Electronic Annual General Meetings & Special General Meetings of Condominium Corporations can now be held “electronically”

Electronic Annual General Meetings & Special General Meetings of Condominium Corporations can now be held “electronically”

As a result of Covid-19 and the many health orders limiting face to face interaction, it became imprudent for condominium Boards of Directors and owners of condominium to hold in person Annual General Meetings & Special General Meetings.  This dilemma has now been solved by Bill 53 - SERVICE ALBERTA STATUTES (VIRTUAL MEETINGS) AMENDMENT ACT, 2021.

So long as a condominium corporation’s bylaws do not expressly prohibit electronic meetings, this amending act provides that Condominium Corporations (as well as Residents Associations, Home Owner’s Associations, Corporations, Societies and Cooperatives) may now hold meetings electronically.

Subsection 1(1) of the Condominium Property Act RSA 2000 c-22 has been amended to read after clause (j.1):

(j.2)   “electronic means” in respect of attending or holding a meeting, means a method of electronic or telephonic communication that enables all persons attending the meeting to hear and communicate with each other instantaneously, including, without limitation, teleconferencing and computer network-based or internet-based communications platforms;

and Section 31 has been amended to read as follows:

             Meetings of Board or Corporation

Manner and venue

31(1) Unless a corporations’ bylaws expressly provide otherwise,

(a)    A person entitled to attend a meeting of the corporation or of its board of directors may attend the meeting by electronic means,

(b)    A meeting of the corporation or its board of directors may be held entirely by electronic means,

(c)     A person attending a meeting by electronic means under clause (a) or (b) who is entitled to vote at the meeting may vote by any electronic, telephonic or other method that the corporation has made available for that purpose, and

(d)    A person attending a meeting by electronic means under clause (a) or (b) is deemed for the purposes under this Act to be present in person at that meeting.

(2) Meetings that are not held entirely by electronic means must be held at a location within the municipality in which the units are located unless an ordinary resolution to hold the meetings in another location is passed at a general meeting of the corporation.

Condominium Corporations should no longer hold off giving notice of their Annual General Meetings and proceed to hold them electronically if necessary.

Corporate Governance of Condominium Corporations in Alberta; Director's Duties

     I have put off writing this blog about the responsibility and duties of Directors of Boards of Directors of condominium corporations for some time.  Whenever I tried to distill a principle worth communicating my mind wandered.  Today a basic principle coalesced.  From my experience as a lawyer I have concluded that many owners do not truly appreciate the basis upon which condominium corporations where developed.  This lack of appreciation forms the basis of many a misunderstanding between owners and in many cases is the source of many unnecessary disputes.  My objective in writing this blog is to summarize the statutory regime upon which condominium corporations are built and how they are managed and then offer some observations related to how boards of directors of condominium corporations can satisfy the legal obligations which the Condominium Property Act (Alberta) imposes on Directors and at the same time manage the expectations of owners of units. 

    The development of the legal concept of the condominium occurred in the second half of the twentieth century and as such it is a relatively new concept.  In respect of residential dwellings, the concept of a condominium ownership allowed owners to share responsibility for their dwellings and the property which was commonly used by owners (“common property”).  Notwithstanding the sharing of responsibility, at the root of all condominiums are individual owners who, like all persons, want to be heard and want to be respected.  However, the sharing of responsibility limits the ability of individual owners to directly influence the management of their dwellings.  In comparison to non-shared responsibility dwellings (ie. single detached homes), owners of condominium dwellings delegate responsibility for the management of their dwellings to a board of directors.  In Alberta the legislation which governs the creation of condominiums and the management of condominium dwellings is the:

Condominium Property Act, RSA 2000, c C-22 (the “CPA”)         

Section 25 of the CPA establishes that condominiums shall be constituted as corporations though not identical to corporations established for business purposes (condominium corporations are generally treated as non-profit corporations) and establishes that the condominium corporation shall consist of “owners of units”:

Condominium corporation 

25(1)  On the registration of a condominium plan, there is constituted a corporation under the name “Condominium Corporation No.         ” and the number to be specified is the number given to the plan on registration.

(2)  A corporation consists of all those persons

                             (a)    who are owners of units in the parcel to which the condominium plan applies 

(5)  The Companies Act and the Business Corporations Act do not apply to a corporation.

 

Though not a business corporation, every condominium corporation has a legal personality and is owned by the owners of the units.  In contrast to business corporations which issue shares to the business corporation’s shareholders and which shareholders liability is generally limited to their investment, ownership of the common property in a condominium corporations is a function of “unit factor”, also referred to as unit entitlement, and owner’s liability is not limited to their investment (ie. the purchase price paid for a condominium unit).  Section 6 of the CPA provides that:

Certificate to show share in common property 

6(1)  The Registrar, in issuing a certificate of title for a unit, shall certify on it the owner’s share in the common property.

(2)  The common property comprised in a registered condominium plan is held by the owners of all the units as tenants in common in shares proportional to the unit factors for their respective units.

Similar to business corporations where shareholders do not typically actively manage a corporation and shareholders instead elect or appoint a board of directors to control the corporation, condominium corporations also elect a board of directors to control the condominium corporation; the CPA states this in section 28:

Board of directors

28(1)  A corporation shall have a board of directors that is to be constituted as provided by the bylaws of the corporation. 

The board of directors is responsible for CONTROLLING, MANAGING and ADMINISTERING the condominium corporation and enforcing the condominium corporation’s bylaws; section 37 and 32 of the CPA address this:

Control and management 

37(1)  A corporation is responsible for the enforcement of its bylaws and the control, management and administration of its real and personal property, the common property and managed property.

