Modifications
Also see: About Condo memo on Indemnity Agreements; Bill 106 Blog entries (1) and (2) on Modifications;
Short Answer
Changes made to the common elements, assets or services of a condominium in accordance with the provisions of the Condominium Act, 1998.
Definition
The Condominium Act, 1998, (the "Act") allows owners or the board of directors of a condominium corporation to initiate alterations, additions or improvements to the common elements or assets of the condominium provided certain conditions are met. These conditions vary somewhat depending on what part of the property is to be changed, the nature or extent of the change, and the cost of the change. Changes to the services of the corporation proposed by the board of directors are subject to the same kind of conditions.
Section 97 of the Act defines four general categories of modification (to common elements, assets or services) that can be initiated by the board of directors of a condominium corporation:
1. Changes made to the common elements or assets of the condominium as a consequence of carrying out the repair or maintenance obligations of the corporation. Provided that such changes are made using materials that are as reasonably close in quality to the original as is appropriate, as determined by reference to current construction standards, no notice to, or approval by, unit owners is required. (In the terminology of the Act, such changes are, in fact, deemed not to be "modifications", as such term is defined here and as it will be defined in section 97 of the Act, as amended by the Protecting Condominium Owners Act, 2015, when such amendments are proclaimed to be in force.)
2. Modifications to common elements, assets or services of the condominium corporation that do not require notice to, or approval by, unit owners. There are three sub-sets of modification within this category:
Section 97 of the Act defines four general categories of modification (to common elements, assets or services) that can be initiated by the board of directors of a condominium corporation:
1. Changes made to the common elements or assets of the condominium as a consequence of carrying out the repair or maintenance obligations of the corporation. Provided that such changes are made using materials that are as reasonably close in quality to the original as is appropriate, as determined by reference to current construction standards, no notice to, or approval by, unit owners is required. (In the terminology of the Act, such changes are, in fact, deemed not to be "modifications", as such term is defined here and as it will be defined in section 97 of the Act, as amended by the Protecting Condominium Owners Act, 2015, when such amendments are proclaimed to be in force.)
2. Modifications to common elements, assets or services of the condominium corporation that do not require notice to, or approval by, unit owners. There are three sub-sets of modification within this category:
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(a) Changes that the corporation is required to make pursuant to legislation or due to a mutual use (or shared facilities) agreement;
(b) changes that the board considers necessary to ensure the safety or security of persons using the property or assets of the corporation, or to prevent imminent damage to the property or assets; and (c) changes that have an estimated cost that is less than the greater of $1,000 and 1% of the annual budgeted common expenses of the corporation for its then current fiscal year (regardless of when such cost is to be paid). NOTE: When the relevant provisions of the Protecting Condominium Owners Act, 2015, are proclaimed in force, the latter sub-category will be amended such that the estimated cost must be less than the lesser of $30,000 and 3 per cent of the corporation's annual budgeted expenses for its then current fiscal year (regardless of when such cost is to be paid), and must be a change that "the owners, on an objective basis, would not regard ...as causing a material reduction or elimination of their use or enjoyment of the units that they own or the common elements or assets, if any, of the corporation, as determined by the regulations." The provisions of the Protecting Condominium Owners Act, 2015, will also allow the government to specify by regulation certain additional purposes for which modifications can be made without notifying or seeking approval from unit owners. |
3. Modifications to common elements, assets or services of the condominium corporation that do require notice to unit owners. For modifications that do not fit any of the foregoing categories and do not qualify as "substantial", the board of directors must provide notice to the owners. Certain requirements as to the contents of the notice are set out in the Act. If the owners have not requisitioned a meeting (in accordance with section 46 of the Act -- see the Condopædia entry on Requisitioned Meetings ) in response to such notice and within 30 days of such notice being sent, the corporation can proceed with the modification. If a requisition is received, the meeting must be called and held by the corporation, and if the owners have not voted against the proposal at the meeting, the modification may be made.
