The Condominium Act, 1998: Ontario's Comprehensive Review

June 8, 2012

Introduction

It has been eleven years since Ontario's Condominium Act, 1998 came into force. In that time, the condominium market has changed dramatically in both size and complexity. The Ontario government recognizes that a comprehensive review is necessary to modernize the Act so it reflects the current and future needs of owners, residents and other stakeholders in the condominium community.

On June 8, 2012, the government announced that the Ministry of Consumer Services will launch a review of the Act through a public consultation to identify a comprehensive set of issues and long-term solutions.

The consultation involves working in a new way, through an innovative public engagement approach, with people from the condominium community.

The goals of the review are to:

  • engage and work directly with all condominium stakeholders, including condominium owners and residents
  • build on findings and advice from a broad range of individuals and organizations that have been studying the issues in the condominium sector
  • find long-term solutions that will work for everyone in the years to come

This webpage provides background for anyone interested in the issues facing the condominium sector and who may want to become involved in the review. It outlines:

  • the need to review the Condominium Act
  • the approach that the government will use to undertake the review
  • the issues that have been identified to date by the public, condominium owners and other key stakeholders
  • how to stay informed on the review and its progress and become involved 

The Need For a Review

The condominium sector has changed dramatically since the Act first came into force in 2001.  Over one million people live in condominiums in Ontario.  In 2011, Toronto had the fastest growing high-rise condominium market in North America, with an estimated 120 buildings under development. In 2010, the Municipal Property Assessment Corporation estimated that there were over 525,000 condominium units in the province.

There is a wide variety of types of condominiums today – many did not exist when the Act came into effect. Today we see:

  • mixed-use condominiums (with commercial and residential uses)
  • hotel condominiums (with units used as hotel suites)
  • townhouse, low-rise and high-rise condominiums
  • retail condominiums
  • condominium conversions

Despite its immense popularity, condominium ownership remains an often poorly understood form of housing. The Condominium Act, regulations and individual condominium declarations and by-laws contain complex requirements and rules for security, maintenance costs, and for the use and enjoyment of common elements. Condominium ownership is quite different from owning a freehold home.

The current condominium development boom has brought to light significant concerns for buyers, owners, condominium boards, and the businesses that build, sell and manage condominiums. The ministry is aware of a range of concerns, including:

  • the growing number of absentee investor owners and landlords
  • unhappy experiences with buying a new condominium including unexpected costs following developers' handover
  • sudden increases in maintenance fees
  • insufficient knowledge about the condominium lifestyle, rights and obligations
  • lack of a quick and inexpensive means to resolve disputes
  • property managers and boards, who are not always familiar with their duties and obligations, yet are in charge of multi-million dollar budgets
  • the emergence of condos as the GTA's fastest growing form of rental accommodation.

Several other Canadian jurisdictions have updated or are currently seeking to update their condominium legislation. British Columbia, Alberta, Saskatchewan, Manitoba, Nova Scotia and Newfoundland and Labrador have all completed stakeholder consultations in reviewing their respective condominium legislation.

Understanding the Issues

Successful legislative reform requires that everyone affected have an opportunity to have their voice heard in the process. This is especially important when the subject involves rules that affect people directly in their homes and home communities.

The Ministry of Consumer Services is planning an approach that will engage interested individuals, groups and organizations affected by the Condominium Act, including owners, residents, developers, condominium board members, property managers, builders, brokers and lawyers.  Through an open and inclusive public engagement approach, the ministry will ensure that interested individuals and organizations have the opportunity to speak about their issues, hear the concerns of others, and work together to develop solutions. 

There are three components to this public engagement approach:

  • The first step is to bring together members from the condominium community to discuss their concerns
  • Next, they will work with a range of experts in the fields of concern that were identified to develop potential solutions
  • Then, before making a decision on any recommendations that would be presented to government, we would have an open and transparent discussion with the condominium community about the potential solutions

There are several benefits to using the public engagement approach to policy development, including:

Reaching out in a comprehensive, collaborative way

The identification of issues will be in the hands of the people that live them. Through a participatory, collaborative process, condominium residents and other stakeholders will have the opportunity to hear each other's concerns and work together to explore solutions.

Stakeholders "owning" their issues

Engaging condominium residents and other stakeholders to share their views and hear the views of others can bring Ontario's condominium community closer together.    

The approach will require the stakeholders and condominium residents to work together to identify issues and concerns, and to find solutions. Because these stakeholders are directly involved from the beginning, there will be a strong sense of ownership over the outcome.

Given the variety of stakeholders involved, any single issue may give rise to different ideas about how to resolve it. When the process gives stakeholders the chance to hear and understand each other's viewpoints, there is a greater likelihood of finding solutions that make sense for the community.

What We Know Today

We know there are challenges facing the condominium community in Ontario. The review will draw on work already done by organizations like the Association of Condominium Managers of Ontario (ACMO) and the Canadian Condominium Institute-Toronto and Area Chapter, which prepared a detailed submission with over 200 recommendations to reform the Act.