                Bylaws 

32(1)  The bylaws shall regulate the corporation and provide for the control, management and administration of the units, the real and personal property of the corporation, the common property and managed property.

(2)  The owners of the units and anyone in possession of a unit are bound by the bylaws.

 

All owners of units and anyone in possession of a unit are bound by the bylaws of a condominium corporation.  The duties and responsibilities of directors of condominium corporation’s board of directors is prescribed by section 28(2):

 

Board of directors

28 (2)  Every member of a board, in exercising the powers and performing the duties of the office of member of the board, shall

                             (a)    act honestly and in good faith with a view to the best interests of the corporation, and

                             (b)    exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

 

Ironically, even though a condominium corporation is expressly stated to not be subject of the Business Corporations Act, this language mirrors that of section 122 of the Business Corporations Act (Alberta):

Duty of care of directors and officers 

122(1)  Every director and officer of a corporation in exercising the director’s or officer’s powers and discharging the director’s or officer’s duties shall

(a) act honestly and in good faith with a view to the best interests of the corporation, and

(b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

In summary, the CPA provides that the owners of units are to elect a board of directors who are delegated responsibility for the enforcement of the condominium corporation’s bylaws and delegated responsibility for the control, management and administration of the condominium corporation’s real and personal property, the common property and any applicable managed property (this concept emerges from bare land condominiums which is beyond the scope of this blog).

Board members, and in aggregate the board of directors upon which they serve, must act honestly and in good faith (this obligation being informed by the obligation to act in the best interests of the condominium corporation) and must not act negligently (that is, exercise the care diligence and skill of a reasonably prudent person in comparable circumstances).  Often disputes between owners and Boards of Directors (or the property managers retained by the Boards of Directors to assist in the enforcement of the condominium corporation’s bylaws and the control, management and administration of the condominium corporation’s real and personal property, the common property and managed property.

Section 67 of the CPA establishes the boundary of “improper conduct” by which all Board members and boards of directors must govern their conduct, by which all owners must govern there conduct and provides that an “interested party” may make application to the Court for relief in respect of the “improper conduct” of, amongst others, a board member, board of directors or an owner:

Court ordered remedy

67(1)  In this section,

                             (a)    “improper conduct” means

                                     (i)    non‑compliance with this Act, the regulations or the bylaws by a developer, a corporation, an employee of a corporation, a member of a board or an owner,

                                    (ii)    the conduct of the business affairs of a corporation in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of an interested party,

                                   (iii)    the exercise of the powers of the board in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of an interested party,

                               (iii.1)    the conduct of an owner that is oppressive or unfairly prejudicial to the corporation, a member of the board or another owner,

                                  (iv)    the conduct of the business affairs of a developer in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of an interested party or a purchaser or a prospective purchaser of a unit, or

                                   (v)    the exercise of the powers of the board by a developer in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of an interested party or a purchaser or a prospective purchaser of a unit;

                             (b)    “interested party” means an owner, a corporation, a member of the board, a registered mortgagee or any other person who has a registered interest in a unit.

 

(2)  Where on an application by an interested party the Court is satisfied that improper conduct has taken place, the Court may do one or more of the following:

                             (b)    direct that the person carrying on the improper conduct cease carrying on the improper conduct;

                             (c)    give directions as to how matters are to be carried out so that the improper conduct will not reoccur or continue;

                             (f)    give any other directions or make any other order that the Court considers appropriate in the circumstances.

To be clear section 67 does not just impose obligations to act properly on board members and Boards of Directors but also provides, among other things, that the failure of an owner of a unit to comply with the CPA, the regulations or a condominium corporation’s bylaws or actions of an owner of a unit which are “oppressive or unfairly prejudicial to the corporation, a member of the board or another owner”  are “improper conduct”.  This is a very significant point and one which is not appreciated by many owners of units.   Owners of units expecting to be treated reasonably by boards of directors owe a reciprocal duty to be reasonable towards board members and boards of directors.

Owners of unit must understand that, generally speaking, the Courts in Alberta will defer to decisions made by Boards of Directors [see 934859 Alberta Inc. v. Condominium Corporation No. 0312180, 2007 ABQB 640 (CanLII)]:

 

[55]            In my view, as a matter of general application, Courts do defer to duly elected condominium boards. However if improper conduct is alleged and a Court is satisfied that improper conduct has taken place, the Court, pursuant to Section 67(2) of the Condominium Act, may then direct and/or grant any of the remedies set out therein.

 

The CPA thus imposes clear obligations on boards of directors and individual directors to act reasonably and in good faith.  If this obligation is not satisfied the Court can conclude that “improper conduct” has occurred.   This obligation is matched by the obligation on owners of condominium units to not act in a manner which is in breach of the bylaws or is  oppressive or unfairly prejudicial to the corporation, a member of the board or another owner. 

This blog is being written in August of 2020.  Condominium corporations are facing a changed operating environment because of the impact of Covid-19 on our society generally and economically.  Recently I have seen the expectations of owners increase due to this dynamic.  Owners must appreciate that board members and boards of directors have obligations which take priority over the interests of any particular owner.   That is, directors and boards of directors must act in the best interests of the condominium corporation which the board of directors serves. 

For example, it would not be appropriate for a board of directors to permit owners to not pay the monthly condominium contribution required by an owner of a unit; payment of condominium contributions by owners is the economic life blood of condominium corporations.  Failure to require owners to pay may be considered to be a breach of the obligation to act in good faith, negligent and, accordingly, improper conduct.  This does not preclude a board of directors agreeing to a deferral on arrears in condominiums contributions which have accrued.  However, boards of directors must impose a reasonable timeline (usually not more than 6 months) to allow owners of units in arrears to bring the owner’s contribution account into good standing.

