CONDOMINIUM ACT, 1998 / LOI DE 1998 SUR LES CONDOMINIUMS
CANADIAN CONDOMINIUM INSTITUTE, GOLDEN HORSESHOE CHAPTER
DEACON, SPEARS, FEDSON AND MONTIZAMBERT
CANADIAN BAR ASSOCIATION -- ONTARIO
CANADIAN CONDOMINIUM INSTITUTE, ONTARIO
CANADIAN CONDOMINIUM INSTITUTE, OTTAWA CHAPTER
BROOKFIELD LEPAGE RESIDENTIAL MANAGEMENT SERVICES
CANADIAN CABLE TELEVISION ASSOCIATION
CONTENTS
Wednesday 28 October 1998
Condominium Act, 1998, Bill 38, Mr Tsubouchi /
Loi de 1998 sur les condominiums, projet de loi 38, M. Tsubouchi
Canadian Condominium Institute, Golden Horseshoe chapter
Mr Ron Danks
Deacon, Spears, Fedson and Montizambert
Mr John Deacon
Mr Kevin Crowe
Canadian Bar Association -- Ontario
Ms Audrey Loeb
Bratty and Partners
Mr Michael Volpatti
London Guarantee Insurance Co
Mr Sandy Ewen
Mr Bernie Sieger
Canadian Condominium Institute, Ontario
Mr Jerry Hyman
Canadian Condominium Institute, Ottawa chapter
Mr Jim Davidson
Brookfield LePage Residential Management Services
Mr John Oakes
Delzotto, Zorzi
Mr Harry Herskowitz
Canadian Cable Television Association
Mr Roy O'Brien
Mr Ken Engelhart
Mr Peter Nielsen
Mr Leor Margulies; Mr Alan Dean
Subcommittee report
STANDING COMMITTEE ON GENERAL GOVERNMENT
Chair / Président
Mr John O'Toole (Durham East / -Est PC)
Vice-Chair / Vice-Présidente
Mrs Julia Munro (Durham-York PC)
Mr Mike Colle (Oakwood L)
Mr Harry Danford (Hastings-Peterborough PC)
Mrs Barbara Fisher (Bruce PC)
Mr Tom Froese (St Catharines-Brock PC)
Mr Steve Gilchrist (Scarborough East / -Est PC)
Mr Wayne Lessard (Windsor-Riverside ND)
Mrs Julia Munro (Durham-York PC)
Mr John O'Toole (Durham East / -Est PC)
Mr Mario Sergio (Yorkview L)
Substitutions / Membres remplaçants
Mr Douglas B. Ford (Etobicoke-Humber PC)
Mrs Lillian Ross (Hamilton West / -Ouest PC)
Also taking part / Autres participants et participantes
Mr Rick Bartolucci (Sudbury L)
Mr David Caplan (Oriole L)
Mr John Gerretsen (Kingston and The Islands / Kingston et Les Îles L)
Mr Tony Martin (Sault Ste Marie ND)
Mr Bruce Smith (Middlesex PC)
Clerk / Greffier
Mr Tom Prins
Staff / Personnel
Mr Christopher Wernham, legislative counsel
The committee met at 0947 in committee room 1.
CONDOMINIUM ACT, 1998 / LOI DE 1998 SUR LES CONDOMINIUMS
Consideration of Bill 38, An Act to revise the law relating to condominium corporations, to amend the Ontario New Home Warranties Plan Act and to make other related amendments / Projet de loi 38, Loi révisant des lois en ce qui concerne les associations condominiales, modifiant la Loi sur le régime de garanties des logements neufs de l'Ontario et apportant d'autres modifications connexes.
The Chair (Mr John O'Toole): I'd like to convene this session for the hearings on Bill 38. Also, for the record, the clerk has just advised me that all the caucuses had been advised that this meeting was to start at 9:40 and, out of respect to the deputants, we would ask to go forward and hear those comments.
CANADIAN CONDOMINIUM INSTITUTE, GOLDEN HORSESHOE CHAPTER
The Chair: I'm going to call the Canadian Condominium Institute, Golden Horseshoe chapter. Could you approach the desk and, for the record, pronounce your name and the organization you're representing. You have 20 minutes to use as you wish.
Mr Ron Danks: Good morning. My name is Ron Danks, president of the Golden Horseshoe chapter of the Canadian Condominium Institute. Our chapter takes in a territory bounded by Niagara Falls, Welland, Kitchener, Guelph, through to Oakville. Our membership is drawn primarily from the Hamilton-Wentworth and Halton areas where we represent in excess of 11,500 residential condominium units and roughly 30,000 adults living in those units.
Our membership has been very involved in the development of the new legislation, working through the working draft and lately Bill 38. We have conducted a number of polls of our membership, questions and answers at numerous seminars, and of course we've received many written submissions from our membership. As a result of that, we've also participated in the ACMO/CCI joint committee and we wholly support the recommendations contained in the submission made by that group, of which I am also a member.
Our chapter, our membership specifically, would like to focus today, if we could, on five issues that we feel very strongly about.
First of all, we'd like to start by saying that we applaud the new legislation and we look forward to it being enacted as soon as it can. We do believe, however, that this is, practically speaking, the last opportunity we may have to fine-tune some of the provisions that are there so that what we end up with is not only a good piece of legislation but a workable piece of legislation for the people out there who are going to be dealing with it on a day-to-day basis, specifically our membership, the owners, the boards of directors and the property managers.
The first item I'd like to address is subsection 31(13), director's re-election, and the restriction on a director to only serve two terms before they are required to step down. Our membership feels very strongly about this and would like it removed. They do not believe it's necessary. There may have been a few occasions when perhaps a declarant board retained control for too long or a group of investors may have held on to a board or control of a board, but by far, 95% to 98% of the condos out there are made up of owners on the board. They will always have owners on the board.
The time it takes to train a new director -- it's at least three years just to get a good feel of this condo, this community, what the background is, what the needs are. When you get into your second term, you're really coming into your prime as a director, and many corporations do have directors who have served, two, three and sometimes four or five terms. The owners don't object to that. They re-elect them through the elections every three years. There are opportunities and provisions available under the legislation to remove a director, either by not voting for them next time around or removing them early if they find that they're not performing their duties. So our membership feels very strongly that to restrict to two terms would deprive the corporations of experienced directors who, generally speaking, all do a very good job of what they're doing.
The next item I'd like to talk about is the performance audit. This is the engineering investigation that's required to be completed within the first year of the registration of a new condominium. The idea of this was that it would force, in some cases, developers who retain control of the corporation for a little bit too long and, in most cases, the first board of directors, to get some kind of study done of the complex and submit it to the Ontario home warranty program to ensure that their interests are protected. The problem with the language in this is that it's somewhat reinventing the wheel. It's a standard procedure now for a corporation to obtain what's called a technical audit within that first year. A technical audit is a thorough investigation of all the common elements of the corporation finalized in report form and then normally submitted by the corporation to the warranty program in support of any deficiency claims that report might reveal.
The performance audit that's described in the legislation is something short of a technical audit. It deals with only the major components. The problem this will cause is that it's really forcing the condominium corporations to buy two engineering studies. One is the performance audit, as required under legislation, and the second one will be to acquire a technical audit to fill in all the gaps that the performance audit doesn't cover. Since all of those costs are going to be picked up by the homeowners in that condominium, we believe the provision respecting the performance audit should be amended to reflect that the study must encompass all of the common elements and assets of the corporation. Assets include units that the corporation may own that have service facilities such as transformers or water pumps. It's not uncommon to see that kind of set-up.
Another issue that gives us a lot of concern is the definition of a substantial change or alteration to the common elements under section 98. Currently it's really up to the board of directors working with the unit owners to determine whether a proposed alteration such as a major renovation of a lobby or something along those lines is considered to be substantial or not. A lot of factors are taken into consideration. Cost is certainly one of them, but it's not the determining factor in a lot of situations. It doesn't cost a lot of money, for example, to tear down a recreational centre. In fact, I have a file right now in my practice where a condominium wishes to do that. The cost of tearing it down will amount to something less than 5% of their total budget, but certainly the impact on the owners will be substantial because they'll be deprived of this recreational centre.
On the flip side of this, we have situations where condominiums are entering into energy retrofit projects, converting from hydro-electric heat to gas, which is encouraged by all levels of government. The initial upfront cost to do that conversion could be a substantial amount of money, given the size of the corporation. However, the savings generated on a yearly basis, almost immediately, amount to tens of thousands and in some cases hundreds of thousands of dollars over the next five to 10 years. In fact, these energy retrofits often pay for themselves within five years. So cost alone, again, is not the determining factor in whether those kinds of alterations -- the alterations it would be necessary to retrofit -- are substantial or not.
We're asking that this provision be deleted. Let the owners and the boards of directors decide what is substantial and what is not. All we're asking for is a definition. The voting requirements at 66 2/3 is fine. The omission of the buyback provision for owners who disagree with the vote is fine because there are other remedies available. The oppression remedy is available to deal with those situations.
The issue of insurance deductibles, section 106, is another great concern for condominium corporations. The average condominium corporation is going to have deductibles, depending upon the type of claim, ranging from $500 to $5,000, which is becoming quite common, especially for water damage claims. It's becoming an increasingly severe burden on a lot of condominium corporations to try to pay for those deductibles in the face of sometimes numerous claims when you have a major storm, such as the two hurricanes or the tail ends of the hurricanes we had a few years ago.
We appreciate the fact that deductibles can be collected where damage occurs to a unit which is caused by an act or omission of the owner. We just don't believe it reflects the current law. There's been an appeal court decision recently that sets out very nicely what the law in Ontario is today on the issue of collecting deductibles from owners. The damage must not be limited just to the units, because in many cases the most severe damage is caused to the common elements and other units. For example, in your typical water damage claim, somebody's messing with their plumbing or whatever and all of a sudden you have five or six units below that are flooded out. Restricting the ability of the corporation to just claiming damages to the unit -- the unit itself where the damage originated may have very little damage. It may just be a matter of going in and mopping up the water on the bathroom floor and shutting off the pipes. Most of the damage has occurred to the common elements and the other units.
We'd like to see that clause expanded to include damage to the other units and common elements, and not necessarily require that the owner do some act or omission that results in the damage. The average homeowner insurance has deductibles, and the deductible applies whether it was something that we deliberately did or something that just happened -- the toilet seal going or the pipe bursting for no apparent reason. If it's ours, if it's in our house, we're responsible for the deductible. We're suggesting that the same rules apply essentially to condominium homeowners, to also defeat, in a large sense, the nuisance claims where people are deliberately damaging carpeting and things like that to get replacement under the insurance for the corporation.
Another area that we have some very big concerns about is the clause under subsection 133(4) involving disagreements between corporations and owners. We like the idea of requiring mediation and arbitration. We're concerned, however, that the way the clause is drafted, it infers that any dispute in respect of a declaration, bylaw or rule would have to go to mediation and, failing mediation, arbitration through the Arbitration Act.
The problem with that is, if somebody is breaching a rule, if they're causing a nuisance, if they're having wild parties every Saturday night, and the corporation makes an effort to enforce that rule, that person says, "Well, the rule's not reasonable; it wasn't enacted properly," and all of a sudden, do we have to go through a mediation process and, if that's not successful, through an arbitration process? This in reality can take months and months to complete and costs the corporation and the homeowner quite literally thousands of dollars, because mediation isn't free and neither is arbitration. In many cases, the cost of mediation and arbitration can exceed the legal costs of going for a compliance order under section 135 of the act, the new legislation.
Therefore, we'd like to see subsection 133(4) -- and it would have to be tidied up in section 135 as well -- amended to make it clear that mediation and arbitration are not required where a breach of the rules or a breach of a provision in the declaration bylaws or the act, for that matter, occurs. In other words, give the corporation the right to immediately proceed to a judge to get an order where you have these kinds of things going on, such as the nuisance, such as ongoing damage to the property, harassment of other owners and some of the more serious issues that corporations are faced with from time to time.
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We'd also like to suggest that the clause be expanded to include disputes between the corporation and owners respecting interpretations of the act itself, as well as joint bylaws and joint rules. There are other provisions in the legislation which allow phased corporations to create joint bylaws and joint rules that affect all of those corporations. Mediation would seem to be the best method of solving a dispute, say, between the corporation and an owner over one of those as well. It's simply a matter of expanding the language somewhat.
Last is the oppression remedy, subsection 136(4). We're suggesting or recommending there that a clause or a sentence be added to make it clear that if mediation and arbitration have been tried and a decision or a settlement has been reached, the oppression remedy should not be made available to deal with that same issue or substantially that same issue. This is simply to avoid a multiplicity of actions and an owner who's determined to further their personal agenda from carrying it on and on and on to the detriment of the corporation and the cost of all the other owners.
I think at that point I'll end my presentation. I'd certainly be available for any questions.
The Chair: Thank you for your presentation. There are about four minutes remaining, so I would ask for a very quick question or comment from each of the caucuses, starting with the Liberal caucus.
Mr Mario Sergio (Yorkview): I don't have a specific question. I was interested in listening to the presentation and I'm pleased that he has taken the time to come down. I've made some notes and I have no specific questions. Thank you.
Mr Wayne Lessard (Windsor-Riverside): Same.
The Chair: For the government side, Ms Munro.
Mrs Julia Munro (Durham-York): I just wanted to ask you a question in reference to the issue of the term of a director. You indicated that it takes a few years for people to be comfortable and therefore you feel that six years would mean that you're putting a limit on the opportunity for the expertise of people. We've heard from others who have indicated their support for that kind of time limit. As it stands now, there isn't any kind of time limit. I'm just wondering whether or not you see any virtue in -- if it's not six years, should there be something in the legislation that does give people that kind of limit?
Mr Danks: No, I don't think there should be. I think there are opportunities under the legislation where a group of owners feel that perhaps it's time that a particular director step down. The options are that you don't vote for them next time around, obviously, or you use the ability to remove a director early from their term of office.
You have to consider too that there are literally hundreds, perhaps thousands of condominiums in Ontario that are comprised of no more than 15 or 20 units. You have a very small pool of expertise to draw on. Traditionally in those situations you get the same directors coming back every year, because nobody else wants the job in a lot of cases. It would be a real burden on those small corporations to impose this restriction on them, because you may end up some year with vacancies on the board that just can't be filled.
Mr Douglas B. Ford (Etobicoke-Humber): I'd like your opinion on the insurance aspect of the condominium. Do you think the condominium management or whoever is running that condominium should carry the insurance or the individual dwelling owner should carry the insurance or extended insurance? In other words, if the condominium association carries the insurance, they download it to the various tenants within that building, but do they carry their personal insurance?
Mr Danks: No. The way it is today is, the condominium corporation will maintain a policy of insurance to cover both the common elements and the units as originally built. So your basic model, if you like, the day it was first occupied, is covered by the insurance of the corporation. That shouldn't be changed, because the intent was to avoid what we call the black hole theory, the fact that somebody could not carry insurance, the unit could burn down and you're left with this empty shell.
The homeowners should, and do normally, obtain their own unit policy to cover their contents, liability and their betterments and improvements. Under the legislation, you've proposed the ability of a corporation to define what is a standard unit for insurance purposes. I think that will go a long way to clearing up any question about who has to insure what inside their unit.
Mr Ford: That's what I'm questioning, because of the water damage you were talking about.
The Chair: Thank you, Mr Ford. We're out of time.
Thank you very much for your deputation and thank you for the questions.
DEACON, SPEARS, FEDSON AND MONTIZAMBERT
The Chair: At this point, we will call the next deputation, which is Deacon, Spears, Fedson and Montizambert. If you could put your name on the record for the members of the committee and Hansard, you have 20 minutes in which to make your presentation and/or share for questions.
Mr John Deacon: My name is John Deacon. I'm senior partner in the firm Deacon, Spears, Fedson and Montizambert. I've practised condominium corporation law in Ontario for the past 21 years, and the firm currently acts on behalf of approximately 250 to 300 condominium corporations throughout the province. On behalf of my law firm, Deacon, Spears, Fedson and Montizambert, I thank you for allowing us this opportunity to express our views on the proposed amendments to the Condominium Act contained in Bill 38.
Our firm, to avoid conflict, does not act on behalf of either developers or property managers. Accordingly, the recommendations that are contained in this presentation reflect the needs of condominium boards of directors and owners, at least as we perceive them as their legal counsel. I'm also a member of the condominium subcommittee of the Canadian Bar Association and have had numerous discussions over the previous years with ministry staff, which led to the preparation and amendment of the current act, as well as drafts leading to the proposed bill.
I have enumerated six areas that I would like to specify in today's presentation. I would certainly like to thank Ron Danks for his presentation, which I thought echoed some of the aspects that I have selected for today, and I would like to generally throw my support behind the good work that CCI and ACMO have done in presenting a detailed report to you. I agree with the presentations that have been made to date indicating that this is a consensus of those generally involved in the industry, but I also would say that there's some cleanup work that needs to be done. It's certainly a lot better to do it at this stage than have representatives coming after the enactment of the bill, saying: "This doesn't work. We have to work to improve it."
The areas I'd like to deal with are reserve funds and the use of reserve funds; the cost of work done by the condominium corporation for a unit owner; agreements by which owners may alter common elements; communication control units, which you've heard about before; and the narrow ambit of a performance audit, which Ron Danks has also dealt with this morning; as well as court compliance orders and mediation, which is of general concern to the profession.
Use of reserve funds: My view is that Bill 38 clearly recognizes the importance of adequate reserve funds to ensure the continued viability of the condominium form of property ownership, and I applaud it. Unfortunately, the provisions of sections 94, 95 and 96 only deal adequately with the requirements to contribute to the reserve and leave a large loophole with respect to the use of the fund that could result in inadequate reserve funds. While section 95 requires the reserve fund study, preparation of a plan and implementation of that plan, and I think is workable in that respect, it does not limit expenditures from the reserve fund, other than to say it's for the purpose of major repair and replacement of common elements and assets.
That very broad definition allows the following abuse: Many boards of directors, which are elected to try and keep the common expenses at their lowest possible level -- I'm sure you're all aware of this; keep taxes down and keep services up -- are very tempted, if they're approaching an operating deficit, to pay as much as possible from the reserve funds if possibly included in the definition of "major repair and replacement." On the other hand, they're trying to reduce the amount that they contribute to the reserves and they might be tempted to say: "The townhouse painting, the wallpapering of the hallways and other borderline issues we don't have to really calculate. We'll handle those out of our maintenance payments." They're not bound by that decision, and when they come to us and ask for an opinion as to whether they can pay the cost of wallpapering from the reserves, the answer is yes, they can, and it results in a deficient reserve.
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I believe it would be a very simple matter to correct by amending the provision -- I believe it's subsections 94(2) and 96(1), both of which say the same thing -- to limit the expenditure side to major repair and replacement of only those parts of the common elements and assets of the corporation that form part of the plan implemented by the board of directors pursuant to subsection 95(10). If the plan is calculated to include wallpapering the hallways, fine, they can use the money out of the reserve to pay for the wallpapering. If the plan is not calculated to include that, then even though that's major repair and replacement, they can't spend reserves on it. I think that would assist in preserving the integrity of the reserve fund, which as I say, is very important.
The second item is section 93, cost of work done by the condominium corporation for a unit owner. The ACMO-CCI brief has also dealt with this section. It's an essential section to provide an efficient out-of-court remedy should a situation occur where the condominium has to step in and do repairs that a unit owner should do. Examples are cleaning out lint from dryer vents, which can result in a fire; failure of an owner to properly install dishwasher or clothes washer hoses -- this frequently results in serious flooding in high-rise developments; or failure of an owner to recaulk shower tiles, resulting in mould or ceiling collapse in units below.
All of those three examples may or may not be covered by the definition of "repair." CCI-ACMO had suggested a broader definition, that it be "repair or maintenance" with respect to the owner's obligation in his unit to avoid this problem. The dryer vent may run, for example, from the unit to the common elements. No one really knows exactly whose responsibility it is in different places, but the condominium corporation, in order to protect the building and the other owners, needs to ensure that proper maintenance is done, so I recommend acceptance of the ACMO-CCI expanded definition.
Thirdly, section 99: Agreements by which owners may alter common elements. This is the type of situation where an owner is installing a skylight through their roof, which may comprise part of the common elements -- it usually does -- perhaps adding a deck to the rear yard common elements area or a balcony enclosure in a high-rise, provided it's consented to by the board and properly engineered. There has not been a mechanism in the old act to allow this kind of owner alteration; in fact, the old act was very restrictive.
This new provision is excellent. It just needs one little clarification. All the work that's been done to date by responsible condominium corporations to arrange for these agreements, of which there are many -- I've talked to a number of other lawyers, all of whom have the same sort of procedure. They approve the alterations and make sure that the owners accept them, review the specifications and then enter into an agreement and register that agreement on title. For every agreement to be reapproved and re-registered would literally be a nightmare for many corporations. I think it could be cleaned up simply by a transitional provision that existing registered agreements be accepted and enforceable in the same manner as agreements contemplated under section 99.
When you saw me last Thursday as a member of the C3 panel, the Condominium Cable Communications Committee, we strongly recommended certain amendments to section 22. I'm not going to spend extra time today restating the position. However, I would like to say that it remains a source of serious aggravation to homeowner boards to have a developer who retains ownership in a portion of the property in the condominium for the sole purpose of profiting in supplying the television signal to the residents.
Some of the provisions in section 22 ameliorate that somewhat, and I can understand the ministry's reluctance to proceed with retroactive legislation depriving developers of a property right. I simply regret that the Condominium Act is so generally worded that it can include this kind of a violation of what I consider the general spirit and understanding of condominium. However, all I can do is restate the C3's position and recommend that the amendments, specifically clause 22(2)(d), be accepted by the committee in considering your clause-by-clause debate.
