Protecting Condominium Owners Act – Insurance, 1st year budget and investments

Protecting Condominium Owners Act – Insurance, 1st year budget and investments

This marks another excerpt from the Ontario Governments web-site publications on this new act and what it means. To read the entire article, please click on the link at the bottom of this article.


The Condominium Act Review process highlighted numerous gaps and shortcomings in condo insurance practices.

Some of the most troublesome issues relate to the definition of a “standard unit” in a condo building. Without a clear definition, it is difficult for owners to know exactly what they are responsible for insuring.

The review of the Condominium Act resulted in a recommendation for a set definition of a standard unit. A corporation would have authority to amend the definition through a by-law.

In line with this recommendation, regulations will set out a basic, default definition of a standard unit in cases where a condo corporation has not passed its own by-law spelling out such a definition.

The condo corporation would be required to obtain insurance for all standard unit components of a unit, as well as the common elements.

Owner’s liability for damage

Sometimes an owner’s carelessness results in damage to the common elements, assets of the corporation or to another unit. The existing law was unclear about who pays the corporation’s insurance deductible for the damaged property, although a board does have the option to pass a by-law assigning this responsibility.

The Stage 2 report recommended greater clarity on this issue. The act make it clear that the responsibility for damage lies with the owner of the unit where the person (or, if set by regulation, the thing — such as a pet) who caused the damage lives — provided the damage was not caused by agents or employees of the corporation.

If, for example, a unit’s resident damages a unit, any assets of the corporation or common elements covered by the corporation’s insurance, , an amount will be charged back to the unit owner’s contribution to common expenses. This charge-back will be calculated as the lesser of:

·         the cost of repairing the damage

·         the deductible limit of the corporation’s insurance policy

A condo board would not be able to make certain alterations to this obligation through a by-law (as is the case under the current act). It could be changed only by amending the condo declaration.


A charge-back is an extra fee added to a condo unit’s monthly common expenses. Under the current act, a condo board can issue a charge-back to recover costs that the corporation incurs for items like:

·         carrying out an owner’s repair or maintenance obligations, or

·         certain court costs obtained by a corporation against an owner

Most condo declarations also contain indemnification clauses. These clauses set out when a corporation may add a cost that it incurs to an owner’s common expense fees.

The Stage 2 report recommended that the act clarify what a charge-back is and when it can be charged.

In the amended Condominium Act this will be done through:

·         a prohibition on fines

·         the regulation of any indemnification or charge-back clauses in a condominium declaration

Corporations would also be required to provide a notification to owners on any charge-backs that the unit owners owe, which would include a deadline for payment.

Owners would be able to submit certain charge-backs to dispute resolution within 30 days of receiving a charge-back notice.

Payment would be suspended during dispute resolution proceedings related to the charge-back. However, if the owner transfers the unit, he or she would have to make sure that the unpaid amount in dispute is held in escrow before the transfer, and until the dispute is resolved.

Disclosure of known costs beyond the corporation’s first year

At present, a condo developer may defer some of a corporation’s operating costs and not include them in the first-year operating budget. A unit’s monthly fees can rise sharply once these costs take effect.

As a result, the act requires developers to disclose any circumstances that they know of, or ought to know of, which may lead to an increase in common expenses within a set period of time after the corporation’s first year (e.g., elevator maintenance contract). In some cases, developers would also have to disclose the amount of the potential increase to common expenses.

Condo corporation investments

Condo boards now have little flexibility to decide how to invest a corporation’s funds. The Stage 2 report recommended consideration of a wider range of options.

With respect to investments, the act allows a greater measure of flexibility – to be set out in the regulations. However, it would also maintain, and in some cases clarify, some fundamental protections.

Updated: April 22, 2016 - Published: May 27, 2015

For the full article as published by the Ontario Government, please click on the link below