Update on the Condominium Act Review

In September 2013, the Ontario government, in conjunction with Canada’s Public Policy Forum, published a working paper on changes to the Condominium Act of Ontario. The current Condominium Act in use in Ontario was prepared in the late 1990s and brought into force in 2001. It is widely held that a review of the Act is long overdue. When the report was issued in the fall of 2013, much was made of some of the bigger recommendations, such as setting up a condo office that would oversee arbitration between owners and condominiums and would oversee education programs for owners and especially for directors of condominium corporations.

The report also contained other recommendations that did not get as much publicity but which, if acted upon, will have a big impact on purchasers, developers and owners of condominium units.

Firstly, the report suggests a prohibition on deferring operating expenses from first year budgets. Developers will try to keep the first year operating budget as low as possible to show that the common expenses are reasonable. This is done for marketing purposes. Unfortunately, deferring these expenses from the proposed budget doesn’t actually mean that those costs will not be incurred and new unit owners will find that their common expenses are larger than expected. The report suggests stopping this practice. As a result, purchasers will have a better sense of the actual common expenses in their first few years of ownership.

Secondly, the report suggests a new licensing scheme to license condominium managers. There has been much litigation in the province of Ontario where boards and unit owners have sued their condominium managers. Licensing of managers is hoped to increase the expertise of the individuals working in this capacity and it is hoped to result in more accountability. Of course, this will also increase the costs of employing condominium managers and this may have a direct impact on the common expenses that unit owners are paying. This may also have the effect of narrowing the field of the companies that are available to provide this service.

Thirdly, one of the options proposed that would have a big impact on developers is that the typical disclosure statement required under the Condominium Act would be made unit specific. Related to this, the report also suggests preparation of an easy-to-read condominium guide that would include essential facts about condominium living. It is hoped that these two items will make it easier for prospective owners to assess what they are buying. Of course, this will increase costs to the developers to prepare such documents in addition to the current requirements.

The Condominium Act review is still in process but there will be changes coming in the future. Although the Condominium Act is a piece of consumer protection legislation, further requirements in disclosure statements will have an impact on the amount of paperwork that is required on the part of developers to prepare a condominium for the market and of course, this will increase the cost of the units, thus affecting purchasers.