Switching from Snail Mail to Email

MailThe first round of amendments to the Condominium Act, 1998, are scheduled to come into force on November 1, 2017. As you likely know, many of the changes will require more frequent (and voluminous) communications to owners. This extra paperwork could be very costly to produce in paper and deliver by mail. As such, now might be the time for most condominiums to switch to electronic means to deliver notices to owners. Electronic means is usually email, but it could be via fax, community website, or another method of communicating electronically.

What’s involved in electronic delivery of notices?

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Draft Reg#2 – Part 3

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The draft regulations also address issues like notices of meeting, voting, quorum, board meetings by electronic means, and voting thresholds for by-laws.

Notices of Meetings

The regulations set out the detail for the preliminary notice that must be sent to owners before an owners’ meeting. It details the type of information about candidates for director positions, candidates for auditors, and other material that owners want to be included (so long as 15% of the owners request it and it is not contrary to the Act or regulations). The preliminary notice will be a standardized form.

One thorny issue will continue to be requisition meetings. Since the amendments to the requisition process will not be included in the first phase of amendments, but the changes to the notice of meeting sections will be, it means that the board only has 5 days to send a preliminary notice of meeting after it receives the requisition. For example, if the requisition is received on January 10, the preliminary notice must be sent by January 14, the notice of meeting by January 29, and the meeting held on February 13. There would be no margin for error in sending out the notices or the meeting would be held beyond the period required by the Act (35 days from the receipt of the requisition).

It is intended that the regulations would come into force on July 1, 2017, but they would only apply to meetings held 40 days or more after the regulations come into force and for those where notice has not been sent.

Voting & Quorum

As you may know, quorum for meetings will be changed by the amendments to the Act. Quorum for owners meetings will be satisfied by: 1) 25% of the owners represented at the first and second attempts to hold the meeting; or 2) 15% of owners at subsequent attempts.

The regulations also require every condominium to have a standard provision in its by-law that no person voting by ballot, proxy, or electronic means, would be required to identify his name or the unit in which the vote is cast. There will be mandatory proxy forms for owners’ meetings instead of the optional forms used now.

In addition, there will be a lower threshold for voting for certain by-laws (i.e. to change the content for information certificates and notices, to add extra disclosure obligations for directors). Instead of a majority of all owners, the threshold would be lower: a majority of votes cast at the meeting.

These changes should be in force on July 1, 2017, but it would only apply to meetings held 40 days or more after the new quorum and voting sections of the Act come into force.

Interesting decision on material change from 40% increase in monthly fees

A new case sheds some light on the requirements for notice of a material change. Section 74 of the Act requires the developer to notify purchasers of material changes in any information contained or required to be contained in a disclosure statement.

In 2009 the purchasers agreed to buy a unit in the Trump Hotel from the developer. The closing date was to be in 2010. An amendment was agreed upon that extended the closing date to March 31, 2012 at the latest. In early 2012 the developer’s lawyer provided the closing documents to the purchasers’ lawyer. The purchasers’ lawyer noticed that the common expenses for the unit had increased from $1,775 per month in the original documents to $2,472 per month in the closing documents. The purchasers’ lawyer wrote to the developer’s lawyer about the difference and argued that it constituted a material change that required the developer to provide notice or a revised disclosure statement. The purchasers terminated the agreement, but the developer refused to return the deposit.

The purchasers commenced a proceeding against the developer. The purchasers argued that the developer’s lawyer had set a closing date, extended it and the developer failed to close by the closing date in the agreement. The developer argued that it had not extended the closing date. The purchasers sought an order requiring the developer to pay back the deposits paid, being $228,250. The developer sought a declaration that the deposits were forfeited.

The court found that the developer’s lawyer had authority under the agreement to extend the closing date and had done so by his communications to the purchasers’ lawyer. The court also found that the purchasers relied upon the communications of the developer’s lawyer to their detriment.

The most interesting portion of the case (for me at least) was that the developer argued that the purchasers should have invoked section 74 of the Act to rescind the agreement, and since they did not they were in breach of contract for failing to close. However, the court noted that the triggering event for rescission in section 74 of the Act is delivery of a revised disclosure statement or notice. The developer argued that the statement of adjustments provided to the purchasers’ lawyer by its lawyer prior to the proposed closing date was sufficient. The court disagreed and found that the purchasers were entitled to rescission since the triggering event (i.e. a revised disclosure statement or a notice of a material change) never occurred, which means the time period for rescinding the agreement had not begun.

The purchasers were entitled to their deposits back plus interest. Costs have not been decided.

This case is important for any developers, purchasers, and their lawyers since there are specific requirements for notice of a material change under section 74 that must be followed. A simple letter from the developer’s lawyer to the purchasers or their lawyer may not suffice.