Electricity Providers’ Requirement for a Security Deposit

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The Ontario Energy Board Distribution System Code (the “OEB Code”) provides that all local electricity distributors’ Conditions of Service must fall within the framework of the OEB Code when requiring electricity security deposits from their customers.

Given the above, when a condominium is presented with the requirement from an electricity distributor (ex. local municipal hydro corporation) to pay a security deposit, the Conditions of Service of the electricity distributor should be reviewed to ensure the request complies with the OEB Code.

In short, the OEB Code does not always require new residential condominiums (as residential customers) to provide security deposits to electricity distributors.

Section 2.4.10 of the OEB Code provides residential customers are deemed to have a “good payment history” (the absence of which allows for requiring a security deposit), unless one of the enumerated default events in section 2.4.9 has occurred.  Being a new customer is not one of the listed events.

More specifically, a condominium should be aware of some of the following provisions under the OEB Code:

1. Residential Condominiums are residential customers: under section 2.4.30A of the OEB Code condominiums with units predominantly used for residential purposes are “deemed a residential customer for the purposes of section 2.4.9” which provides the basis for the electricity distributor’s requirement of a security deposit.

2. Requirement for Security Deposit: section 2.4.9 of the OEB states in part (see below) that a security deposit can be required by the electricity distributor unless a residential customer has a good payment history of one (1) year subject to restrictions regarding calculating the good payment history period and reasons requiring the security deposit form the customer:

2.4.9 A distributor may require a security deposit from a customer who is not billed by a competitive retailer under retailer-consolidated billing unless the customer has a good payment history of 1 year in the case of a residential customer, 5 years in the case of a non-residential customer in a <50 kW demand rate class or 7 years in the case of a non-residential customer in any other rate class. The time period that makes up the good payment history must be the most recent period of time and some of the time period must have occurred in the previous 24 months. A distributor shall provide a customer with the specific reasons for requiring a security deposit from the customer.

*Note: recent amendments to section 2.4.9 that came into effect March 1, 2020, provide that before requiring a security deposit from a residential customer that has not been serviced by the electricity distributor in the previous twenty-four (24) months, the customer shall have the option to enroll in an equal payment plan, pre-authorized payment plan, or both.  If one of such enrollment options is chosen no security deposit can be required unless there is default by the customer.

2.4.9A Before requiring a security deposit under section 2.4.9 from a residential customer who has not been served by the distributor in the previous 24 months, a distributor shall offer the customer the option of enrolling in an equal monthly payment plan in accordance with the Standard Supply System Code, a preauthorized payment plan, or both, and where the customer elects to enroll, no security deposit shall be required

3. Deemed Good Payment History: section 2.4.10 (see below) provides that in the absence of certain default events a customer shall be deemed to have a good payment history for the purposes of requiring a security deposit:

2.4.10 For the purposes of section 2.4.9, a customer is deemed to have a good payment history unless, during the relevant time period set out in section 2.4.9, the customer has received more than one disconnection notice from the distributor, more than one cheque given to the distributor by the customer has been returned for insufficient funds, more than one pre-authorized payment to the distributor has been returned for insufficient funds, a disconnect / collect trip has occurred or the distributor had to apply a security deposit in accordance with section 2.4.26A and required the customer to repay the security deposit in accordance with section 2.4.26B. If any of the preceding events occur due to an error by the distributor, the customer’s good payment history shall not be affected.

A plain reading of this section suggests condominiums should push back against electricity distributors requiring payment of a security deposit on the grounds they are already deemed to have a good payment history and have not committed any of the events of default listed in 2.4.10. This argument could be resisted by the fact the new customer is deemed to have a good payment history but 2.4.10 does not say the good payment history is deemed to be for the time period required by 2.4.9. However, 2.4.10 does note that the deeming of a good payment history is “for the purposes of 2.49”.

As noted, not having a payment history is not one of the listed items that contradicts the deeming of a good payment history.

This provision can also be especially important when electricity distributors try and require developers or condominium corporations to pay a security deposit for each subsequent phase after the initial registration of a standard condominium plan.