Section 44 has been dealt with somewhat by my colleague Ron Danks. I'd just like to confirm that the narrow ambit of the performance audit is going to create a serious problem. The courts have clearly indicated in construction deficiency lawsuits that there are claims that go well beyond those covered by the warranty program, and for the condominium corporation to have to have a second technical audit just to cover those claims doesn't make a lot of sense. It may make sense to require both, a technical audit-oriented claim to be prepared and submitted within the one year as required, and that's a very good provision, plus the technical audit which covers all other items that may form the basis for a claim by the condominium corporation in breach of contract or in negligence.
Finally, section 135, dealing with mediation and compliance orders. Like Ron Danks, I agree that mediation and the direction towards mediation of disputes is very useful. However, there are many disputes that just cannot form the subject matter of mediation. If there's an issue of a nuisance dog, it's not going to be resolved by mediation when the issue is whether the dog is a nuisance or not. If it's an issue of noise or nuisance, sometimes they can be resolved by mediation but in most cases not. With improperly altered common elements such as where the owner has put up -- there's a court case on this one -- an awning over the front of the unit and won't take it down, mediation isn't going to help. They'll string out as long as possible the legal proceedings. Stringing out those proceedings, through mediation, which is mandatory; arbitration, the mandatory second step; and then finally a court application -- is going to cost, in time and money, both the condominium corporation and the offending resident a significant amount.
The simplified court application process is an efficient method of handling the situation. It's well tried. Most condominium law firms are handling these in a very efficient manner with low cost, and in the event that it's abused and the court feels it wasn't a proper item to bring before the court, the condominium corporation could be penalized in costs awarded against it. We recommend clarifying the wording Perhaps the _that_ may be changed to _to say that_??
that the mediation and arbitration provisions are only compulsory in the issues that are identified in section 133 and not the enforcement steps of section 135.
We conclude our presentation, again, by urging favourable consideration of the joint recommendations by ACMO/CCI, of which you've heard several presentations already -- I understand there are two more for later today -- as well as the issues raised above. It is certainly not possible to have a perfect bill, and we recognize time constraints and the general consensus in favour of swift enactment, which I myself would strongly urge the committee towards. But if we can deal with specific issues in the clause-by-clause approval, it will avoid the bill's becoming perhaps outdated at a sooner date.
I know that with the pressure that's been on the various governments for the last 10 years, starting with the Liberals, the NDP and now the Conservatives, you've seen that there has been a really large number of items that needed to be corrected. So I recommend, incorporating as many as possible of the CCI-ACMO amendments that you see fit to enact, as well as the items that I've mentioned in my presentation. I'll stop my presentation at this point.
The Chair: Thank you very much, Mr Deacon, for your presentation. That would leave about two and a half minutes per caucus, and I would start with Mr Lessard from the NDP caucus.
Mr Lessard: I just have one question and that's with respect to the mediation and arbitration sections. What mechanism are you suggesting instead of what you were referring to as compulsory, I guess?
Mr Deacon: Mediation is always available with the consent of the parties, but right now enforcement takes place pursuant to section 49 of the existing act, which is a simple court application. It's not an action; it's an application that involves simply a draft order and an affidavit that's presented to a court on short notice to the owner. The owner attends informally and the matter is determined by the court. As I say, that has been the operating situation now for 15 or 20 years, and there hasn't been a real problem with it. It's not something that unfairly oppresses either side and it's not a particularly costly process, so I don't think we need to reinvent it by putting in two preliminary steps of mediation and arbitration before a court order can be obtained in certain situations.
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Mrs Lillian Ross (Hamilton West): I just want to follow up on that mediation. Is it your understanding or belief that in some cases mediation is the proper way to go, or are you saying that you shouldn't have mediation before going through that court process first?
Mr Deacon: I'm saying that it would be best to leave mediation to the discretion of the parties in the situation of a violation of the act, declaration, bylaws and enforcement thereof.
With respect to the four items, property management agreements, reciprocal agreements, and the others, I have no problem with requiring mediation. I think mediation would be of assistance. I know there was a significant effort made about 15 years ago by the ministry to try and establish In the associations _98 directory there is a listing for _Association of Condominium Managers of Ontario_.
Condominium Ontario with a situation of kitchen-table resolution of disputes. They actually went as far as training hearing officers, but it didn't quite get off the ground. I certainly would recommend a thoughtful approach to that, but I don't think it's useful to have a blanket requirement of all these steps in every situation.
Within the context of the wording of this bill, I can only say leave enforcement the way it is under the current act and, if you'd like to bring in mediation and arbitration, it's useful for these type of agreements, and perhaps over the next few years some kind of a system of isolating on the type of dispute that's useful to deal with through mediation and leaving others aside, could be enacted, but I don't think that this bill really can make that distinction at this point without significant input from the public.
Mr Ford: The questions I have are on section 94 I believe he means _section 94_.
, the reserve fund. What percentage of the maintenance fees should be used in the reserve fund and what is the minimum that should be held in that?
The reason I ask this question is I have condominium units in my riding and on the 17th floor the exterior walls are separating from the building. I'm curious. Can you carry insurance on that, or what kind of guarantee do you have from the builders of condominium units that these large buildings will be maintained? How long do they stay up?
Mr Deacon: They're supposed to stay up forever, and I guess that's the purpose of the reserve fund. The reserve fund is really a long-term budget --
Mr Ford: I realize that.
Mr Deacon: -- designed to take into account all of these things, including the entire replacement of the exterior facade of the building, if necessary, perhaps every 50 years. The idea is that we'll all be long gone before any of these buildings need to be completely razed.
Mr Ford: On this one here their walls are separating about eight feet from the building itself. Now they've got units up there, and they're trying to repair them and different things of that nature. I just wondered if it's a liability for the builder, or is this insured, or is it in the condominium reserve funds? That's all I'm asking.
Mr Deacon: Well, there is a recent line of cases in Winnipeg, Condominium 12 and Bird, which is now holding a longer-term liability and liability and negligence against developers, including subcontractors, if there's an imminent danger caused by a recently occurring construction defect. There certainly is a long line of cases and warranty program cases dealing with liability for construction defects. General insurance would not cover that sort of an item.
Mr Ford: Some of these people go bankrupt or they change the name of their company after they build something, as you know.
Mr Deacon: That's correct. Unfortunately, the reserve fund requirement may well hit a condominium like that very hard if the reserve fund study required by this new act specifies a very large amount and perhaps a five-year term in the regulations to arrive at that amount, but somebody has to provide for it if there's no clear liability of another party.
The Chair: I would ask the Liberal caucus, Mr Sergio, do you have comments?
Mr Sergio: Thank you for your presentation. I would have a number of questions, but due to time, I'll try to do it in a couple of questions.
One is the relationship between management and the board of directors of the corporation. Many of the complaints that I get are about the close relationship that often may exist between the two. This often leaves the unit owners in limbo. With respect to the communication control unit, for example, how do you manage the situation when maybe a minority of the units owners say, "We don't want it, we don't need it and we don't want to pay for it"? How do you get around that?
Mr Deacon: On a communication control unit it's usually enshrined in the declaration, which up until now has required 100% consent of both the owners and the mortgagees, so it's virtually unamendable. There's nothing that the owners or the board or management can do.
But if I'm reading your question correctly, I too hear complaints from owners at annual meetings, which I attend typically, that management is not responsive and the board is not adequately supervising management, or perhaps it's the tail wagging the dog and management is running the show and the board is unable to make them responsible. ACMO has done a very good job in establishing standard-form management contracts and codes of ethics, which hopefully will go a long way to embarrassing the bad managers into complying.
Certainly there are remedies available to boards of directors to terminate management in certain circumstances. But if management and the board is too tightly bound and the owners don't agree with it, then the owners, as Ron Danks indicated, are left with their remedies to remove the board of directors under the provision of the Condominium Act or perhaps to commence an enforcement application under section 49 of the old act, or 135 of the new act, to ensure that the board of directors is carrying out their obligations. There is no easy answer to that question.
The Chair: Thank you very much for your presentation, Mr Deacon. I'm sure the committee is more informed.
For the record, I would like to take a moment to recognize that we have a visitor from the Legislature in Manitoba, JoAnn McKerlie-Korol who is a clerk assistant/journals clerk visiting the Ontario Legislature. I'd like to make note. Thank you for joining us this morning.
KEVIN CROWE
The Chair: At this point, I would call for the next deputation, Kevin Crowe. Do we have a Kevin Crowe in attendance? Come forward and, for the record, state your name and the organization you're representing.
Mr Kevin Crowe: My name's Kevin Crowe. I am a resident-owner at Peterborough Condominium Corp 2, meaning it's very old and is in Peterborough. I have to apologize; my hearing aid has lost its battery function so I need you to speak up if you want to ask me any questions.
Good morning, Mr Chairman and members of the standing committee. I would like to begin by apologizing. The follow speech was prepared within a short period of time. I don't have a copy of Bill 38 and I'm relying on a copy from the government Web site. I would also like to thank Mr Don_t know who he is. Not mentioned in notes
Gordon for his help in clarifying certain sections of the bill, which caused me to hastily modify my thoughts.
I'm a resident-owner of a condominium unit registered as PCC 2 and I am also a director and treasurer of that condominium. Owner occupancy represents approximately 15% of the total 77 units. The year of incorporation was 1977. I've been a resident-owner for nine years and a director for two. I'm married and have two young lads, ages four and 10. I also volunteer as a director, currently vice-president, of a non-profit housing corporation these past three years.
Why did I buy a condo? It was affordable and we assumed the equity would increase and make it possible to move up in a reasonable time frame. Unfortunately, the resale value is steadily decreasing.
The following are suggestions and possible amendments to Bill 38: One, I believe a conflict-of-interest handbook should be developed and be included in the bill as it applies to directors, managers, employees and all suppliers. I speak from my own experience in non-profit housing where we are provided with such a handbook. This handbook has been a very effective tool. The only reference I can understand relating to conflict of interest in Bill 38 is section 40, which only deals with the director's disclosure, and section 41, dealing with an officer's disclosure.
I understand I'm in a delicate situation, and guidance in certain circumstances would ease my conscience that I'm performing my duties properly and also protecting my home's best interests. Am I in conflict if I suggest to the board that my unit and others need a paint job? I have specific examples expressed in my correspondence and acknowledged by the Ministry of Consumer and Commercial Relations in 1994 and 1995. I have learned since that time to try to get co-operation instead of criticizing, but difference of opinion still exists and clarification is necessary.
Two, I greatly believe in mediation and arbitration. It never existed and the cost of pursuing owner co-operation was greatly expensive and in my opinion it took too long to take the necessary measures. I have been told by lawyers that if you've got two years and $20,000 you may be able to do something.
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The other thing is, why should a tenant have an opportunity for mediation and not a resident owner? What is a mediator? Is he or she a government-appointed or private certified mediator? I would suggest the same mediator as is available to tenants.
Third, a clause should be added to section 126 that states that an owner should be entitled to a portion of the sale based on the last purchase price registered on title in the land registry office. The values of most condominiums purchased after 1989 are substantially less than at the time of purchase. If 80% of the owners purchased their condos for a very low amount in 1977, why should the remainder of owners take a substantial loss if theirs are in excess of $75,000 to $100,000 and the appraised resale value for all the units is at $50,000?
Referring to section 31(3)(b), I would like to suggest that a board member may retain his or her seat if no candidates are willing or able to fill the position. In our condominium, it's very difficult to get participation on the board or even attendance at annual meetings. I have dreams of a maintenance committee and/or resident committee, but no responses to past requests have occurred. What a shame it is. I believe that a board of management could function much better.
The last suggestion, is to have a plain English document outlining the most important requirements available for each particular type of condominium, which can't be interpreted other than its true intent.
In closing, I would like to state that changes to the Condominium Act are necessary and that this bill is a vast improvement, but due to my family's current situation, I'm concerned. It's difficult to accept that our lifestyle and the value of our only major asset is determined by the decisions of so many non-resident owners and that we don't have the financial resources to enforce compliance.
I would like to thank the committee for allowing me to address my suggestions and concerns. Any questions?
The Chair: Thank you very much for your presentation, Mr Crowe. I would ask, starting with the government side, if there are any questions.
Mrs Munro: First of all, I want to thank you very much for coming here today and giving us your opinion. It's very important that we have the opportunity to hear from an individual. Clearly it's important to hear from others as well, but I think your personal experience obviously balances the impressions we have from those who represent others.
You raised the issue of the problem of the directors. In this piece of legislation, there has been suggestion made that it would be limited to six years. I just wondered what your experience is and how you would respond to that particular part of the legislation.
Mr Crowe: I had to almost try to convince the present board to have resident owners on the board of directors. The board of directors in my condominium has been there, I would say, since incorporation, and they still are there, which restricts new ideas and a different outlook and doesn't allow for difference of opinions without focusing on what they've been focusing on for the last 20 years.
Mrs Ross: Thank you very much for your presentation. You raised the concern about disclosure of directors, and I wanted to assure you that under sections 41 and 42 in fact a director has to disclose if he has any interest in any contract or transaction to which the corporation has committed, so it's very clear that disclosure is required and must be made. I just wanted to reassure you that was in place.
Mr Crowe: I just wanted it expanded to include management companies that are contracted out. We don't have a management company that is part of the corporation the same as the board of directors; we contract it out. I was hoping to have them be able to sign a conflict of interest, be aware of it and spell out what is a conflict without misinterpretation; the same with the board and any employees, that they sign a declaration that they are not in conflict and they have to stand by that and they understand the terms of the conflict.
Mrs Ross: But the board of directors does do that under section 40.
Mr Crowe: OK.
Mr Sergio: Mr Crowe, perhaps I misunderstood you when you said that you should be entitled to share the excess amount of money. What excess amount of money were you referring to?
Mr Crowe: Again, I'm doing this in a very short time frame of thought. I know how difficult that may be. I was more or less considering it on a percentage type of scale, without having to go to the section of oppression and court action and so forth, just so that an owner who has purchased a unit is not handcuffed by the majority, the 80% of owners who have purchased them since inception.
Mr Sergio: Forgive me if I come back on the same question. I still don't have any idea which excess amount of money you, as an owner of a unit, if you were to sell, should be entitled to a percentage of. Are you talking about the reserve funds? Which excess money are you talking about?
Mr Crowe: I'm talking about the whole condominium corporation termination. If I purchased, let's say, at $90,000 and because of the economy it dropped, but also possibly because of lack of maintenance or for whatever reason, and the value is now $50,000, and at incorporation let's assume they paid $30,000 to $40,000, obviously they don't have as much to lose as I would.
Mr Sergio: I think I know what you're saying. It's just very difficult.
I have just one more question. You have been speaking of making changes and stuff like that, and over the years various governments have always attempted to make some changes and improve the Condominium Act. Do you see the problem more with making changes, or more changes, or with the inability to enforce promptly some of the laws incorporated in the Condominium Act?
Mr Crowe: I would have to say both, because I'm on both sides. I believe in co-operation. I would like to point out that I have seen people just walk out of their condominiums, put their hands up in the air and say: "I give up. I'll declare bankruptcy, whatever. I can't fight." If you can allow somebody to change, they may stay there and allow it to grow, but I still believe they should have been able to have an avenue without having to walk away.
Mr Sergio: Are you a member of the board?
Mr Crowe: Yes.
Mr Lessard: I'm not sure that I understand the concern you have about the value of the property or the drop in the value of your investment. I think you're saying that if part of the reason for the drop in the value of your investment is the result of poor maintenance, you should be compensated for that somehow. Is that correct?
Mr Crowe: Because of the position I'm in, as both a board member and an owner, I really don't want to criticize.
Mr Lessard: I'm just asking generally; you don't need to tell me about your specific situation.
Mr Crowe: In general, it's both the fact that the real estate market took a nose-dive and also because of lack of maintenance and compliance.
Mr Lessard: Are you suggesting that there should be some compensation available because there's a drop in the market?
Mr Crowe: Not for the market, no.
Mr Lessard: OK. What's your understanding of the provisions for mediation and arbitration? You said you preferred that over making application to a court. I'm wondering why you say that. You have mentioned that it would cost more to go to court, but I'm just wondering what your understanding is of arbitration and mediation, why you would prefer that option.
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Mr Crowe: I prefer that option because I'm assuming that arbitration and mediation would be a much simpler process and less costly to a person who has put their full investment into their first home and can't afford to go the court route. With my own experience, I've hit every roadblock there was.
Mr Lessard: Are there limitations in the arbitration-mediation section as far as length of time or the cost, as far as you know?
Mr Crowe: In this bill?
Mr Lessard: Yes.
Mr Crowe: No, I don't see any costs or limitations.
Mr Lessard: You might want to have a close look at that section, and if there are some provisions you might want to recommend to ensure that it doesn't become a time-consuming, costly process, as you perceive it to be in court, you might want to make those suggestions.
Mr Crowe: Because of the new Tenant Protection Act, they are now able to have a mediator available to them. I'm not knowledgeable on the specifics of their mediator, but I would like to see the same mediator or the same process for that mediator available to condominium owners.
The Chair: Thank you, Mr Crowe, for your presentation this morning.
CANADIAN BAR ASSOCIATION -- ONTARIO
The Chair: At this point the committee will call the Canadian Bar Association -- Ontario. I'd ask you to come to the desk and give your name and title for the record. You have 20 minutes to use as you wish.
Ms Audrey Loeb: Good morning. My name is Audrey Loeb. I have provided you with some materials that have been prepared by the Canadian Bar Association members. We are the condominium committee of the Ontario branch of the Canadian Bar Association, real property subsection. There are six members, who represent both the development community and the condominium corporation community. Many of us act on behalf of both purchasers and developers, as well as representing the interests of condominium corporations. So we have a very well balanced committee that has worked together for many years and in fact has made representations to the government on the two previous condominium acts that never got through.
Unfortunately, I must start by saying that this brief has not yet had time to be proofed by CBAO, so what you have is what we're going to submit to CBAO for its formal sanctions. The members of this committee really didn't get their act together, I'm afraid, as quickly as they should have. So we haven't had the approval of the CBAO officially. But we've never had any difficulty before getting their approval with any of our other submissions and we don't anticipate any at this time. There is one section missing, and that's the section on the new concepts, so we haven't covered that yet. That member hasn't provided his material.
I've been asked to speak briefly on our top 10; that would be the best way to describe it. The brief covers everything else, and in addition to the brief I've attached a letter that was sent to the minister concerning the issue of insurance deductibles. It's the front page of what you've received, and then behind that is a section-by-section commentary with respect to the bill. I'm going to start with the voting percentages. I'll just take section 33.
Our approach, by the way, to reviewing legislation is to try to clarify legislation in places where we see that it's problematic in terms of creating litigation, uncertainty or difficulty for the legal profession. That's our approach. We're not commenting necessarily on policy, although we tend to get into that. Our real concern is that the legislation be clear and that the concepts work so that we don't have to spend a lot of time, as Mr Crowe said, spending money on lawyers that people can ill afford.
One of the concerns we have, and we voiced it repeatedly over the years to the government, is the appropriate wording for the voting percentages under the Condominium Act. My history is that I was involved in the last amendment to the Condominium Act. I worked for the government at the time and administered the legislation. We thought the wording of the voting requirements was very clear, until some of the judges got hold of it and essentially turned it around, and what we assumed to be voting majorities of all of the units in the corporation required to approve particular things, like substantial alterations and removal of members of the board of directors, became a quorum requirement, not a voting requirement. Attempts have been made to clarify the wording so this confusion would be eliminated, and we don't believe that this confusion has yet been eliminated. We think there's still a problem with that and that it must refer to the votes of all of the owners of all of the units, because unfortunately the judges are reading the legislation differently from those of us in the profession.
The next section has to do with the records of the corporation and owners' access to records of the corporation, which is subsection 55(4). There are some items which should remain confidential, to which owners should not have the right. We are also somewhat concerned about an owner having the right to an immediate penalty if a board fails to turn something over, particularly if the board relies on a legal opinion. We think there are items, particularly with respect to individuals or litigation, which board members should have the right to keep confidential from the remaining unit owners.
In the area of sections 72 to 98, which I'm sure you've already heard about, we'd also like to add our two cents, for whatever it's worth. We're concerned about the information statement. The information statement comes from something that was actually recommended by the Ontario residential condominium study group report in 1976. In those recommendations, we suggested that the government set up a securities type of filing for condominium developments, where the proposed documents and the agreements of purchase and sale would be approved by government officials and an information statement would be delivered and verified by a government official and then be given to prospective purchasers. The prospectus filing never came into being, but the information statement still sort of stayed in play. What we see is a resurrection of the notion of a two-page information statement which would be given to purchasers and would cover their most commonly asked questions.
In light of the total changes that have been suggested in this bill, we find that the information statement doesn't fit the role it's supposed to. We are advised that it's intended to be an index to the disclosure statement. We believe that if that's its purpose, then it should be an index to the disclosure statement and should be delivered at the same time. It just doesn't make sense. It's only going to create confusion, because disclosure statements do get changed; information statements may not. It won't mean anything to a prospective purchaser, because until they enter into an agreement of purchase and sale it doesn't matter what you give them anyway. It doesn't make sense to provide this in advance of an actual disclosure statement.
I assume the government is trying to make disclosure more complete and more amenable, I guess, to unit purchasers. Our view of the changes to these sections of the act is that it does the exact opposite. As a person who acts for many purchasers and condominium corporations, it's going to be extremely difficult for a purchaser or even a purchaser's solicitor to review the volume of material that is now proposed to be delivered as part of a disclosure package to prospective purchasers. In fact, my guess is that lawyers will limit their retainers and not look at them at all. It's just too voluminous, the responsibility is too onerous and, I can tell you, the unit owners, the purchasers, do not read them.
My current practice is that I do review the disclosure statements. I highlight the sections for my client. Nobody wants to pay the fees I charge. Most people go to lawyers who don't look at them at all, and this is only going to make it worse, because it's going to make it even harder for purchasers to get through what's being given to them.
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In this bill, we've eliminated the disclosure statement, which was the brief narrative provision of the document. That's the only thing the purchasers read, and that's the one thing that has been eliminated in the bill. The only thing I can guarantee that I can get my clients to read is the 10-page abbreviation of the contents of the documents that are appended. What we're going to is just throwing tons of documentation at purchasers with virtually no ability to get through them. Frankly, even the profession won't be able to get through them; they are not knowledgeable enough. Condominium has become a very expert field, and very few people will be able to service their clients appropriately. We find the requirements onerous, we find them confusing, and we think it's going to make life much worse for purchasers.
The other thing we note is that at the moment we have great case law on disclosure statements, delivery and their contents, and everybody knows the rules of the game. When we act for developers, we know what we have to deliver; and when we act for purchasers, we know what we have to look for. This is going to create a volume of litigation in the next recession. There's no question about it. We'll be five or six years fighting out all these new provisions and whether the developers have complied with them etc. We are very concerned about these provisions.
The next provision, which I gather won't be brought to your attention because it got missed, is section 74, which provides for the 10-day rescission period from the date the purchaser signs the agreement of purchase and sale. Since 1978, there is no case law to date on when an agreement of purchase and sale can be rescinded by a purchaser. In this bill, we have included in the draft a provision that says that the 10-day rescission period will start from the later of the date that the purchaser receives the disclosure material or receipt of an accepted agreement of purchase and sale is made by the purchaser. So when the developer accepts the agreement of purchase and sale and the purchaser then receives that accepted agreement of purchase and sale, the 10-day rescission starts.
We have a problem with how the developer is ever going to prove that the documents were received by the purchaser. We will have an ability for a purchaser not to show up and pick up their document and continue the rescission period forever. We have no problem with the way the legislation is currently worded. As I said, there's no case law on it. This is going to be very difficult. Developers will be unable to prove that they delivered accepted offers to the purchasers unless they hand deliver them to the purchasers, which is a cost that nobody can afford.
The next section of the bill that I want to talk about is "significant change," and since I'm the one who gets blamed for it, I guess I have to take responsibility for it. In the Condominium Act before the one we currently operate under, we had a provision in the legislation which said that all changes in the documents had to be indicated to a prospective purchaser. Now when we act for purchasers we get a whole new set of condominium documents just before registration, and that's all we get. We don't, as a rule, from most developers, get a letter saying, "Here is what we changed." We just get a fresh set of documents.
For us to ensure, if we're acting for a purchaser, that there have been no changes in those documents, we have to proofread them page by page by page. It would cost our clients thousands of dollars for us to do that, so we send them out to the client and we tell the client they have to proofread them.
When the concept of significant change came up, all we were saying was, "Black-line for us the changes in the condo docs, like you had to do before the 1978 act." Somebody created this notion of significant change, which develops a whole new concept of disclosure and provides that if you get significant change, there's no remedy. So even if you get a significant change, you can't get out of a deal. Then the question arises, if you get enough significant changes, do they constitute a material change? This is not what was intended by our presentation, and I'm taking a lot of flak for this from my colleagues; they call it the "Audrey Loeb awful amendment."
The last two things I want to talk about are section 93 and section 106. Section 93 is, I hope, just a drafting error. It deals with the condominium corporation having the right to repair the common elements where a unit owner had that responsibility and didn't do so and to lien the unit for the cost of same. In the current act, that provision allows it. It's in section 41 and what it says is that the corporation can go into the unit and carry out a repair if the owner doesn't do so and charge it back to the unit owner. What was supposed to have happened here is that the corporation was supposed to have the right to go into both a unit and the common elements, carry out repairs or maintenance that the unit owner doesn't do, and charge it back to the unit owner. What's happened is we've given the right to the common elements and eliminated the right for the corporation to do it in the unit. We assume that's a drafting mistake, because there was no policy that we're aware of that intended to take the board's right away.
For example, if a bathtub leaks continuously because the unit owner doesn't caulk the tile and you tell the unit owner, "Caulk the tile; we're having water problems in the unit below you," and the unit owner doesn't do it, right now the corporation can go in, do it, and charge it back to the unit owner. What this bill has done is taken away that right. We believe they took the right away from the unit by mistake.
Last but not least is insurance deductibles, which is section 106, and that's the letter that is on the front of our proposal because for some reason it didn't get put into our brief and I didn't notice it until this morning. When we made the recommendations with respect to insurance deductibles, it was on the basis that a unit owner who caused damage to the condominium corporation's property should be responsible for the deductible that the corporation has to bear, that it is unfair for the remaining unit owners to pay a deductible for another unit owner's negligence.
There has been a recent case of the Divisional Court of Ontario which has held that that in fact is the current state of the law. The case is called Stevens vs Simcoe Condominium Corp 60. What it says is that if a unit owner causes damage, the unit owner is responsible for the deductible and the corporation is entitled to lien the unit owner's unit for the amount of the deductible.
What this bill does is say that that deductible will only be recoverable where the damage is done only to that individual's unit. So if we have water damage that affects the individual's unit and there's a deductible, then the unit owner will have to pay it, but if the unit owner leaves his bathtub running and it damages the unit below, the corporation has to pay the deductible. The way this bill is worded, the unit owner is only responsible for the deductible when the damage he or she does is to his or her own unit, not to any other unit and not to the common elements.
Deductible insurance is available to unit owners, and it's unfair to ask other unit owners to pay the deductibles for people's negligence. They don't carry liability insurance because -- normally a unit owner would carry liability insurance, but because of the way the Condominium Act is set up, the corporation is required to insure these things. The result is that the unit owner's unit insurance won't cover this damage, so everybody else has to pay the bill.
Those are my comments, my top 10.
The Chair: Very good. I appreciate your comments, and at this point the rotation of questions goes to the Liberal Party.
Mr Sergio: Thank you very much for an excellent presentation. We will have to find some time and read many of your good points here.
I agree with you that the amount of documents is just unbearable. While you may have prospective purchasers coming to you and they don't want to pay the fee that you charge, they're coming to us for answers and we don't even charge for anything. But it's very difficult to read through the act as well.
Just one quick question. One complaint I hear a lot, especially in some of the newer corporations, is where the developer still has a number of either unsold or rented units. This has been a major bone of contention in many condominium corporations. How do you deal, as a professional lawyer, with a situation like this?
Ms Loeb: Actually, our firm represents over 500 condominium corporations, and this is a most exceptional problem. It is not the norm by any stretch of the imagination. In our experience, the developers want out of there as quickly as they can, and the only reason they are left in there is because they can't sell a unit. Normally, it only occurs in a time of recession. They have the biggest vested interest, financially, in that project.
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Mr Sergio: I'm sorry for cutting you off, but should they retain the majority of the votes even though the economic situation may not favour a particular developer at a particular time? Should they be retaining the overwhelming majority of votes, if you will?
Ms Loeb: I understand: at the meetings etc. If I were to speak on behalf of CBAO, it would be CBAO's position that yes, they should.
The Chair: If we could have the next caucus.
Mr Lessard: I'm giving my time to Mr Sergio.
The Chair: That's fine, if you want to pursue that.
Mr Sergio: I wish you would expand a bit more on that question, because it's a major problem that we encounter.
Ms Loeb: We recommended for the last legislation -- it didn't happen -- a staging process. We recommended allowing a certain number of unit owners to get on the board if a certain number of units were sold. We're still in favour of that type of position. It's just that it didn't get incorporated into this draft bill. What got incorporated was the notion of at least one representative when a percentage of the units has been sold.
In the United States, in most of the American jurisdictions, as the units get sold, the number of owners who are represented on the board changes. But understand that even if you give them representation on the board, they still have the right to vote at a meeting. You cannot take away a developer's voting percentages at a meeting. It's not democracy. If you own 50 units, you can't say to the developer, "You can't vote your 50 units." It's not fair. That individual has the biggest stake in the project.
Mr Sergio: We have heard from a previous presenter, for example, that the developer has a vested interest in keeping it in that particular way because of other areas; let's say the communication control units. They have an interest, so they may make money on other areas of the management of the building. Is that fair to the other --
Ms Loeb: Of the 500 corporations we represent, we do not have that problem.
The Chair: A very good line of questioning, Mr Sergio, but we have one minute left and Ms Ross has a question of you.
Mrs Ross: Under section 74, you talked about the 10-day rescission and how you felt that would be a problem for developers complying or proving that they would have delivered the disclosure statement. I don't quite understand that, and I wonder if you could clarify it.
Ms Loeb: It says in subsection (2) that you have the right to rescind an agreement of purchase and sale if you're a purchaser "within 10 days of the later of." I think this is the result of plain drafting. I think this was not intended as a policy position. But it says within the later of the date that the purchaser received the disclosure statement, which they're going to get the day they sign the contract, or the date the purchaser receives a copy of the agreement of purchase and sale executed by the declarant and the purchaser.
What happens is, the purchaser signs it, gets the disclosure statement. It then goes to the developer. The developer may accept it right away and then has to get it back into the hands of the purchaser and prove that he or she did that, because without proving it, the purchaser is going to be able to say, "I never got the agreement back," or the purchaser says, "I'll come in and pick it up. Don't send it to me," and the purchaser doesn't come and the purchaser doesn't come, which we have now. It's a problem we have already.
I think what happened was this just came out of plain language drafting and nobody realized the consequence of it. But when I do an agreement of purchase and sale for a developer right now and I'm negotiating for three or four weeks and I then send an accepted copy back, they now have another 10 days to get out of the deal from the date they actually get the document, not from the date I mailed it or from the date I accepted it. Right now, we go on the basis of from the date that the developer accepted it.
The Chair: The members of the committee appreciate your informed comments, and I'm sure notes will be taken. Thank you for your presentation.
BRATTY AND PARTNERS
The Chair: At this point, we would call Bratty and Partners. For the record, please state your name and the organization you're representing. You have 20 minutes to use as you wish.
Mr Michael Volpatti: Good morning, members. My name is Michael Volpatti. I'm a lawyer with the law firm of Bratty and Partners here in Toronto. You'll be getting before you a brief handout by me that basically summarizes where I hope to go with my address this morning. Also attached is an excerpt from some material I believe you've already been handed by way of a joint submission from the Greater Toronto Home Builders' Association, the Metro Toronto Apartment Builders Association, the Ontario Home Builders' Association and the Urban Development Institute of Ontario.
Our firm, Bratty and Partners, is a member of the Greater Toronto Home Builders' Association and the Urban Development Institute. Personally, I've been actively involved in the preparation of a good part of that submission. As I said, in the documentation before you is an excerpt from that submission you've been previously given.
Our firm has been a beneficiary, I guess, of the Condominium Act and the recent economy, as well as other Ontarians in the past little while. We hope that continues. Our firm acts for condominium developers both in the low-rise and high-rise market, as well as for lenders who lend to condominium developers. As a result, our involvement with GTHBA and UDI is pretty obvious, and the perspective that I'm addressing you this morning is from that area.
The joint submission that you have an excerpt from is pretty lengthy, and I'm not sure that you've had the opportunity to go through it. I'm sure your time is limited. What I propose to do is to go through three areas of the submission to highlight some typical comments that we've made with the legislation and hopefully get an opportunity for you to get some feedback from us, the industry, as to how we feel about the legislation.
The first thing I'd like to speak briefly about is the termination of various agreements under section 113 of the proposed bill. The provision of section 113 basically deals with the termination of various agreements that were entered into at a point in time when the condominium corporation was effectively controlled by the declarant. As such, those deals may not be in the best interests of the ultimate purchasers, and therefore the legislation has seen fit to give the corporation an opportunity to terminate those agreements within a 12-month period after registration. This is something we have in the current act, by the way.
The wording of section 113 -- although the intention is appropriate, the implementation through the drafting or whatnot causes a minor problem in that section 114 has been added to the act. What section 114 basically says is that there are certain types of agreements that the Legislature feels are important enough that the vote of the owners is not enough to terminate those agreements. So the Legislature, under section 114, said, "You need a court order to terminate these types of agreements." These are agreements basically dealing with the cost-sharing of facilities and amenities and joint-use facilities with practically neighbouring properties, usually in phased condominiums or so forth.
The wording in 113, however, basically would capture and permit the termination of an agreement by the condominium corporation within that one-year period, agreements that would otherwise be protected by section 114. If you note in our submission on section 113, there's a very simple way of addressing that problem. It's simply to say that agreements under 114 are protected and cannot be terminated by the board. I think that's in keeping with the policy aspects of the legislation and adds clarity to the legislation. This is just one of a number of comments we've made dealing with some problems with the implementation of the legislative policy. The policy isn't all bad in and of itself. However, the way it's implemented will cause uncertainty and perhaps not the desired result.
I'd like to turn briefly now to vacant land condominiums and leasehold condominiums. Both these types of condominium corporations are new to Ontario. Hopefully they'll provide a welcome opportunity to developers and purchasers alike for a type of product that hasn't been available to date. From a builder's point of view today, while I think they would like to see these sections, if they're not going to work, they are not going to use them. It's going to be as simple as that.
I believe you've already heard submissions on phased condominiums. We certainly have some written submissions on that that are quite detailed and indicate our concerns as to the implementation of that part of the legislation; again, a situation where the concept makes sense but the way it's implemented through the drafting simply won't work. It will just result in developers not using it because the risks are too significant from a certainty point of view, from a cost point of view, and ultimately from a litigation point of view.
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For our comments on the vacant land condominiums and the leasehold condominiums, I'd like to take you through a couple of the sections and indicate where our concerns lie.
In particular, the first section dealing with vacant land condominiums is section 158, which basically provides for what a description of a vacant land condominium contains. Subsection 158(1)(c) tracks similar language to section 8 of the proposed bill which deals with our traditional types of condominiums. Subsection (c) deals with language such as, "common elements have been constructed...in accordance with the architectural plan" and "a certificate of an engineer that the buildings have been constructed substantially in accordance with the structural plans." Again, we have a very detailed submission in the implementation of this type of language under section 8.
We have the same concerns with respect to vacant land condominiums as we do with the traditional condominiums. Those concerns are simply the cost to implement this type of certification and that the certainty and basically the ultimate benefit to the purchaser is questionable. As I said, we have very detailed submissions and I believe you've heard from Chris Lloyd, an Ontario land surveyor, last week on that under section 8. Our concerns are mirrored here.
Section 159 deals with the scenario where a vacant land condominium corporation proposes to include certain services or roads or what have you within the description that at the time of registration have not actually been constructed. The legislation provides for registration notwithstanding that, provided the developer posts a bond to secure the performance, really not unlike traditional subdivision development in Ontario today. If you develop a subdivision, the municipality always requires letters of credit for roads, sewers and so forth so that if the developer doesn't complete those works, the municipality will draw down on those letters and complete the work. We have a similar sort of scenario that's being implemented here. Again, the concept makes sense but the implementation is problematic.
In this particular case, under clause 159(1)(b) the proposed bill makes reference to the declarant providing to a "specified person" a bond or other security. We take it that they are going to indicate through the regulations who that "specified person" is. We don't think that's a reasonable approach. We think a more practical approach would be simply to specify right in the legislation that's it's a municipality that holds the bond. As a practical matter they're going to give the approvals, whether it's site plan or whatever other type of approval. They are involved with the project; it's their community. We may as well make it the municipality right off the bat. That way everybody knows what it is. It adds certainty to the legislation. Purchasers are protected, and vendors know who's going to holding the bond.
Subsection 159(3), again dealing with these performance bonds, provides that once the works have been completed, the bond can be released. The practical problem there is one of evidence: How do you determine when the work has been completed? Again what we propose in our submission is that an architect or engineer certifies completion. This is no different than what happens with typical subdivision development in Ontario today: Architect's certificates are submitted to the municipality, the municipality reviews them and releases the letter of credit. Again it's a change that adds to the certainty, works for the purchaser, works for the developer and makes the legislation work properly altogether.
Another is subsection 160(3). Section 160 deals with the insurance obligations under section 100 of the proposed bill. The section basically says that the condominium corporation, unlike its requirement under section 100 for traditional condos, doesn't have to implement insurance in respect of a unit; it will let the unit holder insure that unit. Again, given the fact that this is a vacant land condominium and you're really insuring dirt, and whatever improvement you have on there, it's up to you if you want to insure it or not, it makes sense.
The problem with subsection 160(3), however, is that although the owner has the obligation to maintain the insurance, there's no requirement to provide evidence to the condo corporation that it has done so, and the condo corporation, for whatever reason, may want to insure that particular unit. What we suggest is that the owner should provide the insurance; however, he should also provide evidence to the condo corporation. That way, if the condominium corporation doesn't have evidence in its hand, it can simply take the position that, "We are going to effect that insurance on your behalf." Again it's a situation where the intent of the legislation is a proper one but the implementation can be worked on somewhat.
One of the more substantial comments on the vacant land corporations comes under section 162. Section 162 basically deals with a statement of services to be provided by a local municipality in respect of services that are going to be installed within the condominium, including roads and construction. This is important, obviously, because to the extent that the municipality will build a road or will plow an internal road or so forth, the purchasers want to know if that's going to happen.
The problem here is that the wording of subsection 162(1) is, "Before delivering a disclosure statement...the declarant shall request from the municipality" such a statement. The implication is that every disclosure statement that's delivered has to be preceded by a request from the municipality. That's obviously duplicitous and that can't be the intent of the legislation. A more reasonable interpretation would seem to be that when a developer proposes a development, they write to the municipality, determine what services are to be available, obtain a statement and that forms part of the disclosure book. But for the developer to have to do this before they deliver every disclosure statement means they're going to have a purchaser coming in on a Saturday afternoon and saying, "You've got to come back on Monday because I've got to write to the municipality on Monday morning to get a statement." It doesn't make sense, it's not very practical and it doesn't add to the equation.
The other concept we wish to address under the disclosure statement, in particular statements from the municipality, is the scenario where the municipality issues a statement, indicates it's going to provide certain works or services and then changes its mind. Is that a material change from the purchaser's point of view and the vendor's point of view? The way the developer looks at it, that's something beyond the vendor's control. If the municipality which basically controls that area is going to implement a change, they have their ratepayers and taxpayers to account to.
We feel it would be unfair to the developer to have a project that's half sold and the municipality changes its mind on snow shovelling, for example, and issues a new statement, and then the purchaser comes back to the developer and says, "Look, your statement isn't up to date, it's not accurate; I can walk from the deal," something that's completely out of the developer's point of view. The developer used their best efforts to get that statement, obtained a statement, and they're going to be penalized because a municipality changed its statement. Again, that's something we feel should be addressed by simply providing that if a municipality changes the contents of its statement, that won't be considered a material change for the purposes of rescission.
I'll deal very briefly with leasehold condominiums. Our major concern with that is simply the use of the term "rent" in subsection 172(1). "Rent" is not a defined term. The concept behind a leasehold condominium is that a property owner will lease, usually on a long-term basis, a piece of land to a developer and the developer implements its condominium. The lease between the landowner and the developer is what's called the head lease, or creates a leasehold interest, and has many obligations, only one of which is a payment of rent. It could have an obligation to insure, obligation to maintain the property in good repair, all sorts of obligations other than rent.
We believe that in using the word "rent" in subsection 172(1), where rent is not a defined term, it should be expanded, such as, "The condo corporation will have to be bound by all of the obligations under this lease." Again, it would be something that's disclosed to purchasers so they're aware of the obligations, but it should be made clear in the act that rent is not just money, it could be other obligations and it could be monetary payments other than rent.
Finally, I should add one more concern with respect to disclosure requirements for leasehold condominiums. Just stepping back a couple of sections, that's clause 167(2)(d). It requires a developer to disclose all of the particulars or "provisions of the leasehold interests that affect the property." In other words, the developer is being asked to take this lease and summarize it for purchasers. The thought is probably a proper thought: They should know what's involved, but as a practical matter and, I can tell you, as a developer's lawyer, what I would do is practically paraphrase the entire lease for fear that in leaving out one section that I don't think is important, at the end of the day the purchaser is going to come back to the developer and say, "Had I known you had to do this thing, which in anybody's point of view is not substantial, I wouldn't have entered the deal." That sort of uncertainty would scare developers' lawyers into paraphrasing the entire lease. Therefore, we should either take it out or simply provide that a copy of the lease can be attached so that the purchasers can go through it if they wish.
Those are the highlights in a very brief form that I wish to address to the committee. Again, this is based on a joint submission that you have a report on already, and I hope that gives you some flavour of the development industry's concerns and thoughts about the legislation.
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The current act as it stands now, and as you've heard to date, through court interpretation has developed to a stage today which we believe has a great deal of certainty, and we can all see the benefits of that simply by looking at the skyline in whatever city in Ontario. We really hope that these issues we've addressed here are looked at seriously, because if they're not, from a developer's point of view, first, they'll be reluctant to build and, second, they won't get the lending from the financial institutions because no financial institution is going to lend where there's this degree of uncertainty.
The final comment is that there are a number of new provisions which are provided under this legislation, like vacant land condos and leasehold condos. It's a wonderful opportunity to have that legislation implemented and give Ontario something different. It has to be done properly or it will simply be legislation that sits on the books and will not be used by developers. That's my submission and I'd be glad to answer any questions you may have.
The Chair: Thank you for your presentation. That would leave us about one minute per caucus, starting with the NDP caucus. Mr Lessard, if you have a question, very quickly.
Mr Lessard: In your brief you made reference to the GST in respect to the definition of "rent," but you didn't mention that in your oral remarks. I wonder if you could do that.
Mr Volpatti: There are a number of things I didn't address simply through the exigencies of time. The GST is a major concern from a marketability point of view and it's something that we hope we have the Legislature's support on in addressing the issue with the federal government, which obviously will have the ultimate say in this. We are concerned about it, a large marketing concern, and we hope we have the Legislature's support in addressing this issue with the federal government.
Mrs Ross: Thank you very much for your presentation. Under subsection 162(1), disclosure statement, you've made a recommendation that some of the wording be changed there, and of course we've heard this from other people who've made presentations as well. It's certainly an area we're looking at to make some amendments to. Your recommendation is to delete "Before delivering a" and replace it with "Before delivering the first." I just want to ask you, if that wording were changed, do you think that would solve the problem?
Mr Volpatti: We think it would go a long way because, as I said, the developer would still have the obligation to make the inquiry and provide the statement. He's going to do it right off the bat. He's going to include it in the statement and I think that would solve it.
Mr John Gerretsen (Kingston and The Islands): You've provided a very detailed brief, as did the presenter before you. I'm just curious: Did you have an opportunity to make a presentation to the ministry on this act beforehand? Were there any discussions between your organization, not necessarily your law firm but the organization you represent, to make some submissions beforehand? It just seems to me that there are an awful lot of changes recommended here. A lot of them seem to make sense to me, and I'm just wondering why they weren't incorporated earlier. Was there an opportunity given to you to respond on this without doing it in a formal manner like this?
Mr Volpatti: I'll have to give you a little bit of history behind my involvement with the act. My involvement has been very recent, probably since the spring. The Condominium Act has several times gone to second reading over a number of years. The most recent one came through relatively quickly. We were working on it pretty much the entire summer to put our submission together. We have not had an opportunity to dialogue a great deal because of the short time frame. We've done the best we can to submit this.
The Chair: Thank you, Mr Volpatti, for your presentation. I'm sure the committee has learned from your comments.
LONDON GUARANTEE INSURANCE CO
The Chair: With that, we'll call the next deputation from London Guarantee Insurance Co.
Mr Sandy Ewen: Mr Chairman, and ladies and gentlemen on the committee, my name is Sandy Ewen. I'm an assistant vice-president with London Guarantee Insurance Co. For those who are interested, London Guarantee Insurance Co is a sister company of London Life. We're owned and controlled by London Insurance Group. I'm not a lawyer, as the two previous presenters were. I'm a business person. I'd like to explain our involvement as London Guarantee in the condominium business.
My particular product line assists condominium developers in providing security primarily to the Ontario New Home Warranty Program. In addition to that, we have consumer products that we provide to purchasers of condominium units. Under the current act if ONHWP, the Ontario New Home Warranty Program, is not involved in insuring deposits, then we provide an insurance policy protecting those purchasers against loss of their monies. This is particularly important in condominium conversion projects, so we're involved from that standpoint on the current condo act.
I should point out as well that London Guarantee Insurance Co is the second-largest contract surety company in Canada. Contract surety companies bond general contractors and subtrades and contractors that involve themselves in the construction of these buildings. I shouldn't forget that on our corporate risk product lines, we also provide directors' and officers' liability insurance to condo boards, that type of thing.
My presentation this morning is not going to be that specific on specific sections of the act and discussing them. It's going to be from a practical standpoint.
I provided you with a summary of Ontario housing starts which I received from Canada Mortgage and Housing. What I would really like to do is look at condominium starts compared to other residential starts in Ontario. For example, if you notice in 1997, there were 8,138 condominium units that were started, and if you compare that to the other freehold-type construction starts, there were just under 45,000 construction starts on freehold-type product in Ontario.
The point I'm trying to make is that the purchasers of those condominium units had greater consumer rights than did the 45,000 purchasers of freehold units. Under the existing act, those purchasers have full disclosure from the declarants or developers of the relevant facts of the project. They also have the ability, under the rescission rights and the 10-day cooling-off period, not to be pressured into a sale situation.
Again, regarding deposit monies, the current act under subsection 53(1) requires that all monies be held in trust unless they are either insured by the Ontario New Home Warranty Program or other insurance-type products.
In contrast, for those 45,000 purchasers who bought freehold units, there are no disclosure requirements, there is no cooling-off period. They buy and they can be forced -- there's quite often a lineup and the developer says, "If you want your house, you'd better put your deposit in today." If that deal is accepted by the developer, they have a binding purchase-and-sale agreement.
The other key point, if you compare purchasers of freehold units, is that they are protected by the Ontario New Home Warranty Program for their deposit monies up to a maximum of $20,000. But if you're buying an estate-type home where the developer wants a 20% deposit and the purchase price is $500,000, if you want the house, he's probably going to insist that you pay a $100,000 deposit and trust that he isn't going to go bankrupt and he will deliver that title to the unit.
To recap my point: Of the total new home starts in 1997, condo purchasers made up about 15%, and those people have already been given considerable additional consumer rights compared to what the freehold purchasers have.
What I want to get to now is a concern of the industry. I'm also a member of the Toronto Home Builders' Association; I sit on the board of directors. Our company is a member of the Toronto Construction Association and we're also a member of the Surety Association of Canada. Our concerns are the new disclosure requirements -- Ms Loeb has talked about those as a concern of even the Canadian Bar Association and the membership there -- and also the concept of "significant change."
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We feel that these additional requirements, if passed, will threaten the potential creation of new condominium projects in Ontario. The reason for this is very simple: Condominium projects need to be substantially completed in order to obtain condominium registration, and you need condo registration in order to pass title to the purchasers and recoup the balance of closing proceeds, which automatically go first to repay the construction lender. The banks and trust companies that typically finance these projects require a certain threshold of pre-sales to commence lending on any of these projects, and they require certainty that these purchase-and-sale agreements are bona fide and that there is some certainty that these purchasers are going to close those sales and the monies received on closing will eventually flow down and repay their construction loan.
We feel that the proposed amendments to the existing disclosure requirements as presented in Bill 38, and specifically those that provide inadvertent rights being accorded to unit purchasers, will undoubtedly affect the ability of the declarant to obtain any of the traditional sources of conventional financing.
I met with CHMC about two weeks ago. CHMC probably would love the act to be passed as it is for the simple reason that most lenders, if they're not going to take the risk themselves, will pass the risk on to the mortgage insurers, who are also going to charge premiums for the associated risks, and unfortunately all those costs get passed down to the consumer.
Very briefly, I'm going to assist you in making up some time before lunch: Those are the concerns of the organizations that our company is a member of. It's predominantly associated with the production of new condominiums in Ontario. I'll try to answer any questions.
The Vice-Chair (Mrs Julia Munro): Thank you very much. We have some time for questions. I believe we're with the government side and we'll begin with Mrs Ross.
Mrs Ross: Thank you for your presentation. It was indicated by a question from the last presenter that he didn't have much time to consult on this piece of legislation. I just want to put on the record that this is a consensus piece of legislation that my predecessor, the Honourable Mr Flaherty, was involved in, discussions and consultations with various groups, and I believe that you were a part of those financial groups that were involved in those consultations. Would you agree that we have come forward with a piece of consensus legislation that you've been involved in this process for some time, coming forward with something?
Mr Ewen: I would agree. I've been with this company for five years and there have been at least two kick-starts to introducing new legislation. Unfortunately, what Mr Volpatti, and I've been involved in that committee as well -- it seemed to be so secretive that we couldn't get our hands on even a draft act until I think June of this year.
Mrs Ross: Of course, draft legislation is not public information until it's presented at first reading in the House, so legislation isn't available. But certainly the consultations were ongoing, I know, for at least a year prior to anything happening. The Home Builders and the Urban Development Institute were involved from the very beginning, as well as the financial institutions.
Mr Ewen: To respond, I had the opportunity to make a presentation on behalf of the Surety Association to Mr Flaherty and some staff probably two and a half years ago.
Mrs Ross: Thank you. I also wanted to ask or to comment, halfway down your presentation, with respect to "significant change." You've raised that as an issue you'd like to flag.
Mr Ewen: As Ms Loeb mentioned, we feel that if "significant change" is introduced, it will only complicate matters from the standpoint of both the developers and purchasers because there is no clear definition of what "significant change" really benefits other than to notify them that there have been changes. The concern is just the increased litigation and the opportunity for purchasers to attempt to breach the conditions of the purchase-and-sale agreement.
Mrs Ross: We have heard that concern before and it is something we're looking at. I just wanted to let you know.
Mr Gerretsen: I'm very much interested in your comments that the government has been so secretive about this process even though it's a piece of consensus legislation. My earlier comments were just general, that there seemed to be some excellent suggestions made by the last two presenters. I was just wondering why they hadn't been incorporated in the act before. It wasn't really intended to be anything more than that, but I'm glad that you just confirmed that it has been a secretive process.
Let me ask you something else. You're suggesting that there's no 10-day cooling-off period when people buy freehold property. Are you suggesting, in order to have the same kinds of rights both for prospective condominium owners and freehold owners, that perhaps there should be a 10-day cooling-off period in those agreements?
Mr Ewen: No, I'm not suggesting that. My illustration was merely to confirm that we have substantially increased consumer rights for condo purchasers already. I don't believe that it is a significant problem on the freehold basis. Otherwise, I'm sure the ministry would have heard about them. It seems to be working fine from the standpoint of the freehold. Obviously, with 50,000 housing starts a year, if there were a major problem, I'm sure everybody would know about it. To answer your question, no, I'm not suggesting that.
Mr Gerretsen: But you agree that there is a difference between buying a piece of freehold property, and you can usually go to the municipality and find out what the situation is, rather than buying a unit in a condominium where you have rights and responsibilities together with a whole group of other people?
Mr Ewen: Definitely, and the big problem -- it has to do with cash flow from the developer's standpoint. The unfortunate situation is that you must complete the whole project in order to pass title to any of the units, whereas you can spot freehold units all over the place and each of those purchasers can get title. So it is a much more risky proposition.
I just think that we can't afford under this legislation to do anything that's really going to impact substantially. Everything has a price tag to it. Lawyers will get involved and banks are just going to charge higher fees or impose mortgage insurance and it will eventually, unfortunately, turn out that the person who wants that condominium-type lifestyle may not any longer be able to afford that type of product.
Mr Gerretsen: I thought the banks were going to do the legal work. Aren't they doing that in a lot of cases already, chucking the lawyers out of business, and that's why a lot of them are running for elected office?
Mr Ewen: No comment.
The Vice-Chair: We'll move on to Mr Lessard.
Mr Lessard: I don't know whether that was a cheap shot or not.
Mr Gerretsen: It's a reality, I'm afraid.
Mr Lessard: I guess we could argue about the extent of consultations all we want and whether or not they were appropriate. That's a debate that will continue to go on in this place well into the future.
The concern I have is that notwithstanding the fact that this is legislation that has been in development for years, there are a lot of people here with a lot of suggestions for amendments. Given that length of time, I wonder why there are so many suggestions for changes. I don't know whether you have any comment with respect to that.
Mr Ewen: From my personal standpoint, I guess like Ms Loeb, who talked about her top 10, from the development community there are probably two top priorities: concern over the additional disclosure and rescission requirements, and significant change. From the standpoint of the development community, I think most of the other things affect more the eventual running of the condominium corporation. From our standpoint, those have been long-standing issues. There has been case law based on the legislation to date, and unfortunately I don't believe there is any interest group here that really wants to represent or is representing potential new purchasers. What we're concerned with is the negative impact of new legislation as it affects the sale and lease of brand-new units from the standpoint of the financial industry and the drying up of conventional sources of financing.
Mr Lessard: You have provided an interesting chart of housing starts here, and I see it's a pretty precipitous drop in the construction of rental housing and a big increase in the construction of condominiums. Have you made any analysis of those changes? Is there anything to which you could attribute that drop in the construction of rental housing?
Mr Ewen: No, I haven't. The source of this information, Canada Mortgage and Housing Corp, certainly has papers, and the Canadian Home Builders' Association also has something. If you wish to contact me, I can get you a copy of that.
Mr Lessard: Thank you.
The Vice-Chair: Thank you very much, Mr Ewen, for appearing here before us this morning. We appreciate your comments.
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BERNIE SIEGER
The Vice-Chair: I'd like to call upon Bernie Sieger. Good morning, Mr Sieger.
Mr Bernie Sieger: Good morning. Thank you for allowing me to be here. I didn't write anything because I didn't know I was required to. I don't represent any group; I am here as an owner-resident. I have been a real estate broker for over 30 years. I don't as a rule handle residential properties, but in my building and the twin building next door I have sold for and sold to different people.
I've heard quite a few things here today and it's very interesting, but I'm very frustrated. If everything were ideal, I could understand it. I heard someone say that six years is not too long to have anyone on a board or as a chairman. It's far too long. I can only speak for our own condominium, but our president has been there for seven years. In his mind he owns the building. It's that simple. He has been a big shot for so many years that you can't talk to him and there's nothing you can do to him.
The board consists of five people. One is -- and I have called him this to his face and put it in writing -- a pompous, arrogant bully. He hasn't done anything about it, so I guess he feels it's true. The other person on the board is a friend of his who says, "You rub my back and I'll rub yours." The third one has been arguing so long he's got a heart condition and his wife says to him, "Get off the board," and he refuses. The other two are rubber stamps. So we have in my building a dictatorship. We have two people who are running the condominium corporation and they have hidden agendas.
Another thing I heard today is that people vote. Most people in a condominium don't care. They shrug their shoulders and they figure, "If I don't have to do it and he's willing to do it, let him." Whether he is able or competent, they don't care.
Being in real estate, I read the declaration before I purchased the condominium, and the declaration spells out the financial situation, what I am going to be allowed to do and what I am not going to be allowed to do. I wasn't worried about the declaration because, in order to alter or amend it, you need 100% of the owners to approve, and there is no way that you're ever going to get 100%. One person, by not signing the letter, can stop the whole thing.
In the act as it stands now, "The Lieutenant Governor in Council shall designate a non-profit corporation incorporated without share capital under the Corporations Act to be the bureau for the purposes of this act...assisting in the resolution of disputes between condominium corporations and unit owners and between two or more unit owners." This, unfortunately, was in the original Condominium Act, and a bureau was never appointed.
I'm living in a condominium. According to the act, in order to change the Condominium Act for the declaration, you have to have a meeting and get 66% of the owners to approve any substantial change in the reserve fund. Four years ago or so we needed some work done, and I'm sure it would have gone through. Our reserve fund at the time was approximately $700,000. The board decided to spend $350,000, that's 50% of the reserve fund, and according to the Condominium Act, they have to have the meeting, get the approval of 66%, and anyone who objects and loses can then, within 10 days or 30 days, go to the board and say, "I want you to buy my condominium unit at fair market price," which the condominium must do and then they can resell it. But if he's not happy with the change, then he's entitled to have them buy his condominium and move. This particular board didn't bother having the meeting -- just didn't bother. It specifically spells out that they have to, but they didn't. What do I do? They broke, as far as I'm concerned -- infringement of my rights -- a law. I can't phone the police. There's nobody stated here in this act that I can call. The only thing I can do is call a lawyer and sue them.
I spoke to a lawyer. He said, "Before I write one letter I want a $1,000 retainer and you can be prepared to pay anywhere between $5,000 and $10,000 if we don't go to court." He says, "If the first letter works it won't cost you that, but it'll be under $1,000." Now, why should I as an owner or any other owner have to go to the expense of legal fees when, when I bought my condominium, the act said that there is a bureau I can go to?
I learned a great deal today in this room, from lawyers and from other people. As I said before, most people are sheep; they just don't care.
The straw that broke the camel's back, about two months ago: According to the declaration, which I read, it says, "The recreation centre," which is shared between our two buildings, "is to be used for recreation and hobby purposes by the owners and tenants." That's it, hobby and recreation. A group of individuals got together and they decided that they are going to hold religious services every week in the party room. A lot of people complained. They went to the board. The board contacted our lawyer. The lawyer said the use is illegal. The board contacted these people and said: "Sorry, you cannot use that any longer; it's not zoned. It's an illegal use of the premises."
One of the observant people complained to the Ontario Human Rights Commission, and this is an insult to everybody in this room. I see the amount of work that's going in. The Ontario Human Rights Commission, forgetting what the act says, said, "They can do it." It was wrong. There's no sense in your wasting time, wasting taxpayers' money and putting in the effort that I see here today if an organization like the Ontario Human Rights Commission can override what you decide, and that's it.
As far as this board is concerned, right today they were doing things, this board, which, when they sent out for the election, sent out a proxy and they said, "If you cannot attend the meeting, give your proxy to" -- president's name, vice-president's name. I complained. I said, "That's illegal, it's against the elections act." You can't say, "If you're not going to be there, give it to him or him." They didn't care. Finally, two years ago they stopped.
Just to give you an example, I looked at the minutes of the meeting and the accountant that we have had since day one is a friend and client of two of the board members, the two strong board members. I got up and I looked at the meeting and finally it penetrated that the three remaining members of the board said, "Let's get rid of the accountant." The minutes said the two abstained, the other three voted unanimously to get rid of the existing accountant and hire new ones, and the names were right there.
Two years later, at the last annual general meeting, I got up and I said, "Can you explain to me how this was passed unanimously two years ago and we still have these same accountants, your friends?" The chairman said, "Well, we had another meeting after that and rescinded it." I said, "Well, where's the minutes?" He said, "We didn't take any minutes." He finally said to me, "Sit down and shut up," because he didn't like what I was saying.
This is what you have to put up with and I am appealing to this committee because I have no recourse. If there was a person I could go to with my complaint who had the authority to step in, investigate without it costing me a fortune, and say, "OK, I've got the minutes," and ask the board, "Why this, why this, why this?" and if they cannot give a satisfactory answer, this committee or this bureau should be in a position to impeach the board, get them out and have new elections, because that's what we desperately need.
To keep a person in for six years is far too long. Three years I think should be the most anybody should be able to serve on the board, and it doesn't take, as I heard someone say, three years to learn what to do. The management handles everything. You meet once a month. By the third meeting you should know what you're doing if you have a brain.
That's all I came here to say.
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The Vice-Chair: Thank you very much. We'll take questions.
Mr Gerretsen: How long do we have?
The Vice-Chair: We have three minutes, each caucus.
Mr Gerretsen: I have a very simple question. These kinds of unfortunate situations I've heard about before as well. It is unfortunate, and I suppose it's one of the problems of condominium-style living that most of the problems people get involved in are of a social nature more than anything else. I've just checked with the parliamentary assistant -- and she can correct me if I'm wrong -- I understand that provision of that kind of a bureau is not in the new act.
Mr Sieger: I know.
Mr Gerretsen: What you're really saying is that there should almost be something similar to the tenants' rental review board, there should be a person appointed whom you could go to without expending on your own behalf lots of money on legal fees etc, who could maybe assist in resolving these issues by arbitration or otherwise.
Mr Sieger: Someone with power.
Mr Gerretsen: Yes, somebody with power.
Mr Sieger: An ombudsman.
Mr Gerretsen: Yes.
Mr Sieger: Excuse me one second. Regarding the Ontario Human Rights Commission, I sent a letter to the Ontario Human Rights Commission; no answer yet. I sent a letter to the Premier of Ontario, Michael Harris. I got an answer. I'm talking to someone now. I sent a letter to the Ombudsman. They are investigating it. I'm not going to sit by, but why should I have to do it?
Mr Gerretsen: Yes. Mario?
Mr Sergio: Just to complete our time here, you did say that you managed to read the declaration.
Mr Sieger: Yes.
Mr Sergio: We had one of our previous presenters saying that hardly anyone bothers to read the documentation because it's so voluminous. One reason is the language that is used in all the documentation -- the bylaw declaration, the act, whatever. When they start to look at it and read it, people just become disenchanted and --
Mr Sieger: Excuse me, sir. I'm not a lawyer, but I can understand it. It is in plain English.
Mr Sergio: Yes, so how many people do you think bother to read all the documentation, and should there be a digested version of all those documents to make it more simple?
Mr Sieger: I don't know. It's simple to me. If you don't want to read the documents and you don't want to give it to your lawyer to read, then you have no recourse. When I read that there is a bureau that can take care of it, and this is the law, I have nowhere to go. The only way I can go is go to court. I think something should be built in.
Mr Sergio: Are they still holding religious meetings in the --
Mr Sieger: Yes, because the Ontario Human Rights Commission said they can. This, by the way, was done under mediation. I've heard a great deal about it. I didn't know we even had our own Gestapo, but the people who were there were told that they cannot divulge anything. The rest of us weren't even allowed to go.
Mr Sergio: What did the corporation do?
Mr Sieger: The corporation did nothing. The corporation mediated. The corporation had no business in it, they caved in, because they could have said to the Ontario Human Rights Commission, "Sorry, what you're asking us to do is illegal and we don't want to talk to you about it."
Mr Sergio: Thanks for coming down for this presentation.
Mr Lessard: I was interested in your suggestions for the new legislation to try and deal with the difficulties you're experiencing. I guess one of the things you're suggesting is something like an ombudsman under the Condominium Act.
Mr Sieger: Yes.
Mr Lessard: The provisions that are in there now with respect to permitting you access to the courts, that's something that I take it you're not satisfied with?
Mr Sieger: It's very costly.
Mr Lessard: Have you tried that route?
Mr Sieger: I spoke to a lawyer and, I told you, he said before he would send the first letter he wanted a $1,000 retainer and he told me I could spend anywhere between $5,000 and $10,000 if we don't go to court. If we go to court it will be $20,000 or $25,000. Legal today is very expensive.
Mr Lessard: One of the suggestions in the legislation is that there be an opportunity for mediation and arbitration. Is that something you think holds some promise?
Mr Sieger: If the person who handles it, who presides, has the power to do what some people would consider drastic moves. In other words, if he found out that a board was corrupt, he would have the right to impeach the board and force new elections. If a person like that came along -- now, I might come to him and he might say to me, "I'm sorry, but you just want too much." I don't know. Right now there's nothing.
