I was speaking this weekend at a Condominium Director’s Course given by CCI-Eastern Ontario. One of the participants asked me to explain the differences between a condominium declaration, by-laws and rules. While the more seasoned condominium directors have become familiar with these documents, many first-time directors may be puzzled by the differences between them. In fact, even some managers seem to refer to these documents interchangeably.
So, which one does what and what is required to change them?
Hierarchy of governing documents
The setting up and governance of condominium corporations in Ontario can be found in 4 different sources:
- The Condominium Act;
- The condominium declaration;
- Its by-laws; and
- Its rules.
I’ve listed these sources in that order as they form part of a hierarchy. The provisions of any of these documents cannot be inconsistent or contradict the provisions of a document above it. For instance, the declaration cannot contradict the Condominium Act but it has precedence over the by-laws and the rules. Similarly, when a board adopts a new by-law or a new set of rules, these cannot be inconsistent with the Condominium Act or with the Declaration.
The Condominium Act
Ultimately, the Condominium Act governs most aspect of condominiums in Ontario. It regulates the creation, the ownership and the governance of condominiums.
Obviously, we don’t have much control over what’s in the Condominium Act. Legislation is adopted by Parliament.
Most of us know that the Ontario Condominium Act is being amended as we speak. The ‘new’ version of the Act was adopted in December 2015, but will only come into force “on a day to be named by proclamation of the Lieutenant Governor“. Your guess is as good as mine as to when that will be. The province is presently working on regulations to supplement the Act. Indeed, in addition to the Act, one must also consider any regulations adopted pursuant to it. Presently, there are only two regulations adopted pursuant to the Condominium Act. The ‘new’ condominium Act leaves a lot to be fleshed out in the regulations to come. The publication of the proposed regulations will provide very useful information on the exact effect of the new legislation.
We already have numerous posts on Bill 106, which is the Act amending the Condominium Act.
Condominium corporations are created by the registration on title of a declaration and description. Once the declaration is registered on title, the Condominium Act applies to and regulates the condominium. The registration of the declaration is done by the developer, or more accurately, by the declarant.
The declaration will, amongst other things, define the units and common elements of the corporation and specify the boundaries of each of them. It will define the percentage of ownership of each unit and set the proportion pursuant to which each unit must contribute to the common expenses. The declaration also usually contains conditions or restrictions with respect to the use and occupation of the units and common elements. For instance, the declaration will determine whether some units can be used for commercial purposes. It will also allocate as between the owners and the corporation the obligations and responsibilities of maintaining, repairing and/or insuring the units and the common elements. Declarations could contain pet restrictions. They could also prohibit or limit smoking in units or on balconies. Smoking is already prohibited on common elements.
The declarant is the entity which sets the precise provisions of each declaration. Declarations therefore vary from one corporation to another but can be modified at a later date. Generally speaking, the declaration can be amended by the owners if 80% to 90% of the owners agree to such amendment (it depends on the type of amendment being sought). This is a high threshold, which is usually difficult to attain.
In addition to the owners’ ability to amend the declaration through a vote, courts can correct a declaration if it contains an error or an inconsistency. A court will only make the correction if it concludes that it is necessary or desirable to make such a correction.
By-laws deal with the governance of condominium corporations (ie. how they are run). For instance, by-laws may deal with the qualification of condominium directors, their remuneration (if any) and their term of office. It may deal with the quorum required to hold meetings (of the board or of the owners). It may grant a corporation with the power to borrow money. It may also define what constitute a standard unit for the purpose of determining the responsibility of repairing or maintaining improvements made to the unit. It may also restrict the use and enjoyment that a person other than the occupant of a unit may make of common elements (ie. whether the owner who leases his or her unit to a tenant use the pool or the gym). By-laws can also govern the management of a property.
By-laws may be passed, repealed or amended by the board of directors. They must, however, be reasonable and they cannot be inconsistent with the Act or the declaration. Before becoming effective, by-laws must be approved by a majority of the units of the corporation. Therefore, 50% +1 of all units must approve a proposed by-law. Once this happens, it must be registered on title. Only then does the by-law become enforceable.
The board can also make, amend or repeal rules. However, rules cannot be about anything and everything. Rules must be either:
- be for the purpose of promoting the safety, security or welfare of the owners and of the property or assets of the corporation; or
- they must be aimed at preventing unreasonable interference with the use and enjoyment of the common elements, the units or the assets of the corporation.
Typical rules may therefore be aimed at preventing nuisance or interference between owners. They may deal with noise, for instance. They may impose parking restrictions. Pet restrictions and smoking restrictions can be found in rules (not in by-laws). These restrictions could also be found in the declaration, but they are far easier to adopt in the context of a rule.
Rules must also be reasonable and must be consistent with the Act, the declaration and the by-laws.
To pass, repeal or amend a rule, a board of directors needs to circulate the rule to the owners for a period of at least 30 days. The notice to owners must advise them that they have the right to requisition a meeting of the owners to submit the proposed rule to a vote of the owners. If no meeting is requisitioned within 30 days, the rule becomes enforceable. If a meeting is requisitioned, the rule becomes valid and enforceable unless at least 50% of the units participating at the meeting (in person or by proxy) approve it.
Each of the declaration, by-laws and rules have a different purpose and are amended pursuant to a different mechanism, requiring a different level of support by the owners. Each of them, however, are equally enforceable. Owners and occupants have an obligation to abide by the Act, the declaration, the by-laws and the rules. Similarly, owners are entitled to require that others comply by them. The Corporation must take all reasonable steps to ensure such compliance.