By way of one further example, boards of directors must be sure to review the bylaws of their condominium corporation prior to making decisions which impact any particular owner.  The bylaws of a condominium corporation, supplemented by the CPA and the regulations, provide instruction on how various issues are to be handled; ie. breach of rules, breach of bylaws, chargebacks for damages due to insured and uninsured perils which are in breach of a condominium corporation’s bylaws, collection of insurance deductibles.  Often important steps are missed by boards of directors and could lead to owners suggesting that boards of directors have acted improperly.

Boards of directors must understand that decisions of boards of directors are either made by an ordinary resolution at a duly convened meeting of the board of directors or by a resolution in lieu of a meeting signed by all board members.  Boards of directors cannot enforce the bylaws of the condominium corporation without satisfying this basic corporate governance principle; boards of directors make decisions by resolution.   Too often boards of directors act causally and make decisions by circuitous email chains or verbally; if decisions are made in this manner, which is not recommended but specifically discouraged, then such decisions should be ratified at a duly called board meeting or by a resolution in lieu of  a meeting signed by all board members.

If boards of directors govern themselves as I have encouraged the likelihood of a dispute occurring with owners will be reduced, not eliminated.  Moreover, it behooves boards of directors to carry on in a manner which satisfies the basic principles of corporate governance and to act in the best interests of the condominium corporation.

Poulin's Sniffer Dogs for BED BUGS

I was introduced to the concept that dogs can be used to "sniff" out bed bugs; if this actually works this is really cool:

http://www.poulins.ca/our-services/bed-bug-services .

The Alberta Court of Queen's Bench has determined that the Alberta Human Rights Act applies to condominiums

I have written on the topic of the Alberta Human Rights Act, RSA 2000, c A-25.5 before at:

http://albertacondominiumreporter.blogspot.ca/2013/05/condominium-complexes-are-private.html

Based on the recent decision of the Court of Queen's Bench in Condominium Corporation No 052 0580 v Alberta (Human Rights Commission) (the "Goldsack case") the Alberta Court of Queen's Bench has determined that the Alberta Human Rights Commission has jurisdiction to hear human rights complaints. 

My original blog was partly in response to a blog by Jenifer Koshan of the University of Calgary.  Ms. Koshan has blogged in response to the Goldsack decision and I thank her for her collegiality.  I will not exhaustively respond to the further comments of Ms. Koshan.  However, I can comment that the reasoning in the University of British Columbia v. Berg case is worthy of further study.

The Berg case was the core basis upon which the Court of Queen's Bench made its determination in the Goldsack case. I contemplate going forward that the tests identified in Berg may have application to complaints made to the Human Rights Commission in Alberta.  In this respect, and without limitation, whether the alleged accommodation, service or facility subject of a complaint satisfies the relational test.  I quote from the Supreme Court of Canada decision in Berg in this regard:

"This reasoning is directly applicable to any selection process used by the School in this case.  Eligibility criteria, as long as they are non-discriminatory, are a necessary part of most services, in that they ensure that the service reaches only its intended beneficiaries, its "public", thereby avoiding overuse and unnecessary depletion of scarce resources.  The benefits of such screening tools, however, should not come at the cost of excluding the protection of human rights legislation.

This is not to say that all of the activities of an accommodation, service or facility provider are necessarily subject to scrutiny under the Act just because some are.  But a quantitative approach still does not help to define what smaller segment of the entire population might suffice.  As long as the debate remains centred on the number of people who can use the service or facility, it will be very difficult to draw lines of inclusion and exclusion on a principled basis because of the varied nature of the services and facilities and service and facility providers which will fall to be considered.

Instead, in determining which activities of the School are covered by the Act, one must take a principled approach which looks to the relationship created between the service or facility provider and the service or facility user by the particular service or facility.  Some services or facilities will create public relationships between the School's representatives and its students, while other services or facilities may establish only private relationships between the same individuals."

...

"The idea of defining a "client group" for a particular service or facility focuses the inquiry on the appropriate factors of the nature of the accommodation, service or facility and the relationship it establishes between the accommodation, service or facility provider and the accommodation, service or facility user, and avoids the anomalous results of a purely numerical approach to the definition of the public.  Under the relational approach, the "public" may turn out to contain a very large or very small number of people.

 For example, Canada or Quebec Pension Plan benefits are provided to millions of Canadians, yet not to the equally large number of Canadians who have not yet attained the qualifying age.  Can it be said that the provision of such benefits should not be free from discrimination because of the established eligibility criteria which ensure that such benefits reach only those who have paid into the fund and are intended to receive them?  Or consider a privately-owned centre which publicly advertises its services or facilities to treat a rare disease, from which only two or three people in Canada suffer.  Statistically speaking, 99.99 percent of the population cannot use this service or facility, since they do not suffer from the disease and are not part of its "public".  Yet could the legislature have intended that the institution could purport to serve the public, then extend its services or make its facilities available only to male applicants?"

The relational test may be applied in some circumstances to suggest that the accommodation, service or facility provided by a condominium corporation and subject of a complaint may not have a public.  The following words from the dissenting opinion from the Berg case express this sentiment and the concern with the decision of the majority in Berg:

"While I agree that human rights legislation should, where possible, be given a broad and purposive interpretation, that interpretation has to be realistic.  If s. 3 of the British Columbia Human Rights Act is given the reach sought in these appeals there would be, in effect, no services that would not fall within the scope of "services customarily available to the public"."