Mr Steve Gilchrist (Scarborough East): Mr Sieger, you won't hear it from the other side, but I'll certainly agree with you that the Ontario Human Rights Commission is just as you describe them and I find it utterly offensive that it doesn't matter that the law says a certain thing, it doesn't matter that the majority of the people in your building have rights. Those rights are reflected in the laws passed by your government, and yet some tinpot dictator can decide, on the basis of one person's supposedly infringed rights, that the rights of hundreds of other people don't count. I would ask you to give me a copy of that ruling because I think this is something I would personally like to follow up on.
I would like to deal with your comments, though, about the mediation and arbitration. You know that the bill as proposed right now does in fact expand your access to other arbitration and mediation methods. I don't know - have you had a chance to read the act in detail?
Mr Sieger: Yes.
Mr Gilchrist: Do you have any comments on how the proposals to increase mediation could be expanded to deal with the specific problems that you have encountered in the past?
Mr Sieger: No. I think it would be as in the old act -- the new act doesn't even mention it -- that someone, some group or bureau should be appointed to handle complaints, trivial or not. It would be up to them whether it was trivial.
Another thing this committee could put in: In the declaration it says "hobby and recreation purposes" for your recreation centre. It could stipulate, "religious services, no" "nudity, no" -- I'm waiting for a nudist colony to start in our rec centre -- or "funerals, no". There are certain things that it doesn't spell out that you just take for granted; it's not recreation and it's not hobby. This committee could stipulate the no-no's. There are certain things you don't want there.
Mr Gilchrist: It would be just as fair though, would it not, that if your board had a more rapid turnover in the members so that you had a greater chance to reflect the current views, that would be something you could impose internally, not just from government coming in and being intrusive?
Mr Sieger: But your board is usually made up of people who take the job because nobody else wants it. I was on the board for three years. We did a lot of work and then this one person, who is now the chairman -- it went to his head. You can't even talk to this man. I have been told to sit down and shut up by him and so have other people.
Mr Gilchrist: Your submission to us is that it should even be tightened up to a shorter period, perhaps three years?
Mr Sieger: To shorten is proper. Yes, three years is plenty. At the end of three let him stay out for a year. Give someone else a chance.
Mr Gilchrist: Thank you for your time.
Mr Sieger: Management usually does all the day-to-day work.
The Vice-Chair: Thank you very much. I think we have opportunity for Mrs Ross and that's it.
Mrs Ross: I just wanted to follow up on the term. You just made a comment, "Nobody wants to run for a term of office." You're saying on the one hand nobody wants to run, but you're also saying they should be allowed -- we've heard from other people saying they should be allowed to run for a long time because of that very reason, you can't get anybody to run. I'm curious to know; you ran for three years, you said.
Mr Sieger: I was on for three years, yes.
Mrs Ross: Did you decide not to run again?
Mr Sieger: I was on for three years. In our condominium there is a stipulation, no pets. Now, some people have cats, some people have dogs. I got on the elevator one day and some woman had -- it looked like a horse -- a huge dog, and I started to sneeze because I'm allergic. I said, "Lady, this dog shouldn't be on the elevator," and she, in so many words, made a racial remark to me. I told her off.
The president came to me. She went to the president and told him what I had said. I didn't swear at her but I did tell her off. He apologized to her on my behalf and then gave me hell. I said, "Look, your mandate doesn't -- you know, you're not the conscience of this building." He said, "If you don't like it, that's too bad." I felt I could do more being off the board than on, and I left. They've got a file that thick for me. I put every complaint in writing -- I've got some of it here -- and they're very upset about it.
The Vice-Chair: Thank you very much, Mr Sieger.
Mr Gerretsen: On a point of order, Madam Chair: Just let the record show that the Ontario Human Rights Commission is headed up by a former Conservative cabinet minister, Mr Keith Norton.
Mr Gilchrist: My guess is he wasn't the person who ruled on this particular issue, as you're well aware.
Mr Gerretsen: In five years from now --
Interjections.
The Vice-Chair: Order, order. Thank you very much, Mr Sieger. We stand adjourned.
The committee recessed from 1200 to 1540.
The Chair: Since the committee is already running almost 15 minutes behind and we're dealing with deputations here, I think we'll reconvene this committee. For the record, the NDP caucus is not here yet, but certainly they'll be given their appropriate time to ask questions.
CANADIAN CONDOMINIUM INSTITUTE, ONTARIO
The Chair: I would ask the Canadian Condominium Institute to approach the table. Thank you very much for your patience in waiting and attending on the members. Could you introduce yourself for the Hansard record. You have 20 minutes to use as you wish.
Mr Jerry Hyman: My name is Jerry Hyman. I represent the Canadian Condominium Institute and I appreciate the opportunity of being able to speak to you today.
The Canadian Condominium Institute supports the passage of Bill 38 and recognizes the excellent work of the ministry in formulating it. However, the changes which have been suggested by the ACMO-CCI joint committee are important and, in many cases, necessary. They do not represent a vested interest of any group. CCI is a non-profit national organization with chapters across Canada whose primary goal is education of condominium directors and others.
As I believe was pointed out to you earlier, the joint ACMO-CCI committee included many of the top condominium professionals in Ontario who devoted considerable time to a section-by-section review of Bill 38 and to the preparation of the recommendations which you have received and which I believe you have in front of you, I hope. We sincerely hope that serious consideration will be given to our comments, particularly so that we might avoid the dislocation, controversy and in fact criticism which is likely to ensue if the act is passed entirely in its present form.
I would like, first of all, to comment on subsection 43(l), which may have already been referred to and probably will be again. The suggested amendment may well be the most important of all amendments recommended by our joint committee. Subsection 43(l) requires the declarant or developer to call an owners' meeting not more than 21 days after the developer ceases to own a majority of the units for the purpose of replacing the developer's board of directors with a board of directors elected by the unit owners.
The problem is that the developer at the time of the turnover meeting may still hold title, for example, to 30% or 35% of the units. The developer can defeat the intended purpose of section 43 by using its concentrated minority voting power to ensure that the declarant's or developer's representatives are re-elected to the board of directors. In other words, the developer can prevent the election of directors by the unit purchasers as intended by the act. Responsible developers do not do this. I should repeat that: Responsible developers don't do that. Other developers have done so. The effect is not only to avoid the turnover intended by section 43 but to render meaningless a number of other provisions in the bill which are intended to protect the condominium corporation and the unit owners.
For example, continued control of the board by the developer after turnover would permit the developer to cause the condominium corporation to enter into a sweetheart management contract with a subsidiary of the developer. They would do that after the turnover meeting, thus bypassing the provisions in the bill which permit the new board to terminate management agreements previously entered into by the developer's board. Once a management agreement is entered into by the developer's board after the turnover meeting, the right under the bill to terminate the agreement disappears. The condominium corporation and subsequent boards of directors will only be able to terminate such agreements in accordance with termination terms, if any, in the agreement. Similarly, subsequent boards may lose the right given in the bill to terminate other agreements entered into by the developer's board.
The developer is obligated to pay the condominium corporation the amount by which the first year's common expenses exceed the budgeted amount shown in the disclosure statement which the developer gave to unit purchasers. A turnover board controlled by the developer could delay or refuse to carry out necessary maintenance or repairs or could delay or refuse to obtain necessary services in order to push costs beyond the first year. This could not only minimize the developer's obligation in regard to costs which exceed the first year's budget, but would reduce the common expenses payable by the developer for the units which the developer still owns at that time. The higher common expenses will be postponed to subsequent years when the developer has sold its remaining units.
The suggested amendment is quite simple. It merely states, "A majority of the directors elected at the turnover meeting," -- and I should stress only at the turnover meeting -- "shall be elected by owners other than the declarant." That amendment, if made, will cure some of the most serious abuses arising out of the turnover meeting. The amendment will not in any way affect the vast majority of developers who act responsibly and who do not attempt to control the board after the turnover meeting.
I have been requested to comment on section 77, which deals with the status certificate which we presently refer to as an estoppel certificate. That's a certificate which can be obtained from the condominium corporation and sets out certain prescribed information relating to a particular unit and to the condominium corporation in general. It is usually obtained by purchasers of condominium units or by their lawyers.
Section 77 deals with what must be contained in the status certificate. If you look at clauses (b) and (c), you'll see that they require disclosure of increases in common expenses and in contributions to the reserve fund which the board has declared or levied since the date of the corporation's budget. We suggest that the status certificate should include increases which the board knows or anticipates will be levied for the current or next following fiscal year.
That's consistent with the requirements in the present act, that is, that the corporation must set out any knowledge of any circumstances that may result in an increase in the common expenses. We see no reason for limiting the disclosure. Purchasers of condominium units should be made aware of contemplated increases in assessments of common expenses or reserve fund contributions.
Clause 77(l)(m): This provision requires disclosure of the amount that was in the reserve fund no earlier than the end of the last fiscal year of the corporation. We believe the disclosure should be of the amount in the reserve fund no earlier than 90 days prior to the date of the status certificate.
Clause 77(1)(o) makes reference to section 84 of the bill, which requires an owner who leases his or her unit to provide the condominium corporation with the lessee's name, the owner's address and a copy of the lease or a prescribed summary of the lease terms. This provision, clause 77(l)(o), stipulates that the status certificate should set out the number of units in regard to which the corporation has received notice under section 84 that those units have been leased. The obligation to notify the condominium corporation of a leased unit, the unit owner's obligation to do that, exists in the present act. It is rarely complied with since the unit owners are either not aware of the provision or simply ignore it. Information in this regard contained in the status certificate would not only be inaccurate but would be misleading. We recommend that this sub-section be deleted.
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I've also been requested to comment on certain provisions commencing with section 100. Subsection 100(3) is a provision that stipulates that the condominium corporation's property insurance "shall not contain an exclusion for damages caused by construction defects." This one is very important. That provision simply cannot be complied with. Ontario insurers are dependent upon international reinsurers who require the construction defects exclusion, which is a standard international exclusion. So a condominium corporation will not be able to obtain insurance containing such an exclusion.
Subsection 106(2) stipulates that an owner or lessee of a unit is responsible for the cost of repairing damage to that unit caused by the owner's or lessee's act or omission to the extent that the cost falls within the deductible under the condominium corporation's insurance. We believe the provision is too limited in its application. It applies only to owners and lessees but not to their families or guests. It applies only to damage to the owner's or lessee's unit and not to other units or common elements which are damaged. The suggested amendment will extend the obligation to other residents or guests and will extend responsibility to damage caused to the condominium property rather than just to the owner's unit.
Subsection 106(3): We recommend that the provision shown in our joint recommendations be added. Subsection 106(1) states that the cost of carrying out repairs which fall within the deductible is a common expense, a point which my confrere to my right is going to deal with shortly. If that is the case, then the act should also specify that the obligation to carry out the repairs rests with the condominium corporation and not with the unit owner as would otherwise be the case.
Clause 108(2)(b): This provision prohibits the corporation from amending its declaration or description for a period of three years if the developer retains at least one unit during that period. We are of the opinion that this provision, in preventing declaration amendments, is far too restrictive. This is particularly so since the declaration can only be amended in any event with written approval of owners of either 90% or 80% of the units, depending upon the provision to be amended. It will be extremely difficult for a condominium corporation to obtain the required approval. If a declarant who owns even a small number of units is not in favour of a proposed amendment, the 90% or 80% approval will likely be impossible to obtain. A declarant or developer who owns eleven units in a 100-unit condominium can block an amendment requiring 90% approval even if every other unit owner votes in favour of the amendment.
The recommended amendment permits a declaration amendment if the declarant or developer has transferred 95% or more of the units and would reduce the three-year prohibition to two years. The amendments also clarify that locker and parking units are not to be brought into the calculation of the percent of units owned by the declarant.
That concludes my comments.
The Chair: Thank you for your presentation. That would leave us with about six minutes left, which is a couple of minutes per caucus. We were last with the Liberals, so it will be the NDP caucus.
Mr Lessard: I just want to thank you for your presentation. It was a lot of information for us to consider.
The Chair: Mrs Ross for the government side.
Mrs Ross: Thank you for your presentation. I appreciate it. As you know, the Condominiums Act has been something this government has been considering since 1996, and I know your industry has been involved in those consultations during that period of time. Some of the recommendations that you've made here, I'm curious to know if you would have recommended these during those discussions between 1996 and now when some of those issues were put forward.
Mr Hyman: Yes. For the most part, these are issues that have been made by CCI and to some extent by ACMO. Of course, some of these recommendations flow from specific provisions in the present bill, and some of those provisions differ from what we have seen previously. To that extent, our recommendations are new.
Mrs Ross: Can I ask you if you think this bill that you see before you is a significant improvement on the previous act?
Mr Hyman: Yes, we believe it is. That's why were in support of it. I guess the problem is that it moves into so many new areas, so much new drafting and is so much longer than the previous act that there are bound to be some glitches in it and that's what we've tried to deal with.
Mr Sergio: Just a comment more than a question. I have enjoyed your presentation and you have made a number of good points. I hope the members will take note here at our committee level and incorporate some of those suggestions that will help make the bill better. The act has been changed many, many times but there is always room for improvements, especially in the areas you've mentioned with respect to absentee landlords or where the developer still owns a majority of votes and so forth. That's an area that we hear complaints on a regular basis, especially the relationship between boards and management.
I appreciate your coming down and making good comments and I hope we can incorporate some of them and improve the bill.
The Chair: Thank you very much, Mr Hyman, for your presentation.
CANADIAN CONDOMINIUM INSTITUTE, OTTAWA CHAPTER
The Chair: At this point, we would call on the Canadian Condominium Institute, Ottawa chapter. Could you introduce yourself for the Hansard record, please.
Mr Jim Davidson: Thank you and good afternoon. My name is Jim Davidson. If I may, briefly, by way of introduction, I am here today on behalf of the Ottawa chapter of the Canadian Condominium Institute, which has a membership of some 289 condominium corporations. I am also a director on the national board of the Canadian Condominium Institute and I am a member of the CCI/ACMO joint legislative review committee with my colleague Mr Hyman and others. I am also here on behalf of my clients.
I am a condominium lawyer with the law firm of Nelligan, Power in Ottawa. I've been practising condominium law for 15 years. I've practised exclusively condominium law. For several years I have been the condominium law lecturer at the Ottawa bar admission course. Our firm has over 400 condominium corporation clients throughout eastern Ontario -- Ottawa, Kingston, Brockville, Belleville, Peterborough and in between. I am the chair of our firm's five-lawyer condominium practice group and I am very grateful for this opportunity to speak with you.
Today I have only a few concerns to express, and one in particular I'm going to spend most of my time on. It's my first and foremost concern and it relates to insurance deductibles. It is a concern that we've expressed for a numbers of years but I don't know that you would have heard it in the last few sessions. This is section 106 of Bill 38. It is my view, and the view of those I represent, that section 106 as presently drafted presents a big problem. I will explain as follows.
As you know, condominium corporations are made up of units and common elements. Generally speaking, the unit owners repair and maintain the units and the condominium corporation maintains and repairs the common elements. So we have this division of responsibilities as between the condominium corporation and the unit owners. However, the condominium corporation obtains insurance on its own behalf, and on behalf of all owners, covering the common elements and the units. The condominium corporation buys insurance covering everything, for the protection of the condominium corporation and the unit owners.
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The difficulty, of course, is that this insurance is subject to a deductible, and these deductibles on condominium corporation insurance policies are rising. A $5,000 deductible is common now. A $10,000 deductible is not unusual. We have four clients with water damage deductibles of $25,000. The practical fact is that condominium corporation insurers only want to deal with big claims. That's why the deductibles are growing on these, what we call, master policies or condominium corporation insurance policies.
I'd like to take an example to show what this means for condominium owners. Suppose there's a pipe that bursts in a condominium, and let's suppose $10,000 damage is caused to drywall in the unit containing the pipe, and suppose the deductible on the corporation's policy is $10,000. The corporation has no insurance for the loss. You have, basically, an uninsured loss, in other words, the deductible, which is $10,000. The question is, who should pay the deductible, the $10,000?
There are two possibilities. Possibility number one is, if the owner of the unit is held responsible for the deductible, then the owner's insurance can cover the loss. Condominium owners can buy insurance covering their unit -- note that this applies to unit damage -- and the insurance will have a much lower deductible, usually $250, just like any other homeowner's insurance. The point is this: Condominium owners can buy insurance that condominium corporations cannot. Condominium owners can buy insurance like any other homeowner. Condominium corporations can't do that. So possibility number one is this: Let the owner take responsibility for the deductible as far as concerns damage to their unit and let the owner buy insurance for that risk.
Possibility number two is, make the corporation responsible for the deductible; make the deductible a common expense. This means the corporation always pays the deductible. This means that all owners in the corporation pay the deductible through their common expenses. This means that condominium owners are forced to self-insure for the deductible. That's basically what it means. It means that condominium owners lose the opportunity or the choice to obtain their own insurance for this risk.
I have attended in the past few years dozens of condominium meetings where I have presented these two possibilities to condominium owners. I have asked them, "Do you want to accept responsibility for the deductible in case of unit damage and use your own insurance for that or, instead, do you always want to pay the deductible through your common expenses?" In about 95% of the cases they have opted for the first possibility, to accept responsibility for the deductible and use their own insurance. In fact they have passed bylaws to achieve this. I've handed around today an example of the kinds of bylaws that condominium owners decide to vote in favour of so that they can use their opportunity as homeowners to buy insurance covering their unit. I've given that so you can see what it looks like. In my experience several dozen condominiums in the eastern Ontario region have done this.
Section 106 of Bill 38 takes this flexibility, this option, away from condominium owners. It forces condominium owners to self-insure for these big deductibles. This puts condominium homeowners in an inferior position compared to other homeowners. They have less flexibility in their insurance arrangements. Note that I am not referring to damage caused by an owner; I'm referring to no-fault damage, which is the most common situation. Damage caused by an owner is another, separate concern. Again, I'm referring to the no-fault situation.
I have been writing, and my clients have been writing, to the ministry about this issue for years. I'm sure you have a stack of literally hundreds, dozens of letters specifically on this issue. I was dealing with Jim Flaherty on it, Lillian and I have talked about it, and I don't think we've been fully understood, with the greatest of respect. Most recently I sent a letter to the minister on this topic. I've distributed it to you. The clerk has helped me with that. My letter explains the law. We have a beautiful Divisional Court decision recently issued which describes the law, just as I've told you. I've attached it. I've described a very simple change that can be made to the legislation to allow condominium owners to decide by bylaw if they want to take on the responsibility for these deductibles and if they want to use their ability to buy insurance to do that.
I've given you a CCI Web site announcement that explains how this works currently under the current law. What I'm saying to you is that section 106 is going to throw this all off kilter. It's a situation that now we understand and that works well in condominiums.
As a last effort on this, in the last few days I went back to many of my clients and many others involved in eastern Ontario in condominium law and condominium management, directors, and I got a petition. I'm going to give it to you. Dozens of people have signed this, a hundred and some people. I've got signatures. Let me read this to you just to emphasize again what I'm saying.
"We, the undersigned, do not agree that condominium corporations should always be responsible for the deductible in no-fault claims. To do so has the effect of forcing condominium owners to self-insure through their contributions towards the common expenses for the deductible on the condominium corporation's master policy.
"We believe that many condominium corporations by a vote of the owners" -- the bylaw -- "may decide that owners will bear the responsibility for the deductible in the case of unit damage. Unit owners can obtain insurance for these deductibles. We believe condominium corporations should have this flexibility, otherwise condominium owners will be denied the opportunity to obtain insurance which is available to all other single family homeowners in the province of Ontario.
"Please revise the wording in Bill 38 to permit condominium corporations, by a vote of the owners, to hold individual owners responsible for the deductible on the condominium corporation's insurance policy in the case of unit damage."
I've offered that wording to you in my letter to the minister. Basically what it says is that to get this flexibility it would require a very minor change to subsection 106(1) along the following lines. The section begins, "Subject to subsection (2)" and then you add "and subject to any bylaw of the corporation," so that if they don't have the bylaw, the condominium corporation will pay the deductible, but they can decide by bylaw to change that. That's all we're asking for: some flexibility in this. Then you could add to the bylaw section, section 56, the provision to allow for that.
That's my foremost concern of all of the things I'm worried about. If I've got a couple more minutes, I had a couple more concerns. If I do, that would be great.
The Chair: You have about five more minutes.
Mr Davidson: Thank you very much, Mr Chairman.
My other concerns are the question of damage, still dealing with the deductible, which is caused by a resident. I support some of the things you've heard from Mr Hyman and the CCI-ACMO legislative committee, that that should be broadened. First, the no-fault situation I've just talked about, please deal with that. Second, for the causation situation, it should be broadened along the lines that CCI-ACMO have suggested.
I want to talk briefly about subsection 31(3). This is the section that says that directors can only stay on the board for six consecutive years. I guess the theory behind this section was that we wanted to get new blood on these condominium boards. I've reviewed this at seminars, at lectures with condominium directors and owners in eastern Ontario; none of them like this. Generally speaking, they say it's difficult to find directors, it's difficult to find people who are willing to sit on these boards, let alone boot them off after six years. If people really want to get rid of somebody, they can do so through the regular election process. Most of the people in eastern Ontario I talked to said they don't like this provision, and I don't think it makes sense either, so that concerns me.
There's one final thing I want to mention to you. The new legislation brings in the concept of mandatory mediation and arbitration. Mandatory mediation and arbitration is an excellent concept for very complex disputes between people, disputes that are going to involve very expensive litigation and things that could benefit greatly from a savings in time through the mediation and arbitration process. But the fact of the matter is that mediation and arbitration is itself quite time-consuming and expensive, so it's a good idea if you have very weighty, expensive litigation waiting for you unless you do the mediation or arbitration.
What we have now under the present Condominium Act is a very quick summary procedure, an application to court to deal with disputes with owners who make too much noise, throw things off balconies or destroy property at the condominium etc, what we call a section 49 application under the current act. It's very efficient and very fast. My fear is that mandatory mediation and arbitration for disputes between a condominium corporation and owners is going to make it more cumbersome and more expensive. I think we're better off with the current arrangement, which is just the application.
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The Chair: Very good. I appreciate your comments, which leave us about two minutes per caucus. We start with the government caucus, Mr Gilchrist.
Mr Gilchrist: Thank you, Mr Davidson. I take at face value your comments on the insurance issue. You've certainly given us a lot to consider, and there's nothing in your presentation I would disagree with in terms of your rationale.
I would like to talk about the issue of the turnover of governing bodies. We had it described by a presenter on the first day of these hearings that the condominium is really a fourth level of government. It delivers all those services. It has taxing authority, in the sense of common area costs. So I'm somewhat intrigued that anyone other than the incumbents or perhaps the developers who have formed a relationship with their subsidiaries and the management companies that are quite frequently set up would be happy with the idea of no elections nor forced turnaround. Perhaps you could try to relate that to what we would have in the electoral arenas, municipally, provincially and federally. Do you take the same view, that just because very few people ever run for political office it wouldn't be a good idea to have elections?
Mr Davidson: No, I certainly don't agree with that. I'm a big proponent of the elections. What I'm concerned about is the six-year turnover. Is that what we're talking about?
Mr Gilchrist: Exactly. My second question to you was, why would we even want to go as long as six years? We had a gentleman this morning who was absolutely outraged at the idea that his board has been there -- and while you're quite correct in suggesting that all you have to do is run, there's no doubt there's a tremendous inertia and the incumbents have a tremendous advantage. Without some other inducement for people to belly up to the bar, I don't think, from my experience and what we've heard in this committee, that reflects what condo users see as their best interests.
Mr Davidson: My experience is that condominium communities are relatively small. They know one another. It's quite easy to get your message out to the owners. It's quite easy to make presentation if you want to get on the board. There is a regular election process. If you're interested in getting on the board, I don't see that that's usually going to be a problem, and it's also very easy to campaign, to get to your owners.
I don't see the concern of entrenchment. I see a bigger concern of maintaining continuity in condominiums. Condominiums suffer if they replace good, hard-working people who are ready to volunteer. Condominium owners don't gain any advantage by being on a board; it's just volunteering their time. In my experience, most directors who want to be there and stay there are energetic people who really want to do good for their community.
Mr Gilchrist: We all hope that, but --
The Chair: Mr Gilchrist, if you could just wrap it up, I think you've made your point very well.
Mr Gilchrist: That's two minutes, all right.
The Chair: Yes, thank you. For the Liberal caucus, Mr Sergio.
Mr Sergio: Your explanation with respect to the deductibles is quite interesting, and we had other people mentioning it as well. Now, you did say that you had some meetings or correspondence with Mr Flaherty?
Mr Davidson: Yes.
Mr Sergio: From your presentation, I believe you have been rather forceful in your views on that particular point.
Mr Davidson: I am forceful in my views about that.
Mr Sergio: To me, it does make sense. Why do you think something that makes sense, that improves the situation -- and you have a petition signed by unit owners, I would assume -- would benefit the individual owner? I think we have to be concerned with that. Why would you think the government side, the minister himself, would not take into consideration including that? What is the explanation he gave you for not including it?
Mr Davidson: Well, I can tell you how this evolved. I spoke a great deal with one of the drafters of the legislation on this issue. We had discussions about it, meetings about it. I don't mean to offend anyone, but it is sometimes a subtle issue for people, and I don't believe he understood the concern. Despite numerous letters, numerous petitions, I don't believe he appreciated what we were concerned about. I think he assumed we were concerned about the situation where owners cause damage. That is not the concern. We're concerned about the no-fault situation, the pure insurance situation. We've been struggling and working in eastern Ontario to try to have this issue understood.
Mr Sergio: This is a very important issue. Can we have the parliamentary assistant perhaps answer? I would like to hear the position of the government on this issue right here, in the open committee.
Mr Gilchrist: That's presumptuous. On a point of order, Mr Chair: This isn't debate; we're here to listen to the deputants.
Mr Sergio: I resent this presumptuous attack from a member of this committee. For goodness' sake, we have a deputant here who has said that he has met with the minister, and I am only trying to find out if the parliamentary assistant would be willing to listen and to bring it to the attention of the minister. To hear the member for Scarborough East calling me presumptuous, I find that very offensive, which means that you have no respect for the people coming down here. You ought to be ashamed.
Interjections.
The Chair: Members. Mr Sergio, out of respect for the integrity of your question, Mrs Ross is willing to give a quick response. I appreciate that.
Mrs Ross: This issue, the insurance, is something we have heard from other presenters, and it is something the ministry is looking at. Amendments will be brought forward next week, and we'll look at it carefully.
Mr Davidson: I'm delighted to hear that. May I offer this: I don't mean any disrespect or offence to anyone. This issue has had difficulty. It's a subtle issue, and it's not an easy one to come to terms with. I express my comments in full respect; I'm forceful, I know.
The Chair: Mr Lessard.
Mr Lessard: My only comment is that I thought that was a very reasonable response, and I'm glad, Mr Chair, you could bring some reason to these proceedings.
The Chair: Well, thank you very much, for the record, of course.
I appreciated your presentation this afternoon. You've raised a very good point, and I'm sure the committee members have taken it seriously. Each caucus, of course, has permission to submit amendments. If we get three, from all sides, we'll have unanimous consent on the amendment. Anyway, thank you very much for your presentation.
Mr Davidson: I'm grateful, and thank you.
BROOKFIELD LEPAGE RESIDENTIAL MANAGEMENT SERVICES
The Chair: Next we call John Oakes. I appreciate, Mr Oakes, that you were willing to change your time around to accommodate other presenters this afternoon. You have 20 minutes to use at your discretion. If you could, for the record, of course, give your name.
Mr John Oakes: Good afternoon, Mr Chairman and members of the committee. My name is John Oakes. I'm the executive vice-president of Brookfield LePage Residential Management Services. Our company is currently the largest manager of condominiums in the greater Metropolitan Toronto area, and for that matter in Canada, with in excess of 150 condominium corporations and 25,000 units in our portfolio.
I personally have been involved in the management of condominiums for over 23 years. I have attended the better part of 3,500 board meetings and probably more than 500 annual general meetings. The reason for this is that I am in the trenches, in a sense, in terms of what is really going on in the condominiums. I've also acted as a consultant to over 80 developers of condominiums in Ontario, and my role there is to prepare first-year operating budgets, to prepare schedule Ds to the declaration which sets out each unit's percentage interest and percentage contribution to common expenses. I've reviewed many disclosure statements and condominium documents from a property manager's point of view, trying to take my experience and make sure these developers are including in those documents things that give us trouble. When I introduce myself to these developers, I certainly say: "I am the ghost of Christmas future. I am the future board of directors breathing down your neck. Please do it right the first time."
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I've been a member of the national board of CCI for six years and a director of ACMO for three and have served as the president for the last two. I also chaired the ACMO legislative review committee and over the last number of months have worked with that committee and in concert with CCI to submit the presentation that was made last week, which contained some 168 recommendations.
I'm here today to make my own personal plea and pitch to ensure that this legislation is as good as it can be and to do whatever I can to reduce the conflicts, confusion and litigation in the future and promote changes that I believe will improve condominium living for our residents and future generations. If you don't live in a condominium now, you may very well live in one in the future. I think it's an outstanding form of housing, and I would certainly recommend it.
I'm only going to focus on several issues, and let me just say to begin with that ACMO and CCI are very pleased with the number of changes and the quality of changes that have been made. We've come a long way. But there are still a number of glitches that we believe should be sorted out.
We have accumulated in our joint committee -- and I'm not here speaking about the joint committee, but I want to make reference to it -- a great number of housekeeping issues that should be sorted out now. If they are sorted out now, they will eliminate a lot of confusion, conflict and potentially litigation in the future.
I really hope you take time to look at those simple wording changes and perhaps try to make as many of those little housekeeping or technical issue changes as possible. I'd hate to see third reading occur quickly, without attention to those issues. My plea is: We want the changes you've made, we want them as quickly as possible, but we want them to be right.
The second issue, I know, is a very sensitive issue and a very political issue for you. Perhaps Lillian remembers that she attended the condominium conference last fall. At that conference, it was loud and clear that those condominium corporations that have age restrictions within their declarations wanted to preserve those rights. All we are looking for at this stage is the right to preserve those rights in those declarations. Out of our 150 buildings, we have only three buildings that have that kind of provision. But it is still a very large issue for those buildings, and it's something you should give serious thought to and make the appropriate changes.
As Mr Hyman mentioned, with respect to turnover meetings, the owner-occupants of the building should have the right, an unimpeded right, to elect the directors they feel would best serve their interests and the interests of the building. I think many developers and declarants have a fear that giving up this right, or giving up their right to vote in those situations, is going to prejudice their ability to sell remaining units and is going to have a negative impact on the quality of the building. Quite frankly, I don't believe that to be the case. In every board I've dealt with in the first-board situation, and I've started up over a hundred buildings, those individuals do elect very responsible directors who have only the interests of the building at heart.
I think that is very important: that that be the start for that building. Many of the developers I know have not got a huge concern about this, because they're reputable builders. I could name 10 buildings right now where the developer has walked into the meeting and said: "We will not be voting for the directors. We will let you pick your own directors." I can name you 10 buildings where the owners have elected one of the declarants, employees, as the director of the building. So, if it's forced on us, I think it's dangerous.
Item number 4: I believe you should give up some authority to collect funds from the owners in a way that is not dependent on schedule D to the declaration. For example, I have two or three buildings right now that are entering into bulk service cable agreements with the local supplier. At the present time, every owner is paying the local cable company directly. They want a master contract. The cable company will give the building a substantial discount, ranging anywhere from 30% to 45%, if it's under one contract. The difficulty is that in buildings with a wide range of suite sizes -- and suite sizes are typically used in the creation of schedule D -- you have some owners who are going to pay a whole lot less for cable because their percentage is low and you're going to get many owners who in fact are going to pay a whole lot more for cable when the cable cost is really an expense that is equal among all the units.
What we'd like is some flexibility and some ability to say: "We want to charge your cable. It's $30 a month. All the units are going to pay $30 a month, regardless of what is specified in schedule D." If you can do something like that, that would make it very easy.
We also have a number of contracts where the unit owner is responsible for maintaining the heating and air conditioning equipment in the unit, for example, a heat pump or a fan cooling unit. They really don't know a lot about these heat pumps, so the condominium corporation steps in and says: "We'll go to a local supplier and we will make a master deal. If we have 100 units out of the 150 units in the building who sign up with the supplier, the cost will be $50 a year." The corporation has great difficulty in collecting that $50, because it's not technically a common expense attributable to the unit. Further, if you use schedule D, which is allocation based on square footage, it's not fair to those unit owners who have large units.
The other thing on this issue is that we have all kinds of situations where an owner will do some damage to the common areas: run through a garage door -- it's on a tape; we've got cameras in elevators and we've watched vandalism -- we have all kinds of situations where an individual owner will do some damage, either accidentally or otherwise. We have no ability, in the current act and in the proposed bill, to go to that owner and say, "You owe us for the damage that you've caused." The owner can easily take the position: "This is normal wear and tear and maintenance in the common areas. I pay my common expenses just like everybody else, and those common expenses should be used to pay for that garage door, broken window or whatever." I think corporations should have some right to go to an owner and try to collect that.
On the tenancy issues, there's not a lot of reference to tenants in the bill. I guess our fear is that there's one provision related to a building that's being converted and the preservation of the rights of the tenant. We certainly have no problem with that whatsoever. In fact, we've got some very responsible tenants. Many of our tenants are far more responsible than our owners, so that's not the issue.
The issue is that if the tenant maintains and keeps his rights according to the Tenant Protection Act, he can in fact retain a pet, for example, in a no-pet building, because we can't get pets out of rental units. But if there's a no-pet provision in a declaration, we have not had any difficulty getting pets out of condominium units. If the tenant keeps his rights under the Tenant Protection Act, but the condominium unit owner doesn't have those rights, we've got two classes of citizens and we could in fact have tenants with dogs in buildings where owners can't have dogs. That's something that has to be fairly easily sorted out, and I think ACMO-CCI mentioned that.
I was not in attendance at the People's Animal Welfare Society presentation so I don't know exactly what they said, but I did talk to ministry staff about this issue. They said, "What do you think about allowing all buildings to have pets?" or something to that effect. We have a number of buildings that have no-pet provisions and these buildings are usually in the downtown core. I think those rights should be preserved. If you want to move into a no-pet building, you've got the right, and if you want to move into a building that allows pets, you have the right.
I really don't believe it's in the best interests of the dogs and the cats and the other pets, or the residents of a building, particularly in a downtown urban area. We have a dozen buildings that don't have a blade of grass anywhere on the property. We have people walking their dogs through parking garages, and this just doesn't seem to me to be the environment for dogs or any other kind of pet.
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The next issue I think Mr Gardiner addressed. There are a number of developers who set up recreation space or facilities as units in a building. In one situation you have a unit -- a swimming pool would be a unit -- which is shared by two buildings. In another building, it would be a common element, also shared by two buildings, but it would be a common element of the one building, and the other building would simply have a right of access and use. We're concerned that the window is open here to allow the taxation department or the assessment department to assess those recreation units, access control units, gatehouses, communication control units, mechanical room units -- I've got elevator units, all kinds of funny units in our condos -- some level of taxation.
I just don't think that's fair, because the vast majority of buildings aren't getting taxed on their elevators, their swimming pools and other things. It's just the way the developer has set it up legally. The facilities in a building have a direct impact on the market value of the unit and therefore you are receiving taxes. If you tax a swimming pool, for example, you're getting a double taxation.
I want to thank the committee for the opportunity to speak, and I want to express my appreciation to the ministry for all the work that it has done to help make this a good bill. We certainly appreciate all the attention that this legislation has received by the ministry.
Mr Sergio: Thanks for coming down to make a presentation. Just one quick question.
How much time do we have?
The Vice-Chair: We have about three minutes per caucus.
Mr Sergio: In your experience, if you had to mention one particular thing that affects the unit owners, the board and the management, what would that be?
Mr Oakes: I wasn't quite ready for that one. Fairness is a critical consideration in all of our directors' meetings, the feeling that if somebody does something, accidentally or otherwise, that person should take responsibility for their actions. I think that wherever we can, we should be building those kinds of protections into the act to give the corporation perhaps the right to demand responsibility for their actions. The deductible issue is, I guess, one that might even fall into that category as well. I didn't deal with that because I knew it was being dealt with otherwise.
You move into a building. Everything's laid out before you in the disclosure statement and in the documents. You make an informed decision to buy in that building, whether it's an adult building, a no-pet building or a building that requires white drapes on the outside. You make these decisions, "That's the kind of building I want to live in." Then legislation is passed that changes all of this. But the adult-only issue is a huge issue in those three buildings, and if I didn't bring it up today, I'm sure they would have terminated my contract, they're so hot about it.
Mr Lessard: I just want to thank you for your presentation. If you want to continue on that train of thought, feel free.
Mr Oakes: I would like to answer Ms Ross's question to Jerry Hyman. We made written comments on every section in the white paper, and we gave that to the ministry staff. Then, when we had the stakeholder meetings, those meetings were dealing with fairly significant issues. We spent a whole afternoon talking about disclosure statements. We spent another whole afternoon talking about status certificates. But at no time was there a clause-by-clause review in those meetings, so a lot of the comments that we made didn't get incorporated, and we're just remaking them, because the focus was on major policy issues, turnover meetings and things like that. I think that's why you're seeing a lot of these housekeeping changes right now, which is rather late in the process I think, but at least you're getting them.
Mrs Ross: Thank you very much for your presentation. As you know, these consultations began in 1996. I just wanted to comment with respect to your comment on the first page about slowing down the process. I really don't know how much slower you can go. It's hard to believe it was a year ago that I actually spoke to your associations. I think we have come a long way and you commented on that as well.
I just wanted to say that the opposition are also wanting to move on this bill, and we did push to get a couple of days of hearings so that we could hear further comments from people such as yourself. I want you to know that we are listening, we are taking them into consideration.
Mr Oakes: That's encouraging. Please don't slow the process down. We've waited for years. We started this process with the NDP government and before that with the Liberal government, so it has been seven years of meeting with the ministry about changes. We're still plugging away.
Mr Ford: I just wanted to know your opinion on time limits, time limits on services -- TV or maintenance of appliances and all this type of thing. You must have contracts with specific people servicing these things. What do you do with the members with TV contracts and all that type of thing? Do you have a time limit on these things?
Mr Oakes: In terms of the term of the agreement?
Mr Ford: The term limits.
Mr Oakes: The terms vary. We have three-year agreements, five- year agreements, seven-year agreements.
Mr Ford: I know some people have extended agreements and there seems to be no end to it.
Mr Oakes: There are two types of contracts. There's a rights contract in which the cable company owns the cable in the building, distributes the signals and collects individually from each owner. Then you have the bulk service agreement where the cable company just bills the condominium for the basic cable and perhaps the MeTV package, and there are a number of different packages that you can buy.
The discount that you get under a bulk service contract, as I said, ranges anywhere from 25% to 45% depending on the length of the contract. We have agreements with some of our suppliers for seven years at 45% and the corporation has the right to terminate those contracts at year 3 or year 5. If they do, the discounts would be lower and there would be a payout because of early termination.
We're finding the cable companies much more co-operative. I guess it's because it's more competitive, but we are making significant progress with the current suppliers on dealing with these long-term rights contracts even, and bulk service agreements. I know the CRTC is certainly looking into this issue and trying to write up regulations on how condominium corporations and rental buildings can finally own the cable in their building. They've given single-family homeowners that right, so they're going to be giving it to condominium corporations as well at some point in the future. I think that will be a huge step. I don't know whether you can do it; I haven't studied the communications section very carefully. I know there was a committee that has made a presentation to you.
The Vice-Chair: Thank you very much, Mr Oakes, for coming here this afternoon.
Mr Oakes: My pleasure.
DELZOTTO, ZORZI
The Vice-Chair: I'm looking for representation from DelZotto, Zorzi.
Mr Harry Herskowitz: Thank you, Madam Chair, members of the committee. It's a pleasure to be here today. I heard John say that he got involved in the process when the NDP government was in power. I got involved in process when I had a lot more hair, when the Liberals were in power, and Monte Kwinter asked my client to get me involved and deal with new issues like vacant land and leasehold condominiums. I never thought I'd see the day when it was close to passing, and I'm just delighted that we're at the last lap, so to speak. I really want to commend your government for finally having a process that hears all sides and tries to balance both purchasers' concerns and developers' concerns and consumers at large.
The Vice-Chair: I'm sorry I must interrupt you because I wanted to ask you to introduce yourself for the purposes of Hansard.
Mr Herskowitz: My name is Harry Herskowitz. I'm a partner at DelZotto, Zorzi. I'm a member of the Canadian Bar Association of Ontario's committee that analyzed this act and has submitted a brief to the ministry. I wear a couple of hats. I also act as counsel to the Greater Toronto Home Builders' Association and was a member of the committee that submitted that long brief on behalf of the Greater Toronto Home Builders' Association, the Urban Development Institute and the Ontario Home Builders' Association.
Because the Canadian Bar Association has a lot of levels to get final approval before the paper and it didn't get in, I decided to simply take the part that I had prepared and give it to you today. I've also given you a copy of a recent issue of the condominium guide. The purpose of that is really illustrative.
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If I could respond to Mario Sergio's question to John -- if he posed that to me, "What is the single most important issue in the condominium industry?" it would be certainty. It would be having a certain playing field where both parties know the rules of the game, devoid of unnecessary ambiguity, because it's ambiguity that gives room for litigation, with a lot of grief and aggravation on both sides of the fence.
One of the things I'm delighted about is that this act, after having gone through so many levels of consultation and open dialogue, under the stewardship of Mr Flaherty and then Lillian Ross, is pretty close to being a great piece of legislation. However, it does need fine tuning. As someone who has developed condominiums for over 19 years, primarily, if not exclusively, for many of the larger developers in Ontario, and has developed condominiums from Sudbury to Sault Ste Marie to Niagara Falls to St Catharines to Toronto and Windsor, I have to emphasize that it's really important that the ambiguities in the legislation are resolved so that we can avoid litigation and an adverse decision where a judge might say to the condominium community, "Purchasers should not be faulted for looking every which way to get out of a deal because the market fell," and thankfully the court of appeal resolved that.
We want to avoid those types of debacles, because although we're in a steady market right now and we have a condominium magazine that has hundreds of advertisements, we could be at a recession right around the corner like we experienced in 1989 to 1995. No one can predict when it happens. But as sure as we're standing here, when the market goes bad, people will look for ways in contracts to get out of deals and they'll look for ways in the legislation for non-compliance. We can't allow them to have an easy attack at things that could be cleared up without too much difficulty. That's why I'm here today, because I would like to have a condominium guide that even in a recession has a lot of ads, because that means the legislation is good and people have confidence in the condominium product and not at any prejudice to consumers or purchasers.
So really today I'm only going to focus for two minutes or less on a couple of sections dealing with disclosure, because I know you've heard it ad nauseam from the builders' representatives and I don't want to belabour the point. It's really dealing with disclosure.
The latest round of legislation drafting introduced this concept of significant change, which I believe was well-intentioned and motivated but is poorly conceived in final form because there's not a definition of "significant change." The Court of Appeal has told the world in Ontario what a material change is and what purchasers are entitled to receive. They should know all of the significant features of the declaration, bylaws, rules and contracts that the condominium will be assuming so that they can make an informed decision whether to buy or not to buy, whether to exercise their 10-day cooling-off period or not. That's what the definition of material was all about in the Abdool v Somerset case. The introduction of another level, another tier called "significant change," without a definition, is simply going to create more ambiguity and a greater potential for litigation, because the next case will come around. If you have seven or eight little minor things that weren't disclosed that in and of themselves aren't material but collectively might be, does that mean that's significant, and if that's significant, does it mean that it's material?
