A few months after publishing the draft regulations relating to the Condominium Management Services Act, 2015 (see our blog entries on those regulations here, here and here), the Ontario government issued several of its promised proposed regulatory amendments under the Condominium Act, 1998, as amended by the Protecting Condominium Owners Act, 2015. Rather than issue entirely new regulations, the government followed the same pattern it did when amending the Act rather than replacing it. Instead of an entirely new set of regulations, what are proposed are amendments to the existing regulation, O.Reg. 48/01.
When the “plain language summary” of the draft regulatory amendments is 38 pages long – a summary that admits it “does not reflect the complete technical scope of the proposed amendments” – and the draft amendments themselves are 69 pages, you know we are in for a ride; and these regulations cover just four topics relating to the governance of condominiums.
When the “plain language summary” of the draft regulatory amendments is 38 pages long – a summary that admits it “does not reflect the complete technical scope of the proposed amendments” – and the draft amendments themselves are 69 pages, you know we are in for a ride; and these regulations cover just a few topics relating to the governance of condominiums. In this and further installments of this blog, we will help you navigate the salient changes under each of the relevant headings. But before we get into what most consider the key points of the draft regulations, we’d like to tell you about…
The change no one is talking about.
If you read the plain language summary of the regulations, you’ll see it is broken down into four general headings: “Communications from corporation to owners and mortgagees,” “Mandatory disclosures and training for condominium board directors,” “Meetings and Voting,” and “Record retention and access”. Our next few blogs will cover points under each of these. One heading that is missing, however, is, “Defining a portion of the units”. Sounds exciting, eh? No, not really. It’s not half as vibrant and gripping (to those who live and breathe condominium law) as the other headings, but it is important and has broad ranging impact on several sections of the Act.
Section 2(1) of the draft regulations quietly adds section 1.1 to Ont. Reg. 48/01, which, in turn, imposes new meaning on thirty other sections of the Act and the regulations. What it requires is that whenever, in any of those sections, there is a reference to a portion of the units – which might mean a majority, or any other number of units – the meaning is:
1. 2. 3. | Where the issue that the section deals with applies to owners of what are currently called “owner-occupied” units, but under Bill 106 will be known as “non-leased voting” units, then the reference to a portion of the units applies only to those units. Where the condominium has the types of unit that section 49(3) of the Act states cannot vote unless they are the only types of unit in the condominium (that is, parking units, storage units, or units used to house services, facilities or mechanical installations) in addition to other types of unit, the reference to a portion of the units applies only to those other types of unit. Where neither of those restrictions apply, then any reference to a portion of the units actually means “all of the units”. |
Without taking you through the complete list, however, we can inform you that the impacts fall under three general headings.
First: Protecting the Voting Power of "Primary Purpose" Units
The term, “Primary Purpose,” has been invented by us for the purpose of providing this explanation. It is not a term used in the proposed legislation. For our purposes, it means pretty much what it sounds like: The type of unit that matches the central character of the condominium. E.g., in a residential condominium, it will mean the residential units; in a commercial condominium, the commercial units; in a mixed residential and commercial condominium, both of those; and so on.
Perhaps a Primary Purpose unit is better defined by what it is not: It is not a unit that is a parking unit, storage unit, or a unit used to house services, facilities or mechanical installations (except in a condominium where any or all of those types of unit are the only types, where they would then be the Primary Purpose units).
These new provisions proposed in the regulations will protect the voting rights of Primary Purpose unit owners by ensuring that where the Act calls for a vote by the owners of a particular percentage of the units, it is to be read as meaning a particular percentage of only the Primary Purpose units.
But doesn’t section 49(3) of the Act already state that votes cannot be cast for those types of units? Well, yes, but actually that is part of the problem.
What the provisions of the Act currently do is actually grant a kind of voting – or, more accurately, vote-blocking – power to those units in situations where the outcome of a vote is determined not by a majority of owners present at a meeting, but by some percentage of all of the units. In those cases, the percentage required to be met to pass the proposed business (be it a by-law, or a change to the common elements, or removal of a director, and so on) is a percentage of the total number of units including both voting and non-voting types of unit.