Notwithstanding this minority decision, the Berg decision has been referred to in almost 300 decisions.  As an example of the types of decisions which will have to be made a search of CanLii lead me to the 1996 Supreme Court of Canada decision in Gould v. Yukon Order of Pioneers.  The Court considered the Berg decision and concluded that the services provided by the Yukon Order of Pioneers were outside of the ambit of the subject Human Rights legislation. I think this may be a portent of the type of analysis which may have to be made by the Courts in Alberta  as a consequence of the Goldsack decision.  

 

Audits of Condominium Corporations

I am delighted to see other professionals making the time to share information which will assist boards of directors, property managers and owners in operating condominiums effectively.  In this regard, I share a link to an accountant's perspective on some of the accounting obligations of a board of directors with a focus on audits:

http://www.albertacas.ca/docs/member-advisory-2012/january-2014-audits-of-condominium-corporations-nbsp-.pdf?sfvrsn=0

Directors' Liability

This is a good article from a few years ago relating to condominium directors liability; this will be even more salient once the amendments to the Condominium Property Act (Alberta) are proclaimed.

https://issuu.com/lsgraphics/docs/cci-t-condovoice-spring2014/45?e=1206437/7747339

Owner Responsibility for Damages from Release of Water in Condominium Units

I recently found some time to blog.  This was also motivated by my being retained by a number of condominium corporations to deal with water issues.  The specific issue which compels me to write is what is commonly referred to as a chargeback.  A chargeback occurs when a condominium corporation incurs an expense as a consequence of an owner’s (or an owner’s tenant’s) breach of the condominium corporations bylaws or in some cases based on conduct of an owner which is not a breach of the bylaws (this is less common).  The condominium corporation is permitted pursuant to its bylaws to charge back the sum expended to the owner of a subject unit.

Based on the authority of the decision in Condo Plan 8210034 v King, 2012 ABQB 127 (“King”) as affirmed in Bank of Montreal v Bala, 2015 ABQB 166 the amounts expended by a condominium corporation may be collected as if they were a condominium contribution (that is in priority to other charges against the title to an owner’s unit) so long as the language in the bylaws supports this.  Many condominium corporation’s bylaws have bylaws to this effect.  It is important to recognize that this principal from King may be impacted by the amendments to the Condominium Property Act (Alberta) [the “CPA”] once they have been proclaimed.  More particularly the amendments state that any monetary sanction, any costs incurred as a result of damages caused by an act or omission of an owner, tenant or occupant, and any other amount specific in the regulations, shall not be permitted to be treated as a condominium contribution.

If this provision is proclaimed condominium corporations claim for expenses incurred as a consequence of a breach of the bylaws may be more difficult to recover.  The Conservative Provincial Government gave assent to the amendments in December of 2014 but the NDP Provincial Government has not as at the date of this blog proclaimed the amendments.  It will be essential for all condominium corporations to review their bylaws once the amendments have been proclaimed and take steps to amend their bylaws to fortify them in the face of the amendments and also to bring them into compliance with the amendments.

However, this blog is written from the perspective of the law in effect today; that is based on the application of the principles in the King decision.  One of the more common instances of chargeback arises when there has been a release of water from a condominium unit into either another unit or into the common property of the condominium corporation.  Once the incident occurs the condominium corporation must follow a detailed path prescribed by the CPA before being able to claim any expenses incurred against the owner of the subject unit.  Moreover, the condominium corporation must comply with all requirements imposed by its bylaws (including without limitation additional obligations to insure perils other than prescribed by the CPA Regulations) and the bylaws of the condominium corporation must have the requisite language to comply with the King decision (the bylaws must allow for the amounts expended by the condominium corporation to be treated as a contribution and then the amounts expended by the condominium corporation may be charged back to an owner).

The first step in this process is practical; the condominium corporation must gather its evidence.  It is unfortunate in many circumstances where there has been a release of water that neither the owner nor the contractor who attends at the subject unit takes pictures of the release of water or creates a detailed summary of the cause of the release of water.  It is behooves all condominium corporations, their property managers, and their contractors to take pictures when they first arrive at the subject unit and make the time to analyse and detail what caused the release of water.  Without this information it becomes a proverbial “crapshoot” whether a Court will conclude that the release of water was anything other than a “sudden and accidental escape” and/or that the responsibility for the damages caused by the release of water was the owner’s.

The importance of this evidentiary focus can be understood by looking at section 61(1)(i) of the CPA Regulations:

61(1)  For the purposes of section 47(1)(a), (b) and (c) of the Act, a corporation must place and maintain insurance against the following perils:

(i)    water damage caused by sewer back-up or the sudden and accidental escape of water or steam from within a plumbing, heating, sprinkler or air conditioning system or a domestic appliance that is located within an insured building;