In 2010, the ministry conducted an online questionnaire of condominium owners to get a snapshot of their concerns. Over 3,100 responses were received which provided valuable information and insights into the condominium sector.

Overview of Issues Identified to Date

Issues in the condominium community appear to fall broadly into five key areas:

  • condominium board governance
  • dispute resolution
  • condominium finances and reserve fund management
  • consumer protection for buyers
  • expertise/accreditation of condominium managers

Below is a sampling of issues that have been raised. This is not an exhaustive list. The public engagement approach is intended to surface a comprehensive set of issues natural to a sector of this size and complexity.

Condominium Board Governance

A substantial portion of the Condominium Act is dedicated to the running of a condominium corporation. Suggestions have been made to better facilitate the relationship between unit owners and the corporation (via the board). Some of the issues we have heard so far include:

  • The high number of absentee owners in many condominium buildings has made it difficult to achieve quorum at annual general meetings impeding the ability to make fundamental changes to corporate by-laws.
  • Many directors do not fully understand their responsibilities and some may not have sufficient competencies to carry out their duties.
  • Unit owners who cause damage to other units or the common elements are not required to pay all costs, e.g., insurance deductible associated with repairs.

Dispute Resolution

Condominium owners and corporations have raised concerns that the existing legislated dispute resolution mechanisms of mediation and arbitration are costly and time-consuming.  Stakeholders in other provinces have raised and attempted to resolve similar concerns.

Some stakeholders have requested a third party dispute resolution mechanism in Ontario, similar to the Landlord and Tenant Board. Specific issues include:

  • Where there is a minor issue of non-compliance with by-laws or rules (such as a unit owner painting his/her hallway door in an unapproved colour), it is often not efficient to submit the matter to mediation and arbitration, and some have raised concern that some owners have used mediation / arbitration to unduly prolong their non-compliance (which can be costly for all parties). Similarly, requests have been made to clarify when disagreements can go straight to court for compliance orders.
  • Mediation is ineffective unless both parties are willing to come to an agreement, since mediation is non-binding.
  • Arbitration is costly and time-consuming as lawyers are usually engaged.

Condominium Finances and Reserve Fund Management

Concerns have been raised about the long-term viability of condominiums in the province. Condominium ownership is a relatively recent concept in Ontario – the first Act came into effect in 1978. In particular, there has been some recent media coverage about buildings that are in serious states of disrepair and which have required court-appointed administrators.

Specific issues include:

  • A lack of common standards under the Act concerning how to calculate reserve funds.
  • A need to expand the scope of the reserve fund to include the purchase of "green" technologies to conserve water and energy (e.g., grey water reuse and solar panels).
  • A lack of oversight of the proper use of reserve funds (e.g., no body to "police" if a Board does not comply with a reserve fund study).
  • Confusion about when the unit owner or board holds responsibility for repair and maintenance of windows, balconies, etc.

Consumer Protection for Buyers

Many condominium purchasers, condominium owner associations and boards, have raised concerns that developers are treating them unfairly and have asked the Act be amended to ensure fair dealing. Specific issues include:

  • The lack of Tarion warranty protection for condominium conversions.
  • Developers owning and either leasing or selling to condominium corporations' mechanical or electrical systems, roofs, garages, etc. that have traditionally been considered part of the condominium building's common elements.
  • Developers requiring condominium corporations to enter into agreements that increase the ongoing cost of ownership but do not become payable until after the first year of ownership (i.e., artificially low maintenance fees are advertised).
  • Agreements of purchase and sale and related documents which are opaque.

Developers, on the other hand, have told us that existing sale and contract materials provide home buyers with clear options and disclosure of key terms.  Further, the flexibility of terms that may be offered contributes to a healthy condominium marketplace with many choices for consumers.

Expertise/Accreditation of Condominium Managers

Concerns have been raised about condominium managers who do not understand the Act or their professional responsibilities, and who are also improperly advising condominium boards. Specific issues include:

  • A lack of knowledge, training, or oversight of property managers who can find themselves responsible for multi-million dollar operating budgets without any formal training. Many stakeholders point to licensing and registration as a solution.
  • Fraud or theft committed by managers. Recently, a GTA-based condominium manager was accused of fraudulently obtaining millions of dollars in loans by registering fake by-laws for the condominium corporations that had employed him.

Other issues

Residents have also raised condo-related issues that are beyond the scope of the Condominium Act. Over the years, recommendations have included changes to other statutes, including the Building Code, the Planning Act and the Ontario New Home Warranties Plan Act. Some of these issues may be raised in the course of the review. However, the focus will be on finding solutions to issues within the scope of the Condominium Act. Recommendations related to other legislation and aspects of condo living will be brought forward to the ministries responsible.

How You Can Get Involved

Details of the public engagement process will be announced this summer.  In the meantime, you can stay informed on the status of the Condominium Act review and register your interest in becoming involved.  You can: