Terminating Agreements in Condos

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There has been some talk about a recent decision of the Court of Appeal that discussed the duty of honest performance. The duty of honest performance “requires the parties to be honest with each other in relation to the performance of their contractual obligations”. This is not the first case to discuss this obligation, but it an important case for the condo industry.

A little about the case first. A contractor provided services to ten condominiums as part of a shared facilities agreement. There were two agreements. One for summer maintenance and one for winter maintenance. The winter agreement permitted the condominiums to terminate on 10 days’ notice to the contractor. The condominiums decided to terminate in March or April of 2013, but did not provide notice to terminate to the contractor until September after he had provided services at no charge to the condominiums as an incentive to renew the agreements. The contractor sued for breach of contract.

The Court of Appeal found in favour of the condominiums. While the condominiums may have failed to act honourably in delaying the termination and accepting the “freebies” when they knew they planned to terminate the agreements, their conduct did not rise to the level required for breach of the duty of honest performance. According to the terms of the contract the condominiums were required to inform the contractor of the decision to terminate and give him 10 days’ notice. As the Court said, “[t]hat is all the [contractor] bargained for, and all that he was entitled to.” Accordingly, the contractor’s claim for breach of contract was unsuccessful and the condominiums were awarded legal costs of $10,000.00 for the appeal and their legal costs of trial.

The case highlights the importance of reviewing agreements carefully before signing them to make sure you get what you bargained for. Even though the condominiums were ultimately successful, the case is a good reminder of how easy it is for a condominium to get into trouble when terminating an agreement. In many cases, condominiums terminate agreements without any legal advice and only seek our help after they’re in trouble. Here are some suggestions to help you avoid trouble in the first place.

Terminating Contracts – Condo Act Rights

The Act describes the termination rights of condominiums in some cases. For instance, some agreements entered into before the owners elect a new board at a turn-over meeting may be terminated by a condominium even if the agreement does not contain a termination clause. The requirements for termination, such as the notice period, vary depending upon the type of agreement. For instance, a management agreement can be terminated with at least 60 days written notice to the management company.

In some cases the agreement may only be terminated within the first 12 months after the turn-over meeting is held. A mutual use agreement may be terminated within 12 months following the turn-over meeting, but only if a judge of the Superior Court determines it is necessary to amend or terminate the agreement because the disclosure statement did not clearly and adequately disclose the agreement and the agreement is oppressive or unconscionably prejudicial to the condominium or the owners. Other agreements, such as those where the condominium receives goods or services on a continuing basis (i.e. snow removal), can be terminated with 60 days notice within the first 12 months following the turn-over meeting where the owners elect the new board.

An insurance trust agreement can be terminated upon 60 days notice to the insurance trustee, despite the provisions of the declaration or the insurance trust agreement. This is not restricted to agreements entered into after the turn-over meeting.

The termination of telecommunications agreements is described in section 22 of the Act. A condominium that includes one or more residential units may terminate a telecommunications agreement if at least 10 years have passed since the later of execution of the agreement and registration of the declaration. The Act also requires the board and the owners of at least 50% of the units approve the termination. The condominium must give 120 days written notice of termination to the other party. The termination right in the Act does not apply to agreements entered into after the turn-over meeting if the agreement is non-exclusive and the agreement also for the installation of other telecommunications systems.

It is important to keep in mind the termination rights described above do not permit a condominium to terminate an easement except in accordance with the easement instrument document. Often, easements are modified on the consent of the parties. In this case, the Act has specific requirements that a condominium must follow before it grants, transfers or releases an easements. In some cases, the condominium can do so by passing a by-law. In other cases an amendment to the declaration may be required.

Other Agreements

Where the Act does not provide termination rights the parties should look to the agreement itself and general contract principles, such as the duty of honest performance described above. In some cases, the agreement will describe a process for notifying the other party of performance issues before terminating the agreement. The purpose is to provide the other party with an opportunity to remedy the issue before the agreement can be terminated. In other cases, such as with employees, there may be legislation that describes the rights of the other party upon termination of the agreement by the condominium.

In most cases it is wise to have a lawyer review the agreement before providing notice of termination to the other party. The lawyer can help you determine the termination rights of the parties (i.e. applicable notice period) and advise you of the consequences for terminating an agreement early (i.e. being sued for breach of contract).

Upcoming Condo Conferences

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November is going to be a busy month in the condo industry with three conferences! Yes, you heard me right – THREE!

The CCI National kicks off the month with its Fall Leaders’ Forum in London November 8-10.  Apart from the Leaders’ Forum sessions there are several exciting social events planned including Big Band at the Station (CCI-N Awards Banquet) on Thursday and A Night at the Races on Friday. The 1st Annual CCI National Conference – Mental Health in Your Condo Community – will take over on Saturday. Don’t miss out on this amazing opportunity. Registration is still available. Hope to see you there!

The ACMO/CCI Toronto conference is back for its 22nd year on November 16 & 17. There will be over 200 exhibitors and dozens of great speakers. This is always one of the most popular educational events of the year so you are sure to see some familiar faces in the crowd, including some members of the Robson Carpenter LLP team.  Register now.

