A recurring question from our readers is whether condo owners are required to vote on a renovation project. Aside from the more important question of whether they should be consulted or informed (yes, they should), the legal question is whether consultation is mandatory and, if so, what is the level of support required for the project to go ahead.
This is not an easy question to answer as every situation is very fact-specific. Still, to help the discussion at your next board meeting, we have created an “App” helping you determine whether owners get to vote on a specific renovation project. You’ll find it in our Tool sections (at the top of the blog) and at the bottom of this post.
3 Levels of consultation
Section 97 of the Condo Act deals with changes to common elements made by the corporation (as opposed to changes to common elements proposed by owners, which are dealt under section 98).
Generally speaking, under section 97 of the Act, there are three distinct levels of owner consultation required when the corporation is contemplating a work on common elements.
If the cost of the change is less than $1,000 or less than 1% of the annual budgeted common expenses (whichever is greater) or if the work is required to ensure the safety or security of persons using the property, or if it is required to prevent imminent damage to the property or assets; or if it is required to comply with a mutual use agreement (like a cost-sharing agreement):
- No notice is required to be given to owners and no vote is required.
You may want to note that the $1,000 threshold is expected to eventually be raised to $30,000 or 3 per cent of the annual budgeted common expenses whenever the changes to section 97 of the Act are implemented.
Possible consultation and simple majority
If the cost of the project is more than $1,000, but less than 10% of the annual budgeted common expenses
- Notice is required to be given to owners;
- But the change is only submitted to a vote if requisitioned by the owners of at least 15% of the registered units;
- Should the change be submitted to a vote through a requisition, the change can be implemented if at least 50% of the owners participating at the meeting vote in favour of it.
Mandatory consultation and elevated majority
If the cost of the change is more than 10% of the annual budgeted common expenses:
- This is what we refer to as a “substantial change”;
- Notice is required to be given to owners;
- The change must be submitted to an automatic vote;
- The change can only be implemented if the owners of at least 66 2/3 % of the units vote in favour of it.
What is to be considered in the calculation of the cost threshold?
The determination of what constitutes a “change” vs. what is a “substantial change” is presently determined by cost (whether its cost is estimated to cost more than 10% of the annual budgeted common expenses). Under the new version of section 97 (not yet in force), a more subjective element will be added, namely whether the proposed modification can be seen as causing a material reduction of the use or enjoyment of the common element.
Still, when considering the cost threshold, the waters can be muddied by the fact that a project may combine both pure maintenance (not requiring notice or a vote) and some “change”. Think of a corporation being required to change the deck railings and who opts to go from treated wood to aluminium. If the project was pure maintenance/repair (from treated wood to treated wood), no vote would be required. But by going to a more expensive product, the question surfaces: what portion of the project’s cost must be considered to determine whether we have triggered the requirement to force a 2/3 vote required for substantial changes.
It is generally accepted that, in a situation such as this one, the corporation only need to consider the delta between the cost of a “same for same” project (treated wood for treated wood) and the “improved” version of the project to see whether the 10% threshold has been crossed (from treated wood to aluminium). That sort of makes sense since no vote would have been required on the “same for same” project.
Another question that is often asked is whether the budgeted common expenses against which we measure the 10% threshold considers only the operating expenses or whether it also consider the reserve fund allocation. In our view, unless your governing documents provide otherwise, when calculating the 10% threshold, you consider the total budget, including the reserve fund allocation.
“Is this a Substantial Change” App
We’ve created an easy and fun to use App, to help you determine whether the work you are contemplating constitutes a substantial change and whether you require a vote of the owners.
This App only provides preliminary and basic guidance to help your discussion. Corporations should consult with their legal counsel to ensure that they follow the proper governance and consultative processes when contemplating a project or a change to common elements, assets or services.