In these circumstances, it is possible for a vote to be cast in which the owners of a majority of the voting units approves a decision, but if that majority does not also constitute a majority of all the units, the proposed action will not be approved. In a condominium where a majority of the units are non-voting units (such as any residential condominium in which the Primary Purpose residential units constitute only about one-third of the units in comparison to the parking and storage units), this gives rise to the risk that the condominium might, technically, not ever be able to do almost anything. It also allows an individual owner, or small group, that owns all of the non-voting units, to potentially control the destiny of the corporation in regard to an array of matters.
These quiet little changes to the regulations fix all that.
They also ensure that when counting quorum, it is the proportion of Primary Purpose units that counts.
Interestingly, however, there are at least two exceptions. These new regulatory provisions do not affect the determination of the portion of units needed to approve a proposal to amend the declaration or to amalgamate with another condominium. It is not clear why these situations were left off the list, while other highly significant matters, such as termination of the condominium and sale of the common elements, are affected by the changes.
Second: Ensuring the Voting Power of the Non-Leased Voting Units (sort of)
The changes made in this part of the draft regulations are also intended to ensure that where a section of the Act intends that voting or other determinations should only be by or for the non-leased voting (i.e., owner-occupied) units, it only will be by or for them.
Having said this, however, it appears that (unless our reading of this part of the regulations is flawed) none of the sections of the Act that actually deal with a proportion of the units being a proportion of non-leased voting units is included in the list of affected sections. This could be because any of the relevant sections of the Act is already clear and effective in ensuring that where voting or other determinations should only be by or for the non-leased voting (i.e., owner-occupied) units, it only will be by or for them.
It is possible, therefore, that this part of the definition of a portion of the units is somewhat superfluous; but it might be helpful to be included anyway, even if just on the chance that it is needed to catch and unforeseen situation. There seems to be such a ‘catch’, for example, in the newly proposed section 12.8(1)(a)(i)(A) of Ont. Reg. 48/01, which requires material to be included in a notice of meeting if (amongst other things) submitted by the owners of at least 15% of the units: If the material submitted were to pertain solely to the non-leased voting units, then this requirement should be satisfied by the owners of 15% of just those units. These proposed regulatory changes make this the case.
Third: Controlling the Voting Power of the Declarant (again, sort of)
Lastly, some of the proposed changes are related to provisions of the Act (as amended by Bill 106) that restrict a declarant from exercising control over its newly built condominium in regard to such matters as: what parts of the property of a condominium the regulations require to be considered a unit, asset or common element of the condominium; whether the condominium corporation is required to purchase any property or assets; and what sort of remedies (e.g., legal claims) a condominium can seek against the declarant.
In all these cases, the proposed regulations clarify that where the Act states that such decisions cannot be made by a board that includes of a majority of individuals appointed or elected at a time that the declarant owned a majority of the units, it means a majority of the Primary Purpose units.
At a glance, these provisions appear to be intended to restrict the declarant, but, in fact, they also provide the declarant with some further freedom.
It is true that the effect of the changes is (consistent with what is described under our first heading above) that, if the declarant chooses to retain certain other types of unit after sale of the primary residential or commercial units in the condominium, these will not grant the declarant control over the outcome of any votes. We are aware of at least one condominium which was designed with multiple non-voting (i.e., parking, storage or mechanical facility) units expressly for the purpose of helping to ensure that the declarant could prevent, over the long-term, significant changes to the manner in which the property is operated. The imposition of these provisions of the Act and new regulations will alter this dynamic.
However, at the same time, this means that even if the directors in question are elected or appointed at the time that the declarant owns a majority of the units, but not a majority of the Primary Purpose units, the board can proceed with such matters as rejecting what the regulations require to be considered a unit, asset or common element of the condominium, requiring the condominium corporation to purchase certain property or assets, and restricting the remedies the condominium can seek against the declarant, all of which may be decisions that work in the declarant’s favour.
This is not a pernicious error. It will still be the case that the board so elected or appointed will not have been elected or appointed by the declarant exercising majority control, but by the other owners of the units; but it will allow the declarant to retain those non-voting units to itself if it wishes to, without thereby restricting any of the decision-making authority of the board (which board might or might not be friendly to the declarant’s intentions).