4. Substantial Modifications. Where the total cost of the proposed change exceeds of 10% (or a lesser amount, if one is specified in the regulations made under the Act) of the annual budgeted common expenses of the corporation for its then current fiscal year (regardless of when such cost, in whole or in part, is to be paid), the modification is to be treated as "substantial," meaning that the board of directors of the corporation is to call and hold a meeting of owners regarding the proposed modification, and the modification shall only proceed if the owners of at least two-thirds (66-2/3%) of the units vote in favour of it. In addition, the board of directors may deem a modification to be "substantial" (subjecting it to the same meeting and vote requirements) even if the cost is less than this.
Section 98 of the Act deals with modifications to the common elements (and, when the relevant provisions of the Protecting Condominium Owners Act, 2015, come into force, assets) made by unit owners.
Before modifying the common elements (or, when applicable, assets), a unit owner must first obtain approval for the proposed change from the board of directors of the corporation. If the proposed change will be made to a part of the common elements designated (in accordance with the Act) for the exclusive use of the owner in question, then the board may approve the change provided it has determined the change will not:
- adversely affect other owners' units,
- give rise to any expense to the corporation,
- detract from the appearance of buildings on the property,
- affect the structural integrity of any building on the property (as determined by a competent professional, if a structural change is proposed), and
- contravene the declaration of the corporation or any requirements set out in the regulations made under the Act.
4. Substantial Modifications. Where the total cost of the proposed change exceeds of 10% (or a lesser amount, if one is specified in the regulations made under the Act) of the annual budgeted common expenses of the corporation for its then current fiscal year (regardless of when such cost, in whole or in part, is to be paid), the modification is to be treated as "substantial," meaning that the board of directors of the corporation is to call and hold a meeting of owners regarding the proposed modification, and the modification shall only proceed if the owners of at least two-thirds (66-2/3%) of the units vote in favour of it. In addition, the board of directors may deem a modification to be "substantial" (subjecting it to the same meeting and vote requirements) even if the cost is less than this.
Section 98 of the Act deals with modifications to the common elements (and, when the relevant provisions of the Protecting Condominium Owners Act, 2015, come into force, assets) made by unit owners.
Before modifying the common elements (or, when applicable, assets), a unit owner must first obtain approval for the proposed change from the board of directors of the corporation. If the proposed change will be made to a part of the common elements designated (in accordance with the Act) for the exclusive use of the owner in question, then the board may approve the change provided it has determined the change will not:
- adversely affect other owners' units,
- give rise to any expense to the corporation,
- detract from the appearance of buildings on the property,
- affect the structural integrity of any building on the property (as determined by a competent professional, if a structural change is proposed), and
- contravene the declaration of the corporation or any requirements set out in the regulations made under the Act.
NOTE: When the relevant provisions of the Protecting Condominium Owners Act, 2015, are proclaimed in force, the requirement that the proposed change to exclusive use common elements not adversely affect other owners' units is to be replaced by a requirement that "the owners, on an objective basis, would not regard the proposed modification as causing a material reduction or elimination of their use or enjoyment of the units that they own or the common elements or assets, if any, of the corporation, as determined by the regulations." It will also become necessary to ensure the proposed change does not contravene the by-laws and rules of the corporation, as well as its declaration. |
If the proposed change is to any other (non-exclusive use) part of the common elements, then, before approving the same, the board must determine whether the change would have triggered any notice and/or voting requirements under section 97 if it had been a change proposed by the board rather than a unit owner. If it would, then the relevant requirements of section 97 must also be met in this case. (When the amendments to section 98 come into force that are set out in the Protecting Condominium Owners Act, 2015, then it will be possible for the government to modify these requirements in certain cases in the regulations made under the Act.)
