HomeLife/Bayview realty Inc., Brokerage
These Acts are a direct acknowledgement that often directors and managers lack sufficient knowledge and expertise to be financially responsible and properly run the affairs of a condominium corporation.
Developers will also see new compliance orders relative to buyer information and possibly liability for damages even after they've turned over the building - which they are more or less held unaccountable for now in the case of converted buildings.
All of these measures if implemented properly will certainly help owners overcome the authoritarian nature boards too often adopt, but it can also come at the expense of added government bureaucracy, red tape and maintenance fees.
These Acts are expected to be in place toward the end of 2016 with the oversight/resolution bodies established by early 2017.
Developers:
- will now have to give buyers an easy to read guide on condominium ownership
- provide additional disclosure to ensure buyers aren't sideswiped with unexpected costs after closing
- may be subject to standardized statements, documents and declarations
- conversion of certain condo projects will be protected by the New Home Warranty (Tarion)
The pros of this are: 1) of course more disclosure where hopefully developers can no longer misguide buyers into thinking the low maintenance fees they're quoted on purchase documents is actually not subsidized until turnover and won't increase materially upon turnover. 2) finally, building conversions will no longer be exempt from warranties although we should expect them to be far more loose than the new builds.
The cons are we should not expect: 1) anything other than a disclosure that the fees are subject to change on turnover as opposed to a disclosure of how much if any of pre-turnover fees is put toward the reserve fund; 2) the required reserve fund percentage build-up on turnover and an estimate of all-inclusive fees upon turnover.
Owners
- will be provided with clearer information on the rights and responsibilities of owners and boards
- will be given by the boards more corporation financial information
- will be given greater control over some changes
- will find it easier to vote and participate in meetings
- disputes should result in lower cost
- will be required to pay $1 per month to fund two governmental authoritative bodies with resolution responsibilities, however the authorities will charge a fee which is at their discretion
The pros are: 1) board secrecy is somewhat diminished; 2) owners may be more inclined to challenge absurd rules, by-laws and directives without fear of exorbitant legal costs or reprisal, and demand transparency.
The cons are: 1) still too few owners care to get involved; 2) resolution costs could still be high given they're set by the oversight bodies.
Boards
- will be subject to stricter financial compliance rules to prevent fraud and mismanagement
- some (third-party) contracts cannot be finalized unless they undergo a stated procurement process
- will be required to inform owners of important corporation undertakings such as law suits, on a reqular basis
- will be subject to expanded rules for determining an adequate reserve fund
- directors will be required to complete mandated training
The pros are: 1) awarding projects to insiders or director affiliated parties becomes more difficult; 2) more transparency concerning matters of importance to owners that could negatively affect unit values; 3) reserve funds have a lower chance of suffering from anemia; 4) owners cannot vote down necessary repairs in order to avoid maintenance fee increases; 5) director training will hopefully weed out the incompetents.
The cons are: 1) fewer owners may be willing to devote the time to training; 2) upon implementation of the Act, some corporations should see a sizable increase in fees for funding inadequate reserve funds; 3) fees will increase in order to fund director education.
Management Services
- a condo's manager will require a licence
- a manager will be subject to education requirements and a code of ethics
- will be regulated under the Condominium Management Services Act and a separate oversight authority
The pro is: fly-by-night management firms will have to step up their game.
The con is: management fees may increase due to the additional costs for licensing and education.
Governmental authorities
- will provide resolution services
- will have to have a written administrative agreement with the Ministry of Consumer Services
- will be held to a higher standard of public disclosure via oversight by the Auditor General
- can set their own fees for self-funding
The pro is: There is now independent oversight of boards and management services.
The cons are: 1) red tape; 2) bureaucracy - hopefully not another OMB; 3) they set their own fees; 4) boards and managers could ultimately be liable for the same failure to perform however, having two separate oversight bodies hampers proceedings and can only increase costs.
It's worth mentioning that as of now, according to the government of Ontario, there are some 700,000 condo units stretched over 10,000 condo corporations and housing 1.3 million people. The $1 per month owner fee is expected to bring in about $8 million per year to the two oversight authorities but that is not enough to fund the resolution services given that the same authorities set these fees - and that's the scariest part.
By Penny Elizabeth Dutkowski, Broker with HomeLife/Bayview Realty Inc., Brokerage-Independently Owned
and Operated. Thornhill, On. (905) -889-2200
and Operated. Thornhill, On. (905) -889-2200
All posts are the express opinion of Penny Elizabeth Dutkowski and should not be construed as that of the Brokerage.
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