This section obliges condominium corporations to insure against the sudden and accidental escape of water from within a plumbing system or a domestic appliance.  If a release of water occurs that is “sudden and accidental” then the damages caused by such a release must be subject of the insurance of the condominium corporation.  I must comment that it seems increasingly common that the response of an owner to communication by a property manager to an owner is from the owner’s insurance company.  It is not uncommon that the insurer dogmatically states that the responsibility for the damages caused by the release of water is not the owners because the damages should be covered by the insurance of the condominium corporation.  However, the determination of whether a release of water was “sudden and accidental” has not been well canvassed by Alberta Courts nor is it something that appears to be contemplated by Boards of Directors of condominium corporations or their contractors who attend at a unit to rectify situations where water has been released.  If the water which has been released was caused by a sudden and accidental escape it is clear that it is the responsibility of the condominium corporation to insure for this peril.  However the analysis is not this simple.  The amount of damages caused by the release of water may be less than the amount of deductible required to be paid under the insurance policy; in this case the bylaws may address whose obligation it is to pay the deductible.  An issue has recently arisen in a recent decision of the Provincial Court - Civil Division relating to what a reasonable deductible is.  As a consequence of the flooding that occurred in Calgary in 2013 it is not uncommon for corporations to have deductibles of $25,000 or more.  The Board of Directors should be able to justify the reasonableness of the deductible and this be reflected in a resolution of the Board of Directors.   Perhaps the release of water was not a sudden and accidental escape.  In either circumstance a review of the bylaws of the condominium corporation must be undertaken and, if the release was not “sudden and accidental”, the insurance policy should also be reviewed.

Notwithstanding a conclusion that the release was not a sudden and accidental escape of water, the insurance policy of the condominium corporation may provide insurance for the peril which occurred.  In this circumstance, even if the bylaws suggest that the peril is the responsibility of the subject owner, the condominium corporation may be obliged to treat the release of water as an insured peril.  Also, there are many different bylaws which relate to establishing liability for the damages caused by a release of water and who is liable for the payment of the deductible.  The bylaws may also address if the damages are less than the amount of the deductible who is liable for the damages caused by the release of water.  Many lawyers recommend that it is best if condominium corporations have clear-cut provisions in their bylaws which state that in all circumstances that the deductible is the responsibility of the owner whose unit the release of water occurred from or if the damages are less than the amount of the deductible that the owner is liable for the entirety of the damages regardless of fault. 

Continuing the analysis, the condominium corporation should review its bylaws to determine whether there is a positive obligation on an owner to maintain, repair, replace etc. the unit and, without limitation, the plumbing systems, plumbing fixtures and appliances within the unit.  Similarly the condominium corporation should review their bylaws to determine whether the responsibility to maintain plumbing fixtures within a unit is that of the corporation. The interplay between these two obligations is not always clear.  Once these obligations have been assessed a determination can be made on the basis of the evidence and analysis whether the conduct of the owner was sufficient to satisfy the obligations of the owner and a determination can be made if the owner is liable for the damages caused by the release of water based on the owner’s conduct.  Upon a determination that the owner is liable, the condominium corporation must comply with its bylaws in context of the King decision to collect the damages caused as part of the owner’s condominium contribution.

In conclusion, from discussions which I have had with insurance agents and property managers there is a growing concern relating to insurance claims based on the release of water.  From a political perspective it is just not reasonable for the owners and owner’s insurers to insist that all damages caused by a release of water of any kind be covered by the condominium corporation.  It is more reasonable that owners conduct reasonable due diligence with respect to their units.  This includes inspecting plumbing fixtures and appliances to make sure that they are in good working order.  To dump this responsibility on to the condominium corporation is not workable or reasonable.  Owners should be responsible for their errant behavior and their failure to conduct due diligence.  Moreover if more preventable water claims are made it could lead to a crisis in the condominium insurance industry.  It is not unimaginable that condominium corporations will be required to agree to larger deductibles and be required to pay insurance premiums which will continue to increase.

In light of the dilemma of water claims, the impending proclamation of the amendments to the CPA, among other reasons, condominium corporations should review and revise their bylaws.  The office of Bridgeland Law offers to review the bylaws of condominium corporations and Bridgeland Law has created a revised set of bylaws which contemplate the amendments  and are ideal for townhouse and multi-unit condominium complexes and offers these to Boards of Directors of condominium corporations. 

Are condominium corporations exempt from the payment of tax in respect of income received?

Section 149 of the Income Tax Act [Canada] (the "ITA") is the section which condominium corporations must look to determine whether their conduct attracts the requirement to pay tax.  This section covers exemptions from taxation for non-profit organizations.  In general terms non-profit organizations are those operated for social welfare, civic improvement, pleasure or recreation or for any purpose other than profit. The Canada Revenue Agency ("CRA") has indicated generally that condominium corporations are exempt from taxation not because they are condominium corporations but because they meet the test provided by section 149 of the ITA.  Interpretation bulletin IT 496R explicates this test in respect to non-profit associations.

CRA has indicated there are two possible perspectives that may be taken with respect to income received by a condominium corporation from the leasing of a cell phone tower.  The income is either received by the condominium corporation on behalf of the individual owners and as such it flows through to the individual owners and should be claimed as income by each owner.  In contrast and based on provincial legislation CRA has indicated that usage of income from a cell phone tower to reduce the amount of condominium contributions payable by owners may lead to the nonprofit status of the common corporations being lost. My review of the Condominium Property Act (Alberta) does not reveal any limitation which prohibits condominium corporations from attributing the income received from a cell phone tower to owners and paying this out to owners. The Condominium Property Act (Alberta) also does not restrict condominium corporations from simply crediting the income to each of the owners.  

Condominium corporations must hope that CRA does not insist that the income from cell phone towers be paid to owners otherwise CRA may conclude that the nonprofit status of condominiums is lost.  Condominium corporations will also have to be mindful of section 149 of the ITA when considering whether to install solar panels or photovoltaic panels with the intention of producing electricity and selling it to the utility system. Such action would also be considered to be a profitable activity not unlike cell phone towers and also could lead to the CRA taking the position tax should be paid by condominium corporations on income received from cellphone towers and from solar panels.

