The Controversiality of the Voting Threshold: Borrowing By-laws

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Earlier this week, we blogged about the considerations and processes involved when a condominium determines there is a need for borrowing from a lender, inclusive of the requirement for a borrowing by-law. In this post, we discuss a recent case related to the passage of borrowing by-laws, which has created some controversy within the condominium industry.

LaFramboise v. York Condominium Corp. No. 365, 2019 CarswellOnt 680, dealt with a motion brought by an appointed administrator on behalf of a condominium corporation, seeking direction from the court as to whether a borrowing by-law had been passed at an owners’ meeting. Although there was little information provided on the particular circumstances that led to this application, it appears that some unit owners may have questioned the validity of a borrowing by-law that was passed at an owners’ meeting, resulting in the motion for direction to be filed by the condominium corporation’s administrator.

Based upon an interpretation of sections 50 and 53 of the Condominium Act, 1998 (“Act”), the Court appears to suggest that so long as a majority of all unit owners within a condominium are present at an owners’ meeting called to consider a borrowing by-law, a borrowing by-law can be successfully passed with the support of a majority of all unit owners present at the meeting rather than a majority of all units within the corporation.

Respectfully, the conclusions drawn from the interpretation of the Act in this case are contrary to the Act; specifically, section 56(10) of the Act.

56(10) of the Act unambiguously states that a by-law is not effective until:

“(a) the owners of a majority of the units in the corporation, or such other number of owners that is prescribed, vote in favour of confirming it, with or without amendment…”

Unless a lower voting threshold is prescribed in the regulations, section 56(10) of the Act makes it clear that a majority of the units in the corporation must vote in favour of a proposed by-law in order for it to pass, rather than the majority of units present at the meeting.

An often overlooked section of the regulations provides additional support for our position. Section 1.1(1) states that a reference to the portion of units in a corporation in the Act or regulations shall be interpreted as a reference to a portion of: a) owner-occupied units; b) units that are not s.49(3) units (i.e. parking, storage, facilities or mechanical installations); or c) all units in the corporation if all units are s.49(3) units and clause (a) does not apply. Subsection (2) specifically states that subsection 1.1(1) applies to section 56(10)(a) of the Act. Accordingly, subsection 56(10) requires a majority of units in the corporation that are not s.49(3) units unless all of the units are those type of units.

As noted above, the regulations do outline various by-laws that can be passed by a majority of the units present at a meeting rather than a majority of all units in a corporation; however, you will note that a borrowing by-law is not one of the prescribed by-laws that may be passed with the support of a majority of units present at a meeting [see section 14(2) of O. Reg. 48/01].

Below you will find a chart prepared by our firm which summarizes the by-laws that can be passed by a majority of units present at a meeting, pursuant to the regulations:

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Based upon the clear language in section 56(10) of the Act and the regulations, we cannot agree that a by-law can be passed with the support of a majority of those units present at an owners’ meeting called for that purpose (unless the regulations specifically permit for a lower voting threshold). Rather, in order for a by-law to pass, a majority of all units within the corporation must vote in favour of it.

Accordingly, despite the existence of this case, it would be prudent for condominium corporations to continue to receive the support of a majority of all units within the corporation when attempting to pass a by-law, unless the regulations clearly prescribe a lower voting threshold for that type of by-law.

To Borrow or Not to Borrow? How Does the Process Work: Borrowing By-laws

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Photo by: Tom Reedy

We previously blogged about common myths regarding condominiums utilizing borrowing by-laws here https://ontcondolaw.com/2017/07/12/condo-financing-myths-debunked/

Condominiums have three ways to raise money

  1. Increasing monthly common expenses;
  2. Special assessment of owners; or
  3. Borrowing money from a lender.

As we noted condominiums typically use borrowing by-laws when they have to raise a substantial amount of money within a short period of time.

There can be a multitude of reasons a condominium may want to consider a borrowing by-law: an unexpected need to complete a major common elements repair/maintenance project before projected in the reserve fund, unexpected damage from a significant weather event (ex. the significant windstorm in southern Ontario in May 2018), or the desire to complete replacements related to a major common elements project (ex. installing new windows as part of a building envelope EIFS project). Continue reading

Clear and Current Disclosure

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In Toronto Standard Condominium Corporation No. 2051 v Georgian Clairlea Inc. (“Georgian”) the Ontario Court of Appeal affirmed the findings of the motion judge with respect to a declarant’s disclosure obligations as set out in the Condominium Act, 1998 (“Act”).

Subsection 72(1) of the Act provides that “the declarant shall deliver to every person who purchases a unit or a proposed unit from the declarant a copy of the current disclosure statement made by the declarant for the corporation of which the unit or proposed unit forms part” (emphasis added).  The obligation to provide the current disclosure statement demonstrates that the Act intends for the declarant’s disclosure obligations to continue as the project changes between inception and final closing. Continue reading

Condo Stats – Grand River Edition

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For any of the self-proclaimed condo geeks out there (I’m thinking of you Jon Juffs), I thought that I would update a post we did previously on condo statistics. As a director for the Grand River chapter of CCI and a resident of the area, it seemed most fitting to start with the Grand River. For those unfamiliar with the area, the Grand River includes Brant, Wellington and Waterloo.  In the next few weeks I’ll provide statistics for the other areas of Ontario.

