Protecting Condominium Owners Act – New Purchases, ONHWPA

Protecting Condominium Owners Act – New Purchases, ONHWPA

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.

Condo guide

As part of the drive to improve awareness among condo owners and other stakeholders, the amendments will require the province to publish an easy-to-read condo guide, containing essential facts about the roles and responsibilities of living in a condo. This task could be delegated to the Condo Authority.

The condo guide would include information such as:

·         how corporations are governed

·         owners’ rights and responsibilities

·         care and maintenance of common elements

·         how owners can request an information meeting at any time

Developers will be required to give a copy of the guide to all buyers of newly-built condos at the time of sale. This would enable buyers to read it during the 10-day “cooling off” period that they have to consider their purchase.

Sale or leaseback of units and common elements

Some developers have been separating building components that could have been part of the common elements of a condo property (e.g., amenities like a gym or party room). In some cases, developers will then sell or lease these components back to the condo corporation. This practice has increased in recent years.

The review’s Stage 2 report concluded that this practice inflates the cost of units and has become an unnecessary source of tension within condo communities.

Regulations will be able to specify what components must form part of the common elements or be owned by the corporation at the outset. These specifications would only be subject to future changes made by a particular post-turnover owner-elected board, in accordance with any other requirements in the legislation.

In addition the amendment will forbid:

·         a condo corporation from acquiring an interest in property unless the particular post-turnover owner-elected board agrees

·         attempts to circumvent the above prohibition in the agreements of purchase and sale with buyers

Regulations will allow for some flexibility and exceptions to these prohibitions. For example, one exception could be that developers would be able to sell or lease certain energy-efficient equipment, which would benefit owners, to a condo corporation before turn-over (e.g., solar heating system, energy-efficient boilers water heaters). Other exceptions may include certain facilities to be shared between a condo property and other types of properties. Any such exceptions would be determined during the regulation-making stage.

Shared facility agreements

There have been cases where developers do not install separate electricity, water or gas meters for commercial property users who share these utilities with an adjacent condo property. Instead, there is just one meter and one bill. The total cost is then split among residential units and commercial tenants.

There are situations where a non-condo commercial enterprise (e.g., coffee shop) has used far more electricity and water than individual residential units in a condo property. In these cases, without separate meters, unit owners end up paying a disproportionate share of the utility costs.

There are other cases where a condo property shares the use of land, services or facilities with a non-condo property and no shared facilities agreement has been put in place to deal with matters such as the sharing of costs with respect to maintenance and repair.

The amendments will require a written shared facilities agreement between condo corporations, developers and other parties who share services, land or other property (e.g., swimming pool, underground garage).

Regulations will be able to set out provisions for these agreements. For example, they may set out if these agreements would have to include a method for distributing shared costs.

Regulations will also be able to address other issues, such as whether separate utility meters or sub-metering arrangements would have to be installed.

Disclosure statements and declarations

A disclosure statement is a document compiled by a developer that tells purchasers about the condo they are buying. It provides vital information about the future or existing condo property and corporation (e.g., corporation’s first-year budget, the proposed or actual declaration, by-laws and rules).

A declaration, or a developer’s proposed declaration, sets out matters of ownership, such as the boundaries of the unit, the designated use of the unit, the proportion (expressed in percentages) of common expenses allocated to the unit, and repair and maintenance obligations.

Declarations and disclosure statements vary widely and are often difficult for condo buyers to read and understand.

Regulations will be able to create rules for standard disclosure statements and declarations, in terms of their form and content. Developers would not be able to alter these aspects of disclosure statements and declarations. They would also be easier for buyers to understand.

Among other items, standard declaration provisions would be able to cover unit boundaries, maintenance and repair obligations, and insurance requirements. A standardized disclosure statement summary would replace the current table of contents.

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.

Ontario New Home Warranties Plan Act warranties

A growing number of condo projects centre on the conversion of an existing building, where construction incorporates pre-existing elements like the façade of a church or school, or the entire frame of an office building.

The Ontario New Home Warranties Plan Act (ONHWPA) does not currently extend to these condo conversion projects, creating inequities for consumers and exposing them to risks.

The legislation amends the ONHWPA so that most of the warranty protections available to buyers of new condos would also apply to certain condo conversion projects. Such an extension would provide a necessary safeguard for buyers of this type of condo.

Some ONHWPA warranties would not apply to the pre-existing elements of a condo conversion, namely that the pre-existing elements have been constructed in a workmanlike manner and are free from defects in materials. All other ONHWPA one-year warranties, as well as all other two-year and seven-year warranties would apply to both pre-existing elements and new elements of a conversion.

Condo project websites

Regulations could require developers or a related company to include specific items of information on websites dedicated to their condo projects (e.g., the proposed declaration, by-laws, rules, other key documents, a search function for key words and terms).

Material change

A buyer can currently cancel a condo purchase within an initial 10 day “cooling-off” period for any reason whatsoever.

In addition to the initial 10 day “cooling off” period, a buyer may cancel a condo purchase in the event of a “material change” to the information contained, or that should have been contained, in the disclosure statement.

The act amends the definition of “material change” to exclude certain changes, such as an increase of less than 10%, or another threshold set out in the regulations, to the amount of the projected common expenses previously disclosed to the buyer. This amendment would provide greater predictability to purchasers about increases to the projected common expenses that they could expect once they become an owner.

The definition of “material change” has been amended to exclude certain changes, such as an increase of less than 10% (which will be calculated and determined in the regulations), to the amount of the projected common expenses previously disclosed to the buyer (or an increase of another threshold that will be set out in the regulations). This amendment would provide greater predictability to purchasers about increases to the projected common expenses that they could expect once they become an owner.

Additionally, the amendments will allow a purchaser or past purchaser to make an application to court to seek