When an ethic minority becomes the ethnic majority; a Vancouver Board speaks Mandarin and refuses to speak English

http://www.calgaryherald.com/news/national/english+speaking+condo+owner+files+human+rights+complaint/11608348/story.html

The Calgary Herald reported that a very curious thing happened the other day in Vancouver, British Columbia. A gentleperson named Andreas Kargut made a complaint to the Human Rights Tribunal in British Columbia because he claimed he was being discriminated against by the Board of Directors of the  condominium corporation in which he owned a unit.

The Board of Directors of the condominium corporation was composed of individuals who spoke Mandarin. The Board made a decision that it would be in their best interests that the board meetings be conducted entirely in Mandarin.  Mr. Kargut  took issue with us and asked the Board to speak English; to which request the board refused.  As a result of the refusal of the Board of Directotrs, Mr. Kargut approached the Human Rights Tribunal and made a complaint against the Board of Directors.

It is ironic that a white English-speaking individual would approach the Human Rights Tribunal  suggesting that he was discriminated against.  However based on the multi-cultural (or perhaps better stated ethnic-cultural) mosaic which has been built in Canada it is not surprising to see ethnic minorities becoming ethnic majorities (at least contextually) and now the proverbial “shoe is being worn on the other foot”.  It will be interesting to see how this matter is resolved by the Human Rights Tribunal.

It continues to be my understanding of the law in Alberta that the Human Rights Tribunal of Alberta does not have jurisdiction to deal with complaints in respect of condominium corporations in Alberta. However this may change given the rapidly changing political environment that we are experiencing these days.

Ontario's Bill 106; a portent of Alberta under the Amendments to the Condominium Property Act (Alberta)

The Lawyer's Weekly has recently commented on the changes which might occur in Ontario as a result of amendments to Ontario's Condominium Property Act (this is worthy of a quick read):

http://www.lawyersweekly-digital.com/lawyersweekly/3508/?pg=2&pm=1&u1=friend 

http://www.lawyersweekly-digital.com/lawyersweekly/3508/?pg=27&pm=1&u1=friend 

I have been holding off commenting on the impact of Alberta's Bill 9 which upon Proclamation will amends the Alberta Condominium Property Act.  Given that we have a new government condominium lawyers are unsure when and if Bill 9 will be proclaimed.

The duty to perform a contract honestly and in good faith will now be implied as a term of a contract; this will likely apply to condominium corporation bylaws

The way in which the common law will look at contracts has changed dramatically with the decision of the Supreme Court of Canada in Bhasin v. Hrynew 2014 SCC 71.  The Honorable Justice Cromwell, concurred with by the Honourable Chief Justices McLachlin, Lebel, Abella, Rothstein, Karakatsanis, and Wagner, has found that the duty to perform a contract honestly and in good faith will now be implied as a term of contracts and will, subject to very careful drafting, not be precluded by an entire agreement clause.  This will likely be applicable to all condominium corporation's bylaws which have been determined by the Court to be a contract among owners.

 

What follows are quotes from this ground breaking case which will be a welcome relief to many contracting parties frustrated by what are alleged to be dishonest dealing motivated by male fides; two paragraphs, [33], [74] and [86], summarize the new obligations:

 

"[33] In my view, it is time to take two incremental steps in order to make the common law less unsettled and piecemeal, more coherent and more just. The first step is to acknowledge that good faith contractual performance is a general organizing principle of the common law of contract which underpins and informs the various rules in which the common law, in various situations and types of relationships, recognizes obligations of good faith contractual performance. The second is to recognize, as a further manifestation of this organizing principle of good faith, that there is a common law duty which applies to all contracts to act honestly in the performance of contractual obligations."   

 

“[74] There is a longstanding debate about whether the duty of good faith arises as a term implied as a matter of fact or a term implied by law: see Mesa Operating, at paras. 15_19. I do not have to resolve this debate fully, which, as I reviewed earlier, casts a shadow of uncertainty over a good deal of the jurisprudence.  I am at this point concerned only with a new duty of honest performance and, as I see it, this should not be thought of as an implied term, but a general doctrine of contract law that imposes as a contractual duty a minimum standard of honest contractual performance. It operates irrespective of the intentions of the parties, and is to this extent analogous to equitable doctrines which impose limits on the freedom of contract, such as the doctrine of unconscionability.”

 

“[86] The duty of honest performance that I propose should not be confused with a duty of disclosure or of fiduciary loyalty.  A party to a contract has no general duty to subordinate his or her interest to that of the other party. However, contracting parties must be able to rely on a minimum standard of honesty from their contracting partner in relation to performing the contract as a reassurance that if the contract does not work out, they will have a fair opportunity to protect their interests."

 

Justice Cromwell reflected on three circumstances which historically have attracted the duty of good faith and unpin the manner in which the Court will impose this duty; at paragraph 47 and 48:

 

[47] “By way of example, Professor McCamus has identified three broad types of situations in which a duty of good faith performance of some kind has been found to exist: (1) where the parties must cooperate in order to achieve the objects of the contract; (2) where one party exercises a discretionary power under the contract; and (3) where one party seeks to evade contractual duties (pp. 840_56; CivicLife.com Inc. v. Canada (Attorney General) (2006), 215 O.A.C. 43, at paras. 49_50).

 

[48] While these types of cases overlap to some extent, they provide a useful analytical tool to appreciate the current state of the law on the duty of good faith."

 

Justice Cromwell then went on to make it clear that this obligation will apply to real estate contracts and will be applied to prevent contracting parties who regret a bargain from reneging on the bargain:

 

"[49] The first type of situation (contracts requiring the cooperation of the parties to achieve the objects of the contract) is reflected in the jurisprudence of this Court. In Dynamic Transport Ltd. v. O.K. Detailing Ltd., [1978] 2 S.C.R. 1072, the parties to a real estate transaction failed to specify in the purchase_sale agreement which party was to be responsible for obtaining planning permission for a subdivision of the property. By law, the vendor was the only party capable of obtaining such permission. The Court held that the vendor was under an obligation to use reasonable efforts to secure the permission, or as Dickson J. put it, “[t]he vendor is under a duty to act in good faith and to take all reasonable steps to complete the sale”: p. 1084."

 

"[51] This Court’s decision in Mason v. Freedman, [1958] S.C.R. 483, falls in the third type of situation in which a duty of good faith arises (where a contractual power is used to evade a contractual duty). In that case, the vendor in a real estate transaction regretted the bargain he had made. He then sought to repudiate the contract by failing to convey title in fee simple because he claimed his wife would not provide a bar of dower. The issue was whether he could take advantage of a clause permitting him to repudiate the transaction in the event that he was “unable or unwilling” to remove this defect in title even though he had made no efforts to do so by trying to obtain the bar of dower.  Judson J. held that the clause did not “enable a person to repudiate a contract for a cause which he himself has brought about” or permit “a capricious or arbitrary repudiation”: p. 486. On the contrary, “[a] vendor who seeks to take advantage of the clause must exercise his right reasonably and in good faith and not in a capricious or arbitrary manner”: p. 487."

 

Justice Cromwell makes it clear that commercial parties reasonably expect what he referred to as a basic level of honesty and good faith in their commercial dealings:

 

"[60] Commercial parties reasonably expect a basic level of honesty and good faith in contractual dealings. While they remain at arm’s length and are not subject to the duties of a fiduciary, a basic level of honest conduct is necessary to the proper functioning of commerce. The growth of longer term, relational contracts that depend on an element of trust and cooperation clearly call for a basic element of honesty in performance, but, even in transactional exchanges, misleading or deceitful conduct will fly in the face of the expectations of the parties: see Swan and Adamski, at §1.24." 

 

Justice Cromwell also suggests that the duty of honesty and good faith leads to the conclusion that contracting parties should have “appropriate regard” for their contracting parties “legitimate contractual interests and makes it clear that this duty is distinct from a fiduciary duty.  Justice Cromwell makes it clear that it is not okay to lie or mislead contracting parties but such obligation does not create a duty of disclosure:

 

“[65] The organizing principle of good faith exemplifies the notion that, in carrying out his or her own performance of the contract, a contracting party should have appropriate regard to the legitimate contractual interests of the contracting partner. While “appropriate regard” for the other party’s interests will vary depending on the context of the contractual relationship, it does not require acting to serve those interests in all cases. It merely requires that a party not seek to undermine those interests in bad faith. This general principle has strong conceptual differences from the much higher obligations of a fiduciary.  Unlike fiduciary duties, good faith performance does not engage duties of loyalty to the other contracting party or a duty to put the interests of the other contracting party first.”

 

“[73] In my view, we should. I would hold that there is a general duty of honesty in contractual performance. This means simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. This does not impose a duty of loyalty or of disclosure or require a party to forego advantages flowing from the contract; it is a simple requirement not to lie or mislead the other party about one’s contractual performance. Recognizing a duty of honest performance flowing directly from the common law organizing principle of good faith is a modest, incremental step. The requirement to act honestly is one of the most widely recognized aspects of the organizing principle of good faith.”

 

The Bhasin case will have far reaching implications.  It will be interesting to see how creative lawyers try to limit the scope of the duty of good faith without suggesting that dishonesty is contemplated by the contracting parties.  I query if much of the attempt to exculpate such obligations may simply be unenforceable as against public policy in light of Bhasin.  More significantly litigating parties and their litigators will add this to their pleadings and it will create potential liability even in the face of the well drafted contracts often foisted upon less powerful contracting parties.

Miller Thomson Condominium Law -  Senior Living in Condominiums: 7 Things that Condo Corporations Need to Know Right Now - by Karen Phung, Toronto

The article above which is repeated below was published by Ms. Phung in July of 2014.   Ms. Phung's comments are very insightful and fore warn of the possible difficulties which may arise in Ontario in respect of the aged and as a consequence of the imposition of Ontario's human rights legislation.  A review of Alberta law continues to reflect that human rights legislation does not apply to condominium corporations.  Notwithstanding this Alberta's Human Rights Commission continues to assert that it does and this article sheds light on the need for a proactive approach to what could become a pressing issue.  I have repeated the article in full and linked to the article above.  Thanks to Ms. Phung.  


It is no secret that Canada’s population is aging.

We have all heard the news that more and more baby-boomers (born between 1946 and 1965) are retiring, or will be retiring, in the coming years. Right now, one in seven Canadians are over the age of 65. In 20 years, that number will increase to one in four. We also know that dementia, one of the most widespread mental health illnesses affecting this generation, is also on the rise. But what impact, if any, do these issues have on condominium corporations?

Here are 7 things condominium corporations need to know about Canada’s aging population, and how seniors are impacting the condominium landscape:

(1)   The number of seniors living in condominium buildings will increase

It is common for seniors to downsize their homes after they retire. The kids have moved out, there is more time to travel, and there is no longer a need (or a desire) to own and maintain a house.

Living in a condominium building is appealing to seniors because they come with fewer responsibilities and greater convenience. Seniors can rely on others for maintenance, repair and security services. Access to amenities is faster and more convenient. Limiting one’s living space to a single floor and accessing an elevator makes it easier for those with sight, strength or balance problems to reduce their risk of injury. Condominium corporations can therefore expect a growing number of seniors purchasing units with a view to enjoying these benefits. This also means that the number of condominium owners suffering from age-related mental health illnesses will also increase.

(2)   Seniors are living longer and more independent lives, which may translate to greater issues for condominiums

Not only is Canada’s population aging, but seniors are also living longer and more independently (i.e., preferring to live on their own rather than with family members or in a care facility). Furthermore, a number of seniors have no children or other family members to care for them in their later years.

A desire for independence, combined with an inevitable decline in physical and cognitive functioning, may translate into greater problems for condominium corporations including access issues (i.e., to one’s own unit and amenities), the undesirable use of the common elements (such as monopolizing or loitering), unhealthy dependency on property managers, and illness and/or abandonment. Condominium corporations need to be mindful of the kinds of issues that may arise when dealing with live-alone unit owners with age-related challenges.

(3)   Condominiums have a duty to accommodate physical impairments and mental illnesses to the point of undue hardship

Physical impairments and mental illnesses (including dementia), constitute disabilities under section 10 of theOntario Human Rights Code. Condominium corporations therefore have a legal obligation to accommodate these disabilities to the point of “undue hardship”. What constitutes “undue hardship” will depend on the individual facts and circumstances of each case.  

Those belonging to the baby-boomer generation are known for their strong views of how they expect to live their lives after retirement. Their expectations about independence will bring increased demands on condominium corporations to respond to accommodation requests so that they may maintain a certain lifestyle and level of freedom.

Corporations may have to allow certain changes to be made to an individual unit, or to modify the common elements to accommodate a unit owner’s disability. This may include installing accessibility ramps or sound-proofing rooms. In all cases, however, it means that Corporations must respond to all accommodation requests in a meaningful and timely manner. Who pays for these accommodations may not always be easily ascertainable.

(4)   Seniors with dementia and other mental illnesses may impact the way condominiums deal with compliance matters

Dementia may not only impact a person’s memory and cognitive functioning, but it may also impair his or her day-to-day behaviour and conduct in the community. A unit owner who suffers from dementia may wander into another owner’s unit without realizing it. He or she may cause noise, demonstrate aggressive or disruptive behaviours, and may also exhibit other inappropriate conduct such as hoarding.

However, enforcing compliance with the Act and the condominium’s governing documents as against a person suffering from an age-related mental health illness is not as straightforward as enforcing against the habitual smoker or the music blaster from down the hall. There are laws that protect individuals with disabilities (in particular, the Human Rights Code), which may mean that strict enforcement may not be possible (or legal) in all situations. Although there is no one-size-fits-all solution to accommodation issues, condominiums must ensure they are meeting their obligations to avoid human rights complaints.

(5)   Condominiums need to establish who is responsible for paying for the accommodation

Condominium corporations will have to determine who is responsible for paying the bill for alterations or modifications that result from accommodation requests. Does the corporation pay the bill out of its operating or reserve fund, or can the amount be charged back to the unit in the same manner as common expenses? Under what circumstances should the corporation levy a special assessment?

Whether a condominium corporation can charge back the cost incurred for accommodation is determined on a case-by-case basis and largely depends on the nature of the request and what the condominium documents provide. Typically, if accommodation is made to a resident’s own unit and is for his or her exclusive use, it will be the unit owner’s responsibility to pay. If the accommodation requires a change to a non-exclusive use common element, such as installing a front entrance ramp, the corporation may have to foot the bill.

(6)   Condominiums need to be proactive, not reactive

Condominiums should adopt a proactive rather than reactive approach to these impending issues. Below are some things that condominium corporations should be doing right now:

• Establish and implement appropriate policies and procedures for dealing with residents who have age-related disabilities that may need accommodation

These policies should include protocols for information-gathering, submitting accommodation requests, responding to accommodation requests, obtaining consents, and involving third party professionals where necessary. The corporation’s lawyer should be consulted about the best way to draft and implement these policies, keeping in mind that these policies may change over time.

• Encourage early disclosure of health-related needs and requests for accommodation

The Corporation could create a standard form for recording this information. Senior residents should also be required to provide management with up-to-date contacts in the event of an emergency and in case consent is needed. This way, the corporation will be in a better position to anticipate problems and respond accordingly. This information could be included in the Owner’s and Tenant’s Information forms, in those buildings which use them.

• Know your resources

There should be a protocol in place for contacting the appropriate family member, third party medical professional, or the police. There are a number of resources available to condominium corporations and their residents (including Community Care Access Centers, Mobile Crisis Intervention Teams, and Geriatric Mental Health Services). Condominiums should also take steps to familiarize themselves, senior unit owners and their families of these community resources in cases of emergency or non-emergency.

• Encourage small changes that will have a big impact on resident safety

Making small changes to a senior resident’s unit may have great impacts on their safety and day-to-day living. Some examples include installing safety rails in the shower, applying non-slip mats in the tub, and using fire-safe appliances with automatic shut off features.

• Document everything

Corporations need to implement a protocol for maintaining a detailed and consistent record of all accommodation requests and the Corporation’s response to those requests. Such a record will be important to demonstrate the Corporation’s efforts to comply with its legal obligations.

(7) The time to prepare is now

Condominium corporations should not wait to establish and implement the appropriate policies and procedures for dealing with these issues. As we move into a time where the demands on condominium corporations is becoming greater than ever before, condominiums should be prepared to deal with these issues head on, and with the confidence that the right systems have been put in place.