It is possible the above position will be considered overruled by the amendment to the OEB set out in 2.4.9A and a new condominium may be forced to elect to enrol in one of the payment methods set out in that subsection.

If this argument is resisted because of there being no payment history, the condominium should choose to enroll in an equal payment plan, pre-authorized payment plan, or both in light of the provisions in 2.4.9 that provide if one of such enrollment options is chosen no security deposit can be required.

4. Amount of Security Deposit: Effective March 1, 2020 section 2.4.12 which sets out the formula for the maximum security deposit an electricity distributor can require reads:

The maximum amount of a security deposit which a distributor may require a customer to pay shall be calculated by multiplying the distributor’s billing cycle factor and the customer’s estimated bill (which shall be based on the customer’s average monthly load with the distributor during the most recent 12 consecutive months within the past two years). Where relevant usage information is not available for the customer for 12 consecutive months within the past two years or where the distributor does not have systems capable of making the above calculation, the customer’s average monthly load shall be based on a reasonable estimate made by the distributor.

Also, important to note is section 2.4.16 which establishes the billing cycle factor used in the formula:

2.4.16 For the purposes of sections 2.4.12, the billing cycle factor is 2.5 if the customer is billed monthly, 1.75 if the customer is billed bi-monthly and 1.5 if the customer is billed quarterly.

5. Payment of Security Deposit: If the condominium for some reason agrees to pay the electricity distributor’s security deposit, the condominium should be aware that sections 2.4.20 and 2.4.20A permit condominiums to pay the deposit in equal installments over at least 6 months rather than as a single lump-sum payment.

6. Review/Return of Security Deposit: sections 2.4.22-23 of the OEB Code provide that a customer’s security deposit must be reviewed by the electricity distributor at least once in a calendar year to confirm if the customer should be returned the deposit as it is now exempt in accordance with section 2.4.9.  If payment of the deposit was made via equal installments the distributor’s review shall occur on the anniversary of the calendar year in which the customer made their first payment.

Note: Section 2.4.28 contains provisions for returning the deposit to a 3rd party in situations where a 3rd party (ex. developer) paid the security deposit on behalf of a customer (ex. condominium)

The electricity distributor also should have Conditions of Service that may provide further arguments against a requirement for a security deposit depending on how the Conditions of Service are written. If the local Conditions of Service contradict the OEB Code, the OEB Code overrides the local Conditions of Service according to Sections 1.4 and 1.5 of the OEB Code.

It is therefore important for condominiums and developers to confirm if their electricity distributor’s Conditions of Service comply with the OEB Code’s standards when requiring a security deposit.

If an electricity distributor continues to insist on a security deposit from a residential condominium or proposed residential condominium, the Consumer Complaint Response Process set out in Section 10 of the Code should be implemented. This process sets out some relatively short time periods for the electricity distributor to respond to the complaint.

Condominiums must also ensure no default in payment occurs to their electricity distributor as default in payments opens the condominium up to having to pay a security deposit.

End of the Declared Emergency: Your Most Common Condo AGM Questions Answered

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As you probably know, the declared emergency in Ontario came to an end on July 24, 2020, with the enactment of Bill 195. I’ve received several emails and calls today from clients looking for advice on what Bill 195 means for condominiums. The most significant concern seems to be the requirement for holding AGMs and the temporary extensions for holding AGMs that were provided for in Bill 190. Today I’ll answer a few of the most common questions. Continue reading

Update on Previous Post – Fight Fire with Fire: Seeking Court Orders to Amend the Declaration

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Last year we posted about a case where a condominium commenced an application to the Superior Court of Justice for an order amending its declaration. The condominium wanted amendments to its declaration because of a repair and maintenance issue with the fireplaces in the building. A group of owners with fireplaces filed their own application seeking to have the chimney flues deemed part of the common elements, which the condominium was responsible for maintaining and repairing. They also sought an order requiring the condominium to maintain and repair the chimney flues.