To have two thresholds of materiality, or two thresholds of significance, one that has a rescission-of-the-contract remedy and the other that doesn't, is going to open the ability for purchasers' lawyers to find loopholes out of contracts and for lenders to feel uncomfortable about lending on a project. The first thing a lender says when they look to me is, "Herskowitz, I want you to ensure me that we have 75% or 60% pre-sales, valid and binding and enforceable agreements." Without that level of certainty, I can't make that commitment to them and they won't lend money. That's really the source of the problem.
I believe that the Court of Appeal has adequately addressed this issue and that the legislation doesn't need to create another area of uncertainty, because there haven't been cries from the consumers' side or the lobbyists for purchasers saying that the Abdool v Somerset decision did not resolve things. Since that case came down, there haven't been any cases that I know of where developers have tried to exploit purchasers, have been accused of exploiting purchasers, or where purchasers didn't know what they were getting into when they bought, except for one case where the developer deserved to lose and that was a case where he offered purchasers some recreational amenities as part of a hotel complex in the Muskoka region and they weren't sure what they were getting, and when you looked at that the disclosure statement, you couldn't tell.
It's clear that the Court of Appeal has resolved that for 99.9% of the cases. This act codifies "materiality" in a proper way, and I don't believe that the introduction of the significant change concept will do anything but create more uncertainty, more confusion, more discomfort and definitely more litigation. I don't think lawyers are everybody's best friend, but it will create more litigation work for lawyers and I don't know whether that's a positive attribute or not.
The only other things I want to talk about really are two minor sub-sections. They're minor, but they pack a big wallop and they're in 73(l) and 73(m). You'll find that discussion on page 4 of my brief.
Among other things to be disclosed, the proposed legislation requires the declarant to provide to purchasers copies of the declaration, bylaws, rules, insurance trust agreement, if any and all other agreements that apply to the property. Those words "all other agreements" are so broad and so extensive in scope that we don't know what it means. If you mean service contracts on a continuing basis to condominiums, contracts where obligations are imposed on the condominium corporation where they have to pay money on an ongoing basis, then that's fine, they should be disclosed, but I submit to you that those are the types of contracts that are already characterized in sections 113 and section 114 of the legislation.
What we're proposing is that clause (l) be modified so that a declarant is obliged to provide copies of the declaration, bylaws, rules, management agreement -- because every condominium has a management agreement today -- and the insurance trust agreement. Then in (m), they should provide a brief description of servicing contracts in 113 and reciprocal agreements or mutual easement and cost-sharing agreements in 114 if those agreements are not available.
In other words, if I provide Mr Gilchrist with copies of these agreements and a one-page summary of the types of units, the number of units and whatever recreational facilities and amenities this condominium has the benefit of, which are included in the previous subsections of the act, isn't that all you need? Do I really have to summarize a 50-page cost-sharing agreement or a 30-page bylaw or a 10-page declaration? You can see it.
If the purpose of disclosure is so that you make an informed decision and 10 days isn't enough, then increase it to 15 days so that your lawyer will have enough time to look at it, but don't set a trap for the declarant's counsel to have to try to figure out, what are the significant features of this 20-page document that your lawyer can read? In no other instance in commercial contracts is there a 10-day cooling-off period. You don't have it in freehold homes, you don't have it when you buy furniture, you don't have it when you buy appliances; only in condominiums do you have a 10-day cooling-off period, and now we're codifying when the 10 days start.
I'm submitting to you that the goal is to make sure that every purchaser is an informed consumer, just like the ad, "An educated consumer is our best customer." That's what developers want too, but let's not obfuscate disclosure by having every single agreement that applies to the property disclosed, because I don't know what that means.
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Your definition in your mind may be different than mine, because it's not codified, but clearly we all know what it is. We can all conceive it to be service types of contracts on a continuing basis, agreements where financial obligations are imposed on that condominium, things that affect unit owners' use, enjoyment or cost, and those are the agreements that are referred to in 113 and 114 already. What we're trying to do is suggest that you amend clause (l), eliminate the reference to "all other agreements," but mandate the inclusion of the management agreement, and revise clause (m) so that you either give people copies of those agreements, if they're in final form, or if they're not available in final form, then a brief narrative description of the significant features. That way people know what they're getting into if in fact those agreements aren't available.
I'll give you one simple example. A client of mine, Tridel, is doing a joint venture with the city of Toronto, and part of the development requires an underground parking garage conversion with a city parking area. We don't have the agreements with the city of Toronto, yet everything else has been approved; all the plans and specifications are ready to go. Should we hold off on the marketplace until that agreement is finalized with the city, which may take six months or nine months? I don't believe we should.
What's important is that I disclose to purchasers the significant features of that proposed cost-sharing agreement, what its impact will be financially on the condo corporation and ultimately on each of the unit purchasers, ensuring that that cost is included in the budget statement, and talk about any other restrictions on use of or access to the parking garage. That's what's needed.
This is an example of the type of ambiguity in clause (l) that has to be avoided, because if we allow that ambiguity to exist, it's simply going to give rise to litigation.
That's my submission. I'm ready to take any questions, whether it's on what I've talked about or the CBAO brief, other people who spoke earlier or, in particular, the builders' brief that was discussed at the last committee hearing.
The Vice-Chair: Thank you very much. We'll begin with Mr Martin.
Mr Tony Martin (Sault Ste Marie): I certainly heard what you had to say and I find it useful. You've participated, obviously, in this discussion over the last number of --
Mr Herskowitz: Twelve years.
Mr Martin: Yes. What was brought before us, it seems to me, or how it was explained to me by the ministry when I was briefed on it, was an agreement of sorts that this is what needed to happen in order to balance the various concerns and interests of the groups that were around the table.
Mr Herskowitz: Yes.
Mr Martin: In the short time that I've been able to be at committee here and also from talking to a couple of the groups that had a very clear interest in making sure that this became the law, the issue of disclosure was really important.
Mr Herskowitz: It's the most fundamental. It's fundamental to purchasers so they know exactly what they're getting into so they're not misled, but it's fundamental to developers because failure to disclose in compliance with the act creates a voidable contract. All of the things that you plan on -- your financing, your profit, the commitments you make to third parties -- is all predicated on having binding agreements. Even if you won the lottery, no one builds without having agreements of purchase and sale to bank on, because you don't know whether people will buy your product. So disclosure is critical to both sides of the equation.
The issue is, we have to strike a balance. There are some new disclosure items that have been added in this legislation which by and large the development community will live with and can accept. But we can't accept ambiguity. When you say I have to disclose all other agreements that pertain to the property, I don't know what that means. Do you? I think I know what you mean, but if I'm wrong, if I guess wrong, the result is that all of those contracts in that entire project are voidable at the instance of those purchasers.
We had a situation several years ago when the Abdool v. Somerset case went before the Court of Appeal. It was at a time -- you may have heard about the Palace Pier -- when all of these purchasers balked at closing, so you had an entire project paralyzed waiting for this decision. The Court of Appeal had to deal with the issue of whether there was adequate disclosure of relevant information to purchasers. The purchasers' counsel who were attacking the adequacy of the disclosure were saying that the rules weren't fully described in a significant narrative brief. The rules were attached, but they weren't described as part of the disclosure statement. That's just one example. There are others.
The Court of Appeal said, "Listen, what's important is, on an objective standard, does the purchaser have a reasonably informed decision of what he or she is getting into so they know whether they should resile from the contract and exercise their rescission rights?" If you don't know what you're getting into, you won't know whether you should exercise your 10-day cooling-off period. It's useless.
It basically set the standard very high, Mr Martin. The Court of Appeal set that standard high, and intentionally high, so that people don't try to squirm out of contracts validly entered into, so that they have bona fide motives in trying to get out of a contract, ie, failure to disclose significant material issues. The definition of materiality has already been laid down by the Court of Appeal, and the one that's codified now matches that pretty well, so we're not going to have any problems with that. It's the introduction of "significant," because what is significant to you is subjective.
For example, if you didn't change your contract and you knew that I was spending $1 million on a rec centre and I was going to have a lap pool as part of my recreational facilities, and you decided, "I want a plunge pool; I don't want to do laps" -- if because the market says, "We don't want a lap pool; we want a plunge pool," I decide to change that facility, is that a material change? Would you have made your purchase decision solely on that? You may have, but if you did, you would have gone to your lawyer and said, "Hey, I want to make sure that they warrant that there will be a lap pool." That way I as a developer and a developer's counsel will know what I'm into as far as commitments to you. In the absence of a specific contractual requirement, I would say, "No. Changing the lap pool to a plunge pool when I'm still spending $1 million is not a material change," because overall you're still getting the same unit, the same space, the same view, the same amenities, the same accoutrements to the unit and the building. I'm just changing one facility from one to another.
The Chair: Mr Herskowitz, if you could summarize, I think there are other parties that will ask questions and perhaps you can elaborate at that time. I apologize for interrupting.
I would ask if there are questions or responses from the government side. Mrs Ross.
Mrs Ross: Thank you very much for your presentation. You've been involved in discussions since we've been in government, since 1996. Throughout that process, all the way along, I believe we've tried to keep you informed as to the direction that we're headed.
Mr Herskowitz: Absolutely.
Mrs Ross: I just wanted to ask you a question. The previous presenter said that the most important thing to him was fairness, and you've said the most important thing to you is certainty. This piece of legislation is a piece in which we're trying to provide a balance to everyone involved in the industry. You've said already that you believe it goes a long way towards that.
I wanted to ask you about "significant change." Do you think that if you left in "material change" and forgot about "significant change," that would solve the problem?
Mr Herskowitz: I think it does, because I personally don't think there's a problem that exists right now in the marketplace since the Abdool v. Somerset decision was rendered several years ago. We know that materiality is going to be an objective standard, not a subjective one, and it has to be what a reasonable person in Ontario would think is material to their purchase decision to decide whether or not to stay in the deal. That's really what the Court of Appeal said; that's what the statute has codified.
We've also increased the level of disclosure from the current act. There are more things that we will be disclosing than we were in the past. That's a good thing, not a bad thing. Developers aren't objecting to those.
But where those subsections create ambiguity -- for example, there's another section, a statement setting out the benefits that any condominium corporation confers on others. That's ambiguous because if, for example, you're in a multi-phase condominium and in the first phase is sort of front-end-loaded the cost of the rec facility, is that a benefit that is conferring on to the future phase? We're not sure. Language like that has to be fine-tuned. But I think this legislation has struck a good balance. I think it has gone a long way for fairness, a long way for certainty, but I don't think it's crossed the finish line yet.
That's why the various committees have submitted briefs. I think the builders' brief and the Canadian Bar Association's brief are really not talking about wholesale changes in policy. We're simply talking about fine-tuning the wording.
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Mrs Ross: I wanted to say that the purpose of this hearing as well is to get some further input on what sort of things are missing in the bill. I want to thank you very much for your knowledge and expertise.
Mr Herskowitz: Thank you.
Mr Sergio: Sir, you are eminent in condominium expertise in every field. Another lawyer, I may say.
We had another lawyer before you, Mr Herskowitz, and he was speaking on behalf of the Canadian Condominium Institute, the Ottawa chapter. He brought three particular concerns, but one, he said, he really had problems with. It's something that we were debating here before. It is with respect to the master insurance policy of the corporation; no-fault insurance, if you will. He did mention to us that there are some corporations facing a $5,000, $10,000, $20,000 or $25,000 deductible, versus an individual unit owner, who, if he were to obtain that insurance deductible it would pay much less. He was very, very strong on that particular point. Section 106, the way it is written now, according to him, eliminates that flexibility.
You, as an expert, have put on a very eloquent presentation, as usual. I would like to have your views, for the benefit of the members of the committee here, on section 106 of Bill 38. I would like to hear your expert views on these issues, since the corporation finds it difficult to obtain, apparently, reasonable insurance with reasonable deductibles when it comes to damage caused to a unit from the common elements.
Mr Herskowitz: If I can, I want to answer it in two stages.
In the first stage, we have to define what is the goal. If we want to deter negligent, careless, reckless behaviour, then we shouldn't allow unit owners to carry on activity that is detrimental to the condominium without any negative result; ie, they should be paying the deductible. If I leave the water running in my bathtub and I cause damage, even though that damage is covered by the master insurance, I should be responsible for paying the deductible. Vis-à-vis the party who caused the damage in the condo corporation, I think the condominium should be rendered harmless. If that means that the unit owner should carry an extra rider on their unit owner's policy to cover the deductible, because it may be $5,000 or $10,000, then so be it. I think the proper way is to shift the loss on to the party who caused the damage, because otherwise all of the unit owners have to pay for the negligence of that unit owner.
As far as damage to the party downstairs -- let's say you leave the water running and I'm downstairs and my unit is damaged -- if you're out of the picture, you're bankrupt or whatever, and so there's no recourse against your insurance or you don't carry insurance, then it's between the condominium corporation and the innocent-party-harmed unit owner, and I believe the condominium corporation should pay the deductible. That's one of the reasons why people live in a condominium, so that things like that are covered. Whether the legislation addresses that or not, to me it's clear that that part of the deductible that is not covered by the unit owner's insurance is going to be a common expense.
We have to decide what the policy is. Is the policy to have the condominium corporation bear all costs regardless so that it's no-fault insurance when you move in? I think there was a decision that came down just a month or so ago called Simcoe Condominium Corp 60 v. Stevens where the Court of Appeal -- it was either the Court of Appeal or the Divisional Court; I believe Divisional Court -- overturned the decision by Madam Justice Eberhard, where the Divisional Court said, "In this particular instance, on the facts of this case, where a unit owner was negligent and caused the damage, the unit owner should pay for the deductible, notwithstanding the fact that there's a mandatory obligation on the condominium corporation to obtain and maintain this master insurance."
The Chair: Thank you very much. We've run considerably over on your presentation because of its interest to the members. I appreciate your presentation to the committee today.
Mr Sergio: We should demand that he comes back one more time.
The Chair: We've had some repeat presentations, but other presenters are free to address section 106 as well.
CANADIAN CABLE TELEVISION ASSOCIATION
The Chair: At this point in time I think we'll take a couple of minutes just to sort of clean the table off there, if the Canadian Cable Television Association would be prepared to come forward and introduce yourselves. You have 20 minutes in total. That time can be divided as you see fit.
Interjection.
The Chair: No, we're not taking a break. We're actually running behind. We're going to motor right along here.
I appreciate your patience. You have 20 minutes to use as you wish. If you could introduce yourselves, the Hansard recorder will have that on record.
Mr Roy O'Brien: Thank you, Mr Chair. I am here as executive director, Ontario region, of the Canadian Cable Television Association. With me are Morry Brown, director of marketing for Northern Cable; Ken Engelhart, vice-president, regulatory law at Rogers Communications; and Peter Nielsen, director of government and industry relations at Shaw Communications.
Ontario cable operators deliver television and Internet access to just over 3 million subscriber households across the province. Of these, approximately 150,000 are in condominium buildings.
Let me begin by stating the support of the cable industry for Bill 38. In general, we believe it to be a balanced, well-thought-out and certainly much-needed overhaul of Ontario's condominium legislation.
At the same time, we wish to draw the committee's attention to subsections 22(5) and (6), which deal with a relatively new phenomenon in the communications industry which is called a communications control unit, or CCU.
I would like to take this time to ask Ken Engelhart to review the diagram that was distributed to you earlier.
Mr Ken Engelhart: In order to understand the particular section of the legislation, it's helpful to understand how the wiring in a building for cable TV or telephone service works. The diagram that's been circulated to you is a schematic which in a fairly simple way shows how telephone and cable wiring goes into a building. Simply, the wire goes down the street, sometimes on poles, sometimes underground, and usually outside the building it goes into one of those green boxes, which is the cable pedestal that you'll see on this picture. Typically, it goes underground. It goes into the building through a conduit, which is sometimes called an entrance facility. The wire goes into the basement, and once it's in the basement, it goes into a panel room, as you see there, also sometimes called a meter room. That's just a room in the basement that has all the wires terminating on different panels.
From there, the wire goes up through the building through ducts that are drilled through the concrete floor of the building. On each floor, or sometimes every second floor, those wires go into a closet, a telephone closet or a cable closet, and again they go into panels. Then the wires come out of those panels, go down the hall, sometimes under the floorboards, sometimes in the ceiling, and they go into the individual suites to the telephones or to the TV sets.
You see that picture here. Essentially, everything that's in red on that picture shows how wiring gets into the building to power up your TV and to bring you television signals. The same thing is true of telephones.
The same thing if the building decides they want a satellite provider instead of a cable provider. You see the satellite dish on the roof, and the whole process essentially works in reverse. Again, the satellite wire goes down through those ducts and into the closets and then into the suites.
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Recently, we find the phenomenon of certain developers declaring all of those things, all of those parts in red, to be a condominium unit. They sell themselves a unit in the building which doesn't include suites, doesn't include the normal things that a unit would. It consists of all of those rooms, panels etc that are used to deliver telecommunications infrastructure. The term that's been used in the industry is the CCU, the communications control unit. It's that phenomenon, the developer taking those things out of the common elements where they historically have been and granting them to themselves in a unit, which creates the issue that we're here to talk to you about today.
Mr O'Brien: Before the CRTC opened the industry to competition, CCUs were not an issue. That's because there was no consumer choice, so the only access issue was whether the developer would allow or would not allow cable into the building. Needless to say, that wasn't much of an issue. But with the advent of competition in the past couple of years, the situation has changed. In a contested market, distribution channels are valuable. So what has happened is that some developers have (1) retained control of this means of access; (2) begun packaging it into a sellable unit they call a CCU; and (3) begun charging cable companies and our competitors for the privilege of putting our cables through the CCU.
There may be no reason why the government of Ontario should care who makes or loses some money between the cable companies and the development industry, but that's not the story. The issue here is that the advent of competition is supposed to bring benefits to the consumer, and the practice of charging for CCU access takes those benefits away from the consumer. Competition was supposed to bring choice to the consumer, but under the bill, choice will not rest with the consumers or the condo boards that represent them. It will lie with the developers. That doesn't make sense.
Competition was supposed to bring downward price pressure to consumers. Under this bill, developers will be able to skim the benefits of cable competition for themselves. Unitholders will not obtain the benefits. Indeed, depending on how much the developer charges for CCU access, unitholders could be paying even more than others for telecommunication services.
It is for this reason that the CCTA is recommending that the committee amend subsections 22(5) and 22(6) so that access to the CCU cannot be granted by the developer on an exclusive basis. Instead, power over the CCU would rest where it belongs, with the true consumers for whom competition was put in place, the boards of unitholders.
This is not a matter of taking away from the development industry. The unitization and sale of CCU access has only just begun in Ontario. The committee has a choice: to leave the legislation unamended and divert the benefits of competition from the consumers to the developers, or to amend it so that choice and downward price pressure go to those who need them most, the individual consumers. We would therefore urge the committee to consider amending Bill 38 in the manner we have suggested.
We would now be delighted to answer any questions.
The Chair: Thank you very much for your presentation. It was a unique one. We have just under three minutes for each caucus. I'd start with the government caucus at this time.
Mrs Ross: Thank you for this picture. They say a picture is worth a thousand words, but it's still a complex issue to me. I'm not a technical whiz. If you'll just bear with me for a moment, as you look at this photograph and as you see the lines come up here and you see the darker red boxes, is that where you're saying there would be a separate unit on each one of those floors?
Mr Engelhart: The whole thing is a separate unit. The wire that comes in off the street, the conduits that go into the building, the phone room in the basement, the ducts that rise up through the building, the closets on each floor and sometimes the roof, all of those diverse bits and pieces of the building -- we have seen this recent phenomenon -- have collectively been converted into one unit which is then sold to the developer.
Mrs Ross: The changes that you've proposed here, how would they benefit me if I were a condominium owner?
Mr Engelhart: If you're a condominium owner, what you want to do is either get your condominium board to allow two suppliers into the building so they'll fight it out for your business and compete on price, or you want all of the providers of service to come to the condominium board, give their pitch, and whoever has the best deal gets picked. In either one of those two ways -- some boards do it one way, some do it the other way -- you will get a good deal. You will get better service, better prices, all the things that competitive tendering brings. But without our proposal, that decision gets taken away from the condominium board because it's the developer that controls access. They control the entire link between the wiring infrastructure in the city and the television set or the telephone. There's no practical way to get to those without going through that CCU. Long after the unit has been sold to you the developer will continue to own that CCU.
Mr Peter Nielsen: I'd like just to add to the answer to that. I believe this legislation is addressing one of the issues that condominium owners have been talking about for years and that is the perpetuation of the existing service contracts that developers entered into with a variety of different service providers. There's been a lot of talk, I believe, over the years that the people who buy into the condominium development should not be saddled with, stuck with, a service contract that's been entered into by a developer and a service provider.
Yet what's happening here is, the developer is going to be able to be the gatekeeper for telecommunications services in perpetuity in these buildings because they will have controlled the key area within the structure that's been built in to accommodate the placement, the maintenance, the operation of all that wiring infrastructure. Even though there could be limitations on the duration of a contract between the service provider, be it the telephone or cable television or Internet, the end result is that the original developer will have, in perpetuity, control over that whole arrangement.
The Chair: Thanks. That's very clear. Mr Sergio please.
Mr Sergio: Thank you for coming down and just shedding some light on this. We had similar concerns from a presenter some time this morning and dealt with the fact that the original builder or developer was still in control of the majority of the units. What you're saying here now is that while the building is being built, the developer enters into an agreement with a particular company and that agreement is in perpetuity, that it's even before the condominium's been registered or something like that. Are you suggesting that perhaps the committee and the government should look at, once the condominium corporation is formed and the owners take over, that agreement being subject to the approval of the new board, the new owners?