The CCI-EO/ACMO 2018 Kingston Condominium Conference will be held November 23 at the Ambassador Hotel in Kingston. It is sure to be a hit with topics like cannabis, electric vehicles, human rights, and a legal panel. And at $75 it is quite the steal! Register to avoid disappointment.

Don’t worry if you end up feeling exhausted from all of the events in November. Most chapters don’t have any events planned for December. Rest up. There are some exciting events coming in January.

Modified Record Request Process

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We hear complaints about the new record request process regularly from our clients and owners. The process is cumbersome with the new prescribed forms and timelines. The process takes longer than it did before in many cases (in part because it takes time for people to fill out the forms correctly). Many clients are confused about when they can and cannot charge the requester for labour and copying charges. All of these feelings are completely normal.

The regulations are confusing. Parts described in ten pages could have easily been described in one or two pages if charts were used instead of long, repetitive paragraphs referring the reader to check various other sections of the Act and regulations before they can determine the answer to what was a seemingly straightforward question. Before you know it you’ve spent 20 minutes trying to figure out the answer to a question that used to take 2 minutes.

There is a solution to all your record request problems: The condominium and owner can agree to modify the process. Hooray! Continue reading

Voting by show of hands

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At most condo meetings voting for procedural matters, such as to approve the minutes or adjourn the meeting, is typically done by show of hands. Other matters, such as voting on by-laws or rule changes, substantial changes to the common elements, or the election or removal of directors, are done by ballot and proxy. Does it always have to be this way? Can a show of hands be used for an election? What about a vote on a new by-law? Continue reading

Where there’s smoke there’s…a cannabis allergy

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While condominiums are rushing to get updated smoking rules in place before the upcoming cannabis legalization, a recent article published by the CBC suggests another potential issue to worry about in the rule enactment and subsequent enforcement stages.

The CBC article, “Woman’s deadly cannabis allergy highlights complexity of condo living”, published on September 20th sheds light on the fact that condominiums should be aware of potential competing human rights claims. The article addresses an instance where a person, named Adele, suffering from a life-threatening allergy to cannabis and cannabis smoke resides in the same condominium that has active registered  medical cannabis users. The article raises the question of how to handle competing and directly contradictory health concerns.

The answer of what to do in this instance where there are competing health concerns (and thusly potential human rights issues) within a condominium is unclear.

On one hand, a blanket rule prohibiting cannabis consumption within a unit may give rise to a human rights violation as it would prevent registered medical cannabis users from such use. On the other hand, allowing even just registered medical cannabis users to smoke cannabis within their unit would impose the potential of smoke finding its way out of the unit. Smoke seeping out of a unit may create another human rights violation if the smoke is able to come into contact with a person such as Adele who has a life-threatening allergy to it.

In the article, Adele states that already in her condominium cannabis smoke is leaking into hallways and into the ventilation system to the point that Adele never uses her balcony, puts towels against her door, uses two air purifiers, and tries to avoid all common areas except the laundry room.

It is ultimately up to the condominium board to find a way to accommodate both sides of this issue without violating the legitimate concerns and requirements for both sides. The board in Adele’s case is exploring options including banning smoking on Adele’s floor, making structural changes to units, and exploring whether medical marijuana users can use other means instead of smoking, such as oils or edibles.

Even if not currently faced with a similar situation, consideration of the possibility and careful rule drafting are important. Although there is no firm answer to the matter, condominium boards should ensure that rules are in place to allow control over cannabis consumption. Even if the condominium is to allow smoking, rules should allow the board to restrict smoking if it is causing a nuisance or is posing a health risk to other unit owners. While outright restricting cannabis consumption for registered medical users is likely not a good idea, condominiums may be able to restrict smoking and allow cannabis consumption through other means (such as edibles).

Restricting medical cannabis use to non-smoking means still may not be appropriate if a medical user is able to show that they are required to smoke or vaporize to achieve their doctor-prescribed treatment. This, however, may be case specific, and a restriction to consumption through non-smoking means unless medically necessary is seemingly one of the best options to take as a starting point.

Condominium corporations, moving  forward, must be mindful that any condominium could face the same conflicting concerns that the board in Adele’s situation is trying to resolve. It is better to take precautionary actions in this case than to wait and take reactionary measures once an issue arises.

This post was written by Justin Black. Justin is an articling student at Robson Carpenter LLP working with both the condominium management group and the condominium and subdivision development group.

The Black Hole of Record Requests

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Many good managers and directors have been pulled into the black hole that is record requests under the amendments to the Act. Since November 1, 2017 there is a new process for requesting records and providing copies or access to them. Unfortunately, the new process is complicated and time-intensive, which will likely to lead to more disputes than the old process.

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Amending the Condo Documents

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Lately our firm has been working on a lot of revisions to condominium documents: the declaration, description, by-laws and rules. Cannabis has been a very popular topic these past few months. Some condominiums are updating their condominium documents to reflect changes to the Condominium Act, 1998. Others are making changes to the number of directors or their qualifications.

Many clients complain that the process to change their documents is confusing. The main reason for the confusion is that each type of document has its own process to change it. The purpose of this post is to describe the basic process to change each of the documents.

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