To summarize, the court ordered the declaration amended to make the fireplaces exclusive use common elements, but refused to amend the declaration to require the owners to maintain and repair the fireplaces. As a result, the condominium would be responsible for the repair of the fireplaces while the owners and condominium will continue to share the obligation for maintenance of the fireplaces. Our previous post is available here:https://ontcondolaw.com/2019/08/02/fight-fire-with-fire-seeking-court-orders-to-amend-the-declaration/ Continue reading

Summer Reading: Condominium Authority Tribunal (CAT) 2020

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The courts might have slowed down because of the pandemic, but the Condominium Authority Tribunal (CAT) appears to be unaffected by the pandemic. The CAT is predominantly online with less rigid rules than traditional courts, so this makes a lot of sense. It is relatively easy for online processes to continue in most cases. Here are some of the highlights from the CAT this summer. Continue reading

Reminder: Feedback on Future Amendments to Act Due August 14, 2020

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As you may have heard by now, the Ontario government is looking for feedback on its latest proposals for future amendments to the Condominium Act, 1998. Specifically, it appears that the government is planning to move forward with implementing a “Condo Guide” that would explain, in plain language, basic information for purchasers of new condominiums on such important matters such as the rights and responsibilities of owners, occupiers, and directors. The guide would be prepared by the Condominium Authority of Ontario (CAO) and developers would be required to provide a copy of the Condo Guide to purchasers with other disclosure documents.

Interestingly, the CAO has already developed a Condo Buyer’s Guide, which is available on its website: https://www.condoauthorityontario.ca/resources/condo-buyers-guide.pdf That said, the proposed table of contents suggests that the new Condo Guide will be more comprehensive, including topics such as purchasing a unit (new and resale), moving into a pre-construction condominium, condominium living, troubleshooting, and a glossary of key terms.

The government intends to implement the changes on December 1, 2020. Comments are due by August 14, 2020. Comments can be made on the government website at: https://www.ontariocanada.com/registry/view.do?postingId=33587&language=en

 

Virtual Requisition Meetings

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I am hearing reports that many condominiums are postponing their annual general meetings (“AGMs”) due to COVID-19 instead of using virtual means to hold them. Some condominiums are also avoiding decisions that could result in a requisition by owners, such as making changes to the common elements, assets, or services under Section 97 of the Condominium Act, 1998 (the “Act”), or creating, amending or repealing rules under Section 58. Many appear reluctant to use virtual meetings and electronic voting for a variety of reasons, but the primary concerns appear to be about the security of virtual meetings, the inability of owners to use the technology, and the associated costs.

Last week I participated in my first virtual requisition meeting to remove two directors from the board of directors of a condominium. I have participated in other types of virtual owners’ meetings, but this was the first requisition meeting so I was not sure if it would work as well. Today I thought I would discuss my experience. Continue reading

Amendments to the Condominium Act, 1998: A Recap of 2017 to 2020

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As you may recall, on November 1, 2017, parts of the Protecting Condominium Owners Act, 2015 (“PCOA”), came into force. The PCOA amended the Condominium Act, 1998, and other legislation to protect owners and provide them with more information about their condominiums. Original estimates suggested that the remaining amendments from the PCOA would be rolled out in phases with the first phase as early as the Spring of 2018 and all amendments within a year or two. This did not happen. Most of the PCOA still has not come into force. Continue reading

COVID-19 Resources & Update

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As you may have noticed, I have not blogged about COVID-19 much these past few months. This was an intentional decision based on a number of factors. The situation was evolving so quickly that it seemed like my advice was changing almost daily at times depending on the recent statistics, public health recommendations, emergency orders, and the law. I did not want to confuse or mislead people who might be reading the blog weeks or months later. Also, some people reported feeling overwhelmed by the number of articles, blog posts, and webinars on the topic. I felt it was unnecessary to add to the stress when so many others were doing such a great job publishing information about the subject. I am still frequently asked about COVID-19 resources for condominiums and owners, so today I am going to provide a list of some of the available resources. Continue reading

Guest Post: Dawn of the Virtual Meeting

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Written by: Noah Maislin, CEO, Minutes Solutions

http://www.minutessolutions.com

Effectively operating a condominium is a juggling act at the best of times. In a few short weeks, COVID-19 has utterly upended our world: keeping all the balls in the air is now trickier than ever.

