the declarant’s own people.
In our experience as lawyers to many condominium developers over the past 10 years (and for a few more before that at another law firm) and in dealing and communicating with other condominium development lawyers, it appears to us that nine times out of ten, if not more, the declarant’s pre-turnover appointed board of directors consists solely and exclusively of principals and officers of the declarant. Sometimes there might be a key employee, or a family member (especially for those smaller “mom-and-pop shop” developers); but, in any case, almost never (actually, never, as far as we have seen) is the first board made up of strangers, or even known but arm’s length individuals, in relation to the declarant.
So who do these provisions require the declarant to notify? In both principle and practice in the vast majority (if not all) cases: Itself.
Now, we admit to not knowing every case and circumstance out there, but it seems to us that it would be only the most unusual case where the notification requirements, here mandated as deemed provisions in every declaration, are actually needed for anyone’s protection.
What’s the Problem?
Our attention turns next to the second part of proposed section 6.1. Its sub-section (2) provides as follows:
No board, other than a board of the corporation described in subsection 11 (8) of the Act,
may amend or repeal any of the provisions listed in subsection (1).
We, again, find ourselves asking what the point is; but, more importantly, we think we also identify a substantive problem. In our view, this section is not only relatively pointless, but it also might be powerless, or, in other words, legally ineffective.
On its pointlessness, consider this: What this clause states is that only a board of directors elected or appointed when the declarant does not own a majority of units – for simplicity, we’ll just call this the “turnover/post-turnover board” – is able to amend the provisions deemed to be included in the declaration under section 6.1(1); but, really, why would they?
The deemed provisions clearly only have effect during the period of time prior to the election or appointment of a turnover/post-turnover board. Once that stage in the corporation’s progress is reached, none of the deemed provisions has any effect. The first unit will have been sold already; the declarant will already not own a majority of units; so both the time periods and the purposes of these deemed provisions will have passed.
Further, since these are deemed provisions, they don’t actually show up in the declaration. That is the whole point of a deemed provision: it means it is there in the declaration, without actually having to be written there in the declaration.
So, given those two considerations, why bother amending them? No reasonable turnover/post-turnover board is likely to waste a moment’s thought over the subject. At that stage, they can simply be ignored.
Secondly, though, even if a post-turnover board was to want to amend those deemed provisions, we’re pretty sure they really can’t. Hence, we think the provision could be powerless.
When we raised this issue with the Ministry, they pointed out that some of the new provisions added to section 177(1) of the Condominium Act, 1998, by the Protecting Condominium Owners Act, 2015, do, in fact, deal with the possibility of being able to amend provisions that are deemed to be in a declaration. Indeed, new sub-paragraph 6.1 under section 177(1) does state that the regulations may deem certain provisions to be included in declarations, by-laws or rules of a condominium, “unless they are amended or repealed in accordance with this Act.” Further sub-paragraphs 6.2 and 6.3 deal with further restrictions the regulations may impose on the right to amend or repeal such deemed provisions. However, in our view, these provisions don’t settle or resolve the issue.
One problem here is that while the new sub-paragraph 6.1 of section 177(1) of the Act suggests that the provisions the regulations deem to be included in a declaration may be amended or repealed in accordance with the Act, the Act does not actually contain any provisions that authorize such an action. That is, there is nothing in the Act in accordance with which those amendments can be made.
Presently, and under the changes being made to the Act, declaration provisions can be amended in only four ways:
- Under section 107, the owners can consent to an amendment of any provision of the declaration, as proposed by the board;
- under section 108, the board can unilaterally amend the mailing address and address for service of the corporation;
- under section 109, a court may order certain amendments; and
- under section 110, the director of land titles may also order certain amendments.
In only one of these cases a board of directors can amend a declaration on its own authority, and that case is very, very restrictive, in that it relates only to updating the mailing address and address for service of the corporation. In none of the other cases is it the board that actually amends the declaration – it is either the corporation as a whole (primarily, the owners), the court or the director of land titles. Therefore, unless the Act is amended to grant the authority to amend or repeal a deemed provision in a declaration, it simply can’t be done.
In our view, the proposed section 6.1(2) of Ont. Reg. 48/01 does not fill the gap by creating the authority of the board to amend the declaration; and, even if it was supposed to do that, it does not reference a method authorized in the Act for doing so. Therefore, in our view, this proposed regulatory amendment is not only without any point, but is also without any power.
We said that was “one problem”. There is, we think, another.
As we noted above, since these are deemed provisions, they don’t actually show up in the declaration. That is the whole point of a deemed provision: it means it is there in the declaration, without actually having to be written there in the declaration. So, where is it? It is in the regulation. Now, perhaps it goes without saying, but we will point it out: Not only does the Act not grant a condominium board authority to unilaterally amend the declaration (other than for the limited purposes set out in section 108 of the Act), it certainly does not grant the board the authority to amend legislation.
We aren’t sure that anyone other than the government can amend or repeal (i.e., opt out of) statutorily deemed provisions of any document, unless the statute itself clearly grants that they can. Neither the Act, even as amended, nor these proposed regulatory amendments appears to do this.
In the end, we get that even though it seems no board would ever really have good reasons to do so, the government wished to ensure that a post-turnover board could eliminate those deemed provisions if it wanted to; we just don’t think that these provisions actually accomplish that purpose.