Mr Nielsen: Yes, I think what we're saying is that CCU, if there needs to be such a term, should be in the hands of the people who own the building. Why should it be in the hands of somebody else? They've built the building at considerable expense, they've sold the units, they've made their profit, they're walking away. Why are they allowed to retain ownership of a created unit that should belong in the hands of the people who are unit holders?
Mr Sergio: This brings me, if I have time, to another important aspect that we have heard from lawyers here, disclosure. Wouldn't this be one of the disclosed, if you will, amenities in the declaration?
Mr Nielsen: I think you're right. The thing is, I doubt that there's going to be something as clear as this -- which still requires explanation, "registered on title" -- so that when even a skilful and experienced real estate lawyer is searching the declaration, will they really be able to identify what is going on when they come across whatever wording is there that identifies a CCU? I would suggest that it took us in the industry a long enough time to figure out that we'd better put a diagram together so we don't spend an hour trying to explain what a CCU is.
The Chair: I appreciate that.
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Mr Martin: I find it somewhat strange that this would be the case. I would assume that once you turn the property over, everything then belongs to -- maybe you can help me understand why this would have been allowed to happen in the first place.
Mr Englehart: Quite frankly, it's a loophole. We've got the condominium legislation very clear that the condo board controls the common elements. Then what we have here is something which most people would think of as part of the common elements taken out of the common elements and turned into a unit. It's a loophole because once it's a unit, it's not a common element and that's why we think the legislation needs to clearly say that that type of unit should grant an easement to the condo board so that they can control it.
Mr Martin: Are there any other such examples of units like this?
Mr Nielsen: Not that we're aware of. In fact there's not a large number of these. There's certainly not a preponderance of CCUs in condominium buildings that our industry services in Ontario or in Canada. I think what we're seeing, though, with the advent of competition, is that some developers are saying: "Now, wait a minute. There's going to be some haggling going on here; there are going to be people vying for access to buildings. There may be people wanting to pay for access to buildings. Let's control the access corridor and make some money."
The Chair: Thank you very much for your presentation. Quite a unique perspective from the others, that have been fairly consistent.
LEOR MARGULIES
ALAN DEAN
The Chair: At this point I would call the deputation from Robins Appleby and Taub. Could you come forward and introduce yourselves for the Hansard record? You have 20 minutes to use as you see fit.
Mr Leor Margulies: My name is Leor Margulies. I'm with the law firm of Robins Appleby and Taub. On my right is Alan Dean, who's with the law firm of Smith Lyons. We represent a group of nine financial institutions in the country, four of the five major banks and five of the other lenders operating in Ontario and elsewhere, and we've listed that in our paper.
We have reviewed the legislation from a view of the construction-lending perspective. As you know, developers build, but they only build with financing and it's very important for the lending community to be comfortable with the changes to the Condominium Act in terms of their ability to fund these projects. We welcome the new act. It was time for a new change, and for the most part we're comfortable with the increased disclosure requirements and the many other changes. However, the two watchwords that I've heard here earlier are paramount in our presentation and that's "certainty" and "fairness."
The construction-lending community finances primarily based on the ability to get repaid at the end of the day. That ability to get repaid at the end of the day comes from the sales that will be in place. No conventional lenders will lend against the project unless there's a certain number of pre-sales that would be enough to basically take out their loan, and normally the lending can be somewhere between 60% and 80% of the construction and acquisition costs.
The lenders will look very closely at the construction budgets to ensure that there's a cost in place that will match the funding, and also at the pre-sales that are in place so that there's some assurance that at the end of the day they will not end up with a building that they will have to sell themselves to get repaid. Again, it's a construction loan. It's a short-term facility of 18 to 24 months.
What we've looked at primarily in terms of the act are the disclosure and recision requirements, to see how that impacts from a lending perspective. To the extent that we have concerns that the pre-sales upon which the lenders will be relying are jeopardized, how that will impact on the lending community is that they may require additional equity before they will fund. They may require additional pre-sales.
Right now, anywhere from 50% to 70% is enough to take out the loan, but if there's a real concern that those pre-sales are not real, that because of the increased disclosure requirements and loopholes or inadvertent errors that a developer may make -- remember, it's the developer who's preparing these documents, not the lender -- they may have additional exposure. They may increase those requirements to 70%, 80% or 90%. We don't want to have that happen. As well, they may require additional equity from the board to support their position.
These are all things that we don't want to have happen because in those circumstances it'll be harder to build, more expensive to build and also more time-consuming to build, and that impacts on everybody in the stream, the developer as well as the consumer, because there will be less product, a higher cost and also a longer time frame. That's something that's problematic in the system that we can't eliminate, but we don't want to have it expanded. Right now when a buyer buys a building, buys a unit, he has to wait maybe two years. He's buying a pig in a poke, so you want to have full disclosure, telling him exactly what he's buying.
If the pre-sale requirements are increased to cover off the perceived risk, instead of it being 18 to 24 months, it may be longer, because what will happen is, construction will not commence until enough pre-sales are in place. So if you increase the pre-sales, you then increase the time frame in which to build, which is no good.
What we've looked at again is, are there things in the act that we can go back to our clients to tell them that it works or that they should be concerned about? We have some concerns. I think you all have our paper in front of you. We've looked at it actually from a broad perspective. We've made some recommendations for consumers as well in there. You'll see that one of our recommendations is to create disclosure requirements for the agreement of purchase and sale in terms of adjustments. We feel that there isn't sufficient disclosure. We've tried to come up with a package that really will make the system work because at the end of the day we want our purchasers to close and be happy with what they're buying.
We have a limited time frame. We're not going to go through all the points. I don't think a lot of them -- as you read through them and as we've discussed them with ministry officials -- are controversial. I think they better the act from everybody's perspective, but there are four key areas that we want to focus in on. I will be dealing with some of them and Alan will be dealing with some of the others. If we have time, we'll go through the rest.
The four key ones are our submissions on the significant change issue, which you've heard before; the other agreements issue; the concept of the information statement; and then the fourth one, which may seem the most radical but really focuses on fairness, is our suggestion for the non-material omission clause which creates some balance in the act, balances out the fact that we now have significantly greater disclosure requirements.
Mr Alan Dean: Mr Chairman and members of the committee, thank you for having us here today. You've had a long day, so I'm not going to be lengthy with this.
I'd like to just highlight from our paper the concerns we have about this information statement requirement. It doesn't appear to add any additional information. It appears that it's supposed to be some sort of an index or a summary of materials that are contained in the disclosure materials for purchasers, but our concern, as we say in the paper, is that it creates an additional legal requirement to be satisfied by developers which has to be reviewed by their lawyers and by the lenders and the lenders' lawyers to ensure compliance with the legislation.
We're saying that you're going to have two sets of documentation relating to disclosure by way of this disclosure information statement. It just increases the potential for omission and inconsistency and we think that is not a good position. It leads to uncertainty both for the developer and for the consumer. We would suggest that the requirement for this information statement be disregarded and deleted from the act in its final form.
The other point -- and this I think was probably discussed at some length by Harry Herskowitz earlier, because we came in at the end of his presentation -- is this requirement to provide copies of all other agreements relating to the property as part of the disclosure materials. Frankly, unless some parameters are put on that, you get into a ridiculously long possible list of what they may be. They could include the loan agreements, all the security documents for the construction loan, which probably are of no interest at all to the purchaser. It could include copies of all the other agreements of purchase and sale for the property. I don't think it was ever intended to do that.
I think the balance needs to be struck with agreements which will be binding on the condominium corporation and the owners of the condominium once the project has been finished and sold, obligations that they have to pay for, things that could affect the amenities or the use of the building. I'm sure that was really the intent, but unless that language is coopered up somehow, we're stuck with an open end and, again, uncertainty and we're not quite sure where we go with that.
I think, Leor, you're on the next point here.
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Mr Margulies: This point relates to our suggestion for a new concept in the act -- it's on page 4, paragraph 4.a of our paper -- and that's what we call the concept of non-material omissions.
Right now the act deals with material changes. If there's a material change to the disclosure statement that's going to affect a purchaser's decision, the right to rescission is revived. However, there's nothing in the act, and there was nothing in the old act either, that dealt with the situation where there was a non-material omission in terms of the requirements for disclosure. So under the old act and under the new act, if you miss one thing that's required under the act in terms of disclosure, one agreement, or you make one mistake, you haven't complied with the disclosure statement; therefore the agreement of purchase and sale is not binding. It's not voidable, as Harry said; it's void.
The purchaser can say: "I haven't received the disclosure statement that's required by the act. I don't have to close." We may not find out about this problem until the market downturns and prices have dropped and people are trying to walk away from their deals. I don't think that's the intention. It certainly shouldn't be the intention of providing protection to purchasers. The protection should be there to ensure that there's full disclosure, that they have all the information, but if there's some non-material, inadvertent mistake or omission, that shouldn't suddenly allow the purchaser to walk away from this deal.
Under the old act that right wasn't there; I acknowledge that. But also under the old act the disclosure requirements were fairly general. Other than some specific, basic items, they were fairly broad. Under the Abdool case, you would look at whether you broadly complied with them or broadly materially changed them. But now you've gone ahead and -- we're not arguing with giving more specific guidelines as to what has to be disclosed -- you've expanded it significantly. We accept that; that's fair. In fact, some of the bankers I asked, "What do you think of this act?" said: "I think that's fair. If a guy's buying a pig in a poke he should know everything." I said, "That's fine, but what if we make a mistake, we miss one little agreement, we get some date wrong, where a purchaser can then say, 'You didn't comply with this'?"
On the basis of the current legislation there's certainly more room for making that error because the bar has now been lifted much higher. If you're going to lift the bar higher, you have to create the fairness on the other side and say if the disclosure statement -- I've suggested language which really mirrors the language you have for material change. I'll leave it for the draftsmen, but we tried to track it exactly, such that it wouldn't impact on a purchaser's decision. If he knew about this agreement or he didn't know about it, it wouldn't matter a hill of beans; then he shouldn't be allowed to walk away.
Quite frankly, this is what concerns me most in terms of advising lenders. We can't tell with certainty -- we could never tell before, but before you could look at the plans and you knew there was very little room for omission. Now there's a lot of room for omission and we can never advise our clients that yes, everything complies, because we don't know all the plans and specs. Maybe there's something the developer knows that he forgot to tell us, forgot to tell anybody about.
I would ask you seriously, of all the recommendations, this one certainly creates a balance in the act. We accept the concept of disclosure. Make it as full as you want and as broad as you want, but don't suddenly allow technicalities to allow purchasers to walk away from deals where it's not fair. That isn't fair either. If we're talking about fairness, I would really ask you to look at that, because with that type of clause, in some fashion it means that basically purchasers have to close if you've given them what they bargained for. That's all we can ask for.
The Chair: We've got about three minutes left, if you could use your time however you wish.
Mr Dean: We'll just make one last point. This is on the concept of "significant change" which has been introduced in the disclosure section and is not a defined term. I think we've gone a long way and we're lucky now that the Court of Appeal has spoken with a lot of authority on what a material change is. In fact we think the definition of "material change" in the bill is really nothing more than a codification of what the Court of Appeal had to say, so we all know what that means now. We know what a material change is, but suddenly we find this concept of "significant change" and it's not defined. There doesn't appear to be any remedy provided if it's not complied with. Again, we've gone from a situation which became very clear through the courts, has been confirmed by the bill and then we seem to have muddied the waters yet again.
We gave a number of reasons in our paper why we think it should come out. We understand there is a move afoot that it won't appear next time, and I think it would do a real disservice to everyone if it carries on. We hope we don't see it next time.
The Chair: You've brought a number of important points to the attention of the committee. The time has been exhausted. I appreciate your presentation today. Thank you very much.
That will conclude the presentations for today, but I would request the presence of the permanent members of the committee, as we want to conduct some other business.
SUBCOMMITTEE REPORT
The Chair: I would like to reconvene the general government committee. At this point, the business on the order is Bill 55. I'm looking for a motion. Mrs Munro.
Mrs Munro: I move that we accept the report of the subcommittee as follows:
"The subcommittee met on Tuesday, October 27, 1998, and agreed to the following:
"1. That French and English advertisements will be placed on the Ontario Legislative channel and on the committee's Web page. An English advertisement will also be placed once in the Windsor Star and the Sudbury Star.
"2. That each party may submit a list of potential witnesses, to the clerk or the Chair, by Monday, November 9, 1998, at 4 pm. These party lists, together with any names the clerk has received, will be distributed to the subcommittee members as soon as possible. On Tuesday, November 10 at 4 pm each party will deliver to the clerk a priority list of proposed deputants selected from the list provided by the clerk the previous day. These priority lists provided by each party will indicate which witnesses are to be scheduled for which city. The clerk will only schedule from these priority lists.
"3. That if there are empty spots on the agenda, the Chair may accept additional selections from the subcommittee members in order to fill these vacancies.
"4. That each witness will have 20 to 30 minutes in which to make their presentation and to answer questions form the committee members. The Chair, in consultation with the clerk, will determine the exact amount of time provided to each witness.
"5. That November 9, 1998, at 4 pm will be the cut-off time for people to contact the committee clerk to request an opportunity to appear before the committee. Written submissions must be received by the last day of public hearings.
"6. That the Minister of Education and Training will be invited to make a 30-minute presentation to the committee. Following this presentation each party will have 15 minutes in which to make statements.
"7. That ministry staff be present at all committee hearings in order to answer questions from the members.
"8. That the committee will hold four days of public hearings. The committee will spend one full day in each of the following cities: Toronto, Sudbury and Ottawa. Furthermore, the committee will divide one single day in order to hold hearings in both Hamilton and Windsor.
"9. That the expenses incurred by a witness will not be reimbursed unless the subcommittee approves the request.
"10. That the Legislative research officer will prepare a summary of recommendations. This summary will be distributed to the committee by November 23 at 4 pm.
"11. That amendments are due November 24, 1998, at 5 pm.
"12. That the clause-by-clause process will take place on November 25 and, if necessary, November 26.
"13. That there will not be any opening statements before the commencement of the clause-by-clause process.
"14. That the Chair will begin each meeting once all parties are represented or after a reasonable amount of time has passed.
"15. That the Chair, in consultation with the clerk, will make any other decisions necessary to facilitate these committee hearings."
The Chair: Thank you for that motion. At this point, I would ask the various parties if they want to make a comment with respect to the subcommittee report. Mr Caplan, do you have any comments?
Mr David Caplan (Oriole): The subcommittee report is in order with what we agreed to as a consensus.
Mr Lessard: I think this accurately reflects what we discussed.
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Mr Gilchrist: I wonder if I could perhaps get the acquiescence of the other two parties, because it may be implied but it's not stated in number 9.
We've had some bad experiences in the past where people came to us after the fact and tried to browbeat us. Normally in 9, we would put "approves the request in advance," if that meets with your approval. If somebody has to travel to attend, all that we're asking is that they notify the clerk, and the clerk would then ask the subcommittee to approve that before the person actually incurs those costs. It's also fair to them because if they incurred the cost hoping we would reimburse them and the subcommittee decides not to, then they're obviously left high and dry.
Mr Lessard: I guess if we were having advertising around the province and we expressed that to people, that they had to make that request, then it would make sense, but otherwise people aren't going to know that this is a request they would be able to make or even consider making until they came to the committee. If it would make you feel better, if it's the whole committee that approves the request, I don't have any objection to having that changed.
Mr Gilchrist: That's fine.
Mr Lessard: Perhaps your concern --
Mr Gilchrist: We've actually had problems in the past, Mr Lessard, where we did not advertise that it was an option. Someone did come, presuming for whatever reason, maybe it had been done in the past by some other group they'd spoken to, maybe by the federal committee, I don't know -- we've had cases where someone had already spent the money and then turned to us and said, "Oh, by the way, I expect to be reimbursed," and I don't think that's fair to either party.
The Chair: The clerk advised me it is highly unusual that that occurs here. I think between myself and the clerk we can certainly deal with it. I don't think it's come up that frequently according to the clerk.
Mr Gilchrist: OK.
The Chair: Our destinations are really addressed in the geographical issues.
Mr Gilchrist: That leads me to my second point. My apologies. Not being at that meeting, I certainly don't know the ebb and flow of the discussion, but having been on committees on two occasions that have tried to split their time between quite distant cities, I'm troubled by number 8, the third sentence. I wonder if it would make more sense to split the difference and to have the subcommittee meet for the entire day in the city of London. It would seem to me that would allow people to drive one hour in each direction instead of uprooting the whole committee. In fact it's not us, it's the technical aspects of Hansard and the recording.
Alternatively, if there's one or the other city that the opposition parties feel more strongly they would like to have hearings in, then it would seem to me someone in Hamilton could quite conveniently come to Toronto, whereas it's not all that convenient for someone else in southwestern Ontario to drive all the way to Hamilton. I would offer that Windsor or Hamilton would make more sense than Windsor and Hamilton.
The Chair: Are you really trying to suggest that on one of the travelling days that was suggested be split, we would be eliminating Hamilton?
Mr Gilchrist: My first suggestion, if it passes muster, would be that the committee would give that day to London. If that doesn't find favour with the opposition parties, then I certainly would be prepared to approve one or the other. It would seem to me that Windsor would make more sense because Hamilton is quite close to Toronto.
Mr Lessard: I just wanted to advise Mr Gilchrist that there wasn't really any ebb and flow. Everything was all just done on consent. We came up with this in a very few minutes.
Mr Gilchrist: Great.
The Chair: Yes, that certainly was on paper.
Mr Lessard: I expressed very strong feelings about being able to go to Windsor as I'm a member of the standing committee and I'm also the critic for apprenticeship and training issues and to me it's very important that the committee have hearings in Windsor. It's a community in the southwest. I think the suggestions we've made here cover off the north, the east and Toronto. The real question is where we go in the southwest. Half a day in Hamilton and half a day in Windsor was a compromise, and Windsor is my preference.
Mr Caplan: All I would add is that each caucus suggested different locations and through a process of compromise and consensus we were able to come up with this proposal, and that seemed to satisfy all of the different caucuses. Obviously the committee can do whatever it likes, but we went over all of the issues quite thoroughly. The government, the Liberal Party and the NDP all put forward different proposals and this was struck as a very reasonable way to accommodate all three views. My recommendation is to leave it as it is. That's what would be agreeable to --
The Chair: Just in discussion with the clerk, looking logistically, with the minister and all parties having an opportunity -- the first day's going to be a Toronto day. Much of it will be kicking off the hearing process. You've got some distances to deal with. One of those days is going to be a very long and very unproductive day technically with moving and how much hearing time you're actually going to have in those distant locations.
What we were trying to do was streamline the travel arrangements. That's what we're trying to get to. We're really coming down to whether or not the decision is to split a day, have a 12-hour day basically with travel and two locations quite far apart and/or have an amendment to this agreement so we have a Windsor, Sudbury and Ottawa visit. That's really where we're trying to get to, if the wish is what I'm hearing.
Mr Tom Froese (St Catharines-Brock): If we have an agreement by all three parties, and Mr Lessard has already mentioned that, why aren't we spending a whole day in Windsor then, because to travel to Hamilton and Windsor --
Mr Ford: Waste of time.
Mr Froese: I've been there, done that on Bill 12, where we hit three cities in one day or whatever it was. Well, I better watch what I say because Hansard's recording it, but in my opinion, if we've got an agreement, Windsor is fine.
The Chair: With the permission of the committee members and indulgence, I think to clarify it for the clerk and those scheduling these hearings and the communication that subsequently goes out, we would need an amendment to number 8.
Mr Gilchrist: I'm prepared to propose an amendment for the committee's consideration, to simply delete the last sentence and say instead, "The committee will spend one full day in each of the following cities: Toronto, Sudbury, Windsor and Ottawa."
The Chair: With the consent of the committee, we have an amendment. Any debate on the amendment? We have debated it already.
Mr Lessard: I just want to reiterate what Mr Caplan said. We did have an agreement at the committee. I expressed my preference to ensure that we got to Windsor. I would like to go to Hamilton and Windsor. I think part of the reason for considering this was that the travel time would be during the day. If we were to have hearings in the evening, we'd be able to hear from some apprentices as well who may be working during the day. The fact that we might start out early in the morning I don't think is a major factor. I understand the concern about 12-hour days, and sometimes I wish there weren't 12-hour days around this place. However, that's the reality that we're faced with.
The Chair: That's true.
Mr Caplan: We have to go for a vote, Mr Chair.
The Chair: The vote hasn't rung yet, but could we --
Mr Lessard: The bells are going to ring.
The Chair: Yes, the bells will ring, so we'll get a five-minute warning. Mr Caplan, do you have a comment?
Interjections.
The Chair: There will be a vote called.
Mr Caplan: I just found this out from my Web.
Mr Gilchrist: The vote is at 6.
The Chair: Did you have a comment specifically? We have an amendment before us.
Mr Caplan: No, I have no further comment. In my mind we had an agreement among all of the parties that this was a reasonable way to handle things and my strong recommendation is that we follow what's set out in the subcommittee report.
The Chair: We have tried to accommodate all members of the committee in the subcommittee process. We have an amendment. I'll call the question on the amendment. All those in support?
Mr Sergio: Who made the amendment?
The Chair: The amendment was made by Mr Gilchrist to have a full day in four locations: Toronto, Windsor, Sudbury and Ottawa. All those in support? Those opposed? That amendment's carried.
Mr Sergio: I didn't see a show of hands on the other side.
Interjections.
The Chair: I'll call the question on adopting the report, as amended. All those in support? All those opposed? That's carried. The clerk will be in touch with proceedings on this committee.
This committee stands adjourned.
The committee adjourned at 1750.