The Ontario government recognized that property management companies are essential to the health and safety of condominiums by allowing the firms to stay open for business during this global pandemic.

But how do you ensure a community runs smoothly in the new reality of social distancing and self-isolation when a best practice of good condominium management is holding regular meetings with quorum? Without hashing it all out in person, how does a board and its management team collaborate to pick contractors for repairs, ensure completion of urgent work, set timelines, monitor finances, develop budgets, protect the health and safety of residents and staff, pinpoint priorities, address resident concerns, and so much more?

Condominium life doesn’t get put on hold during a worldwide health crisis: if anything, clear communication and nimble decision-making become paramount when the global situation and business landscape can change hour by hour. Add to the mix the spring AGM season and the challenges may seem insurmountable.

Enter virtual meetings: in this emergency, the infrastructure that developed in recent decades has stepped into the breach. When stakeholders can’t be in the same room, connecting remotely is an excellent alternative that still enables all parties to engage and collaborate — even face-to-face — without missing a beat. Typically, the Ontario condominium legislation permits digital or electronic board meetings (e.g., by video or teleconference) as long as all directors consent and are able to communicate at the same time. However, the legislation was recently amended (as of April 24, 2020) to allow board meetings to be called and held virtually, even if not all directors consent.  It also allows for AGMs to be held virtually, regardless of what the corporation’s by-law permits.

From the tens of thousands of hours of in-person and virtual meetings Minutes Solutions has serviced, we have come away with some insights about remote communication:

  • The Difference Between Videoconferencing and Teleconferencing: Most organizations that are accustomed to working with their teams in-person prefer videoconferencing over audio-only calls. Video isn’t difficult to use and it more easily facilitates social learning and focus even while working remotely. It can also be preferable for tallying votes when a motion is presented at a meeting and for keeping track of who says what. But make no mistake, making decisions and taking action by teleconference are still preferable over not acting at all merely because an in-person meeting isn’t possible.
  • The Top Platforms — Zoom vs. Google Meet vs. GoToWebinar: All three platforms can support dozens of attendees at a time, enable screen sharing, and offer good connectivity. All that’s needed are a decent Internet connection and a functional device. Zoom is easy-to-use, intuitive, and simple to schedule. Google Meet is a smooth transition for users of other Google products. GoToWebinar is the best tool for polls, voting, and obtaining attendee reporting/analytics (better for AGMs, not board meetings).

  • Your Recording Secretary Can Still Attend Your Meeting Virtually: As always, proper documentation creates continuity for a corporation as it navigates all the decisions and tasks involved in managing a condominium. Your minute taker can log-in or dial-in to take minutes live, or can complete the minutes offline from a recording. All the above videoconferencing options can also record your meeting; if you go this route, make sure your team consents to your policies for recorded meetings and understands the privacy considerations.

While it’s true there can be an initial learning curve in adapting to new technology, the pandemic has highlighted the convenience and efficiency of virtual meetings, not just when social distancing is required. When calmer times return, remote, live communication will complement in-person meetings, and may even replace them in some situations.

Virtual solutions expand the business landscape by offering further options for following best practices in condominium management and for tackling new challenges creatively and collaboratively.

Can Unit Owners Examine Opinions or Invoices from the Condominium’s Lawyer?

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Owners are entitled to examine records of the condominium. Subsection 55(3) of the Condominium Act, 1998, gives owners the right to examine or obtain copies of the condominium’s records, subject to certain limits described in subsection 55(4). Subsection 55(4) excludes certain records, including records related to other owners or units and records “relating to actual or contemplated litigation”. These provisions are designed to balance the competing interests of the owners and protect the condominium’s interests. Continue reading