As of June 27, 2017, the Grand River had 971 condominium corporations registered:

  • Brant – 105
  • Wellington – 237
  • Waterloo Region – 629

As of January 22, 2019,  the Grand River has 1007 condominium corporations registered:

  • Brant – 110
  • Wellington – 249
  • Waterloo 648

It should be noted that the total number is not the number of active condominiums as a few condominiums have been terminated or amalgamated. For instance, I attended a meeting for a Waterloo condominium last night that was created in 2004 when 20 condominiums (ranging in size from 3 units to 16 units) amalgamated into a single condominium. On my wish list is an accurate list of active condominiums for each jurisdiction. Maybe someone at the CAO could help us out?

Apart from the number of condominiums, the trends as far as type, number of units, and style appears to be holding steady. For instance, the last condominium registered in Wellington was a 36 unit townhouse style in Guelph. In my experience, many of the condominiums in Wellington are townhouses; high-rise and single detached condominiums are less common. The last one in Waterloo was a 77 unit low-rise in Waterloo. In Brant, it was a 9 unit vacant land condominium. As a percentage of the total number of condominiums, I suspect that Brant (or possibly  Middlesex) may have the most vacant land condominiums.

That’s it for now.  Share this post and let me know what area you want statistics for next!

 

Coming Soon – Better City Waste Collection Options for Condos in Guelph

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Last week I attended a meeting with staff from the City of Guelph’s Environmental Services department to hear about the City’s latest efforts to provide better waste collection services to multi-residential properties, including condominiums.  The City’s 2014 Solid Waste Management Master Plan Update included a recommendation that City waste collection be expanded to multi-residential properties. One of the key pieces of this recommendation – a front-end large bin collection vehicle – is set to be rolled out in the second quarter of 2019. This has taken longer than initially hoped, but better late than never, right? Continue reading

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

Knowing the Signs…Election Times

When you think of an election what comes to mind? In my experience, an upcoming election means preparing for the barrage of campaign advertising, door-to-door canvassers, and social media posts from your relatives and friends that have questionable fact checking. A significant contributor to the visuals of an election are the seemingly inescapable candidate signs on tufts of grass by the local Starbucks or throughout your neighborhood. Condominiums share the unique complication of sharing a collective yard space that represents the building, tenants, and condo corporation, so management must be prepared to manage the political participation of their owners and residents while staying up to date with the current law. Continue reading

Condo Act Changes: A Primer for Real Estate Agents & Lawyers

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Those working in the condo industry often complain that real estate agents and lawyers do not adequately advise their clients before they purchase units in condominiums. With the substantial changes recently made to the Condominium Act, 1998 (the “Act”), and more to come in the following months, it is sure to be a complaint we continue to hear for the foreseeable future. Today, I thought that I would provide a few tips for real estate agents and lawyers acting for those looking to purchase a unit in a condominium.  Continue reading

Common Errors with the Amendments: Part 2

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While we all get a handle on the new forms and requirements (and wait for further amendments still to come), I thought I’d do an update on a post I did a few months ago about common mistakes or misconceptions. Here are some of the most common issues we’ve encountered so far:

Myth: The preliminary notice of meeting is only required for annual general meetings.

Truth: The preliminary notice of meeting is required for ALL owners meetings, including annual general meetings, requisition meetings, and special general meetings. The only time it is not required is where the meeting is called solely to fill vacancies on the board where a quorum has been lost.  For more information, see section 12.2(5) of O.Reg. 48/01.

Myth: There is one form for disclosure by candidates and directors.

Truth: There is no prescribed form for disclosures by candidates or directors. That said, many law firms and management companies have created disclosure forms. Be careful when using these forms. The disclosure obligations for candidates and directors are NOT the same so different forms should be used for candidates prior to election and directors after their election or appointment.

Myth: Nothing bad will happen if we don’t file our returns with the CAO or pay our $1/unit/month assessments.

Truth: There are a number of possible consequences for failing to file the returns or pay the assessments:

  • The CAO can levy late fees for not filing returns on time (see section 9.6 of the Act).
  • The Registrar of the CAO can also order a person to comply with the return and assessment requirements (see section 134.1 of the Act).
  • A corporation that has not paid its fees is incapable of maintaining a proceeding before the Tribunal or a court, except with leave of the court (see section 23.1 of the Act).
  • A person who fails to complete returns or pay assessments may be guilty of an offence and liable to a fine of $25,000 for individuals and up to $50,000 for corporations!

Stay tuned for more common misconceptions and myths.

Soliciting Proxies: What’s Changed?

proxyI’ve had a few files recently where questions surfaced about the new restrictions on who can and can’t solicit proxies for owners’ meetings. When can a manager solicit a proxy? When can’t a manager solicit a proxy? It appears some people may be unaware of the changes to the rules governing the solicitation of proxies for owners’ meetings, especially by managers and others on their behalf.  Continue reading