Whether the owner's proposed modifications relate to exclusive use common elements or other common elements (or, when applicable, the assets of the corporation), the Act also requires that (if the board approves the change) the owner and the corporation enter into an agreement that deals with such matters as who will pay the cost of making the change and who will be responsible for its maintenance, repair and insurance. This agreement -- sometimes called an "Indemnity Agreement" -- is to be registered against title to the owner's unit and runs with title to the land, thus binding all future owners of the unit to its terms, and also ensuring such future owners of the unit also retain the benefits of the modification that is made. (For further information, see our About Condo memorandum on Indemnity Agreements.)
Whether the owner's proposed modifications relate to exclusive use common elements or other common elements (or, when applicable, the assets of the corporation), the Act also requires that (if the board approves the change) the owner and the corporation enter into an agreement that deals with such matters as who will pay the cost of making the change and who will be responsible for its maintenance, repair and insurance. This agreement -- sometimes called an "Indemnity Agreement" -- is to be registered against title to the owner's unit and runs with title to the land, thus binding all future owners of the unit to its terms, and also ensuring such future owners of the unit also retain the benefits of the modification that is made. (For further information, see our About Condo memorandum on Indemnity Agreements.)
What you need to know…
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…as a Unit Owner
Condominium unit owners sometimes forget that the adage, "your home is your castle," does not strictly apply in condominiums. Condominiums are shared ownership communities, and therefore each member of the community also shares certain obligations, including the obligation not to alter or harm other owners' property. Since the common elements and assets of the corporation are shared, and not individually owned, treatment of them is subject to that obligation. It is for this reason that the Act grants the corporation's board of directors -- a group of people selected by the owners to manage the property on their collective (not individual) behalf -- authority to approve or reject an owner's proposed changes to that property. The consequences of making changes without such approval in place include the possibility that the corporation may seek a court order requiring that the modification be removed and the common elements or assets be restored to their previous condition, all at the unit owner's cost. Also, if no agreement is entered into pursuant to section 98, future owners of the unit cannot assume they will be entitled to retain the common element improvements a prior owner of the unit made, which could diminish the value (and, hence, sale price) of the unit. |
…as a Board Member or Manager
Condominium directors and managers need to be careful in their observance of sections 97 and 98. Particularly when carrying out what they believe to be the repair and maintenance obligations of the corporation, the board and manager must be sure that if the work involves a modification to the property that goes beyond using materials that are as reasonably close in quality to the original as is appropriate, as determined by reference to current construction standards, they determine, before commencing the work, whether notice and/or voting requirements arise. Work schedules should be organized around meeting the requirements of section 97 of the Act, and not seek to circumvent, move ahead of, or avoid them. With respect to unit owner changes to the common elements (and assets, when the relevant provisions of the Protecting Condominium Owners Act, 2015, is proclaimed in force), boards not only need to ensure the provisions of section 98 (and, where applicable, section 97) are satisfied, but can explore means of effectively and efficiently achieving some aspects of this, particularly through the mechanism of a "Group Section 98 Agreement", as is explained in our above-referenced About Condo memo on Indemnity Agreements. |
…as a Declarant
Once the declaration and description have been registered and the condominium corporation has come into existence, the declarant no longer has the same extent of rights to alter the property as it might have had before registration. Declarants must be careful not to make changes -- particularly to the common elements, but also to the assets or services of the corporation -- without checking as to whether requirements of section 97 and/or section 98 have to be met. It is also recommended that declarants consider enacting the kind of agreement called for by section 98 of the Act, for all units and prior to closing the sales of any unit, covering the kinds of changes to common elements or assets that the declarant might want to be entitled to offer to purchasers, or that it anticipates the future owners of the units might want to make. Declarants should discuss this idea with legal counsel for the project early on, so that, if such an agreement is to be proposed, entered into and registered on title to the units in the development, it can be appropriately referenced in the disclosure statement required under section 72 of the Act (and, if necessary, in the unit purchase and sale agreements) and a copy of the draft agreement can be included in the disclosure package. |