According to Statistics Canada, new condo construction has been the dominant form of residential construction in Canada since 2012. While most people think of condominiums as a type of building, they are first and foremost a system of ownership. In this system, condo corporations are the legal entity at the center and are regulated by the the Condominium Act, 1998, S.O. 1998, c. 19 (the "Act"), which came into force on May 5, 2001. A recent review of this Act has also brought into existence the Condominium Authority of Ontario, an organization aimed at providing educational info for condo owners and also to provide a dispute resolution service.
In this two-part blog series, we will review the basic structure and inner workings of a condominium corporation and explain protections available for condominium owners. Part 1 - What is a condominium corporation - will take a brief look at condo corporations, the declarations that they can make, and how they are governed in Ontario.
What is a condominium corporation?
A condominium corporation is not a business organization and is not governed by the same federal or Ontario legislation as incorporated business enterprises or non-profit corporations. A condominium corporation is not "incorporated" - it is "created" upon the registration of a declaration and a description in the Land Registry Office by a "Declarant" (the developer who owns title to the condominium lands at registration, or sometimes a nominee corporation controlled by the developer who is registered on title prior to registration of the declaration).
Think of condominium declarations as the "constitutional" document of the condominium. Various terms, conditions, obligations (including payment of maintenance fees), agreements, covenants, restrictions, and reservations can be contained in the condominium declaration that creates the condominium. Unlike by-laws or rules and regulations that can be amended based on certain formulas contained in the Act, it is very difficult to amend the declaration once it is registered, and oftentimes, amendment requires near unanimous thresholds for approval (80% to 90% of the owners who own the units depending on the nature of the amendment) or in some circumstances, a court order or the order of the province's Director of Land Titles (note that the "order" route is rarely used as a court or the Director of Land Titles could refuse to grant such an application in its sole discretion).
For example, approval of owners owning 90% of the condo units is required to alter the proportions set out in the Declaration that unit owners must contribute to the common expenses of the corporation. See Sections 7 and 107 of the Act for more details.
Governance of a condominium corporation
A condominium corporation is governed by its declaration, by-laws and rules and regulations. Subsection 17(3) of the Act stipulates that a condominium corporation is duty bound "to take all reasonable steps to ensure that the owners, the occupiers of units, the lessees of the common elements and the agents and employees of the corporation comply with this Act, the declaration, the by-laws and the rules."
Section 119 of the Act holds that the owner of a unit or an occupier of a unit has an obligation to comply with the declaration, by-laws and rules and regulations of the condominium corporation.
Section 56 of the Act provides that a by-law can be adopted or amended by a majority of unit owners at a meeting duly called with proper notice to adopt the by-law.
Section 58 provides that a rule can be adopted by the board of directors of the condominium corporation. Notice of the rule will then be circulated to the unit owners. If there are no objections within thirty days of the circulation of the rule - then it is deemed to take effect. If an objection from owners comprising at least 15% of the units in the condominium is received by the board, then a meeting must be held for the rule to be voted upon by the unit owners.
If a majority of owners approve the rule, then the rule shall be adopted. A majority is defined in the Act as: "a majority of the votes cast by owners present at the meeting in person or by proxy if there is a quorum at the meeting." Note that there are certain votes that require percentages of unit owners to vote in favour - for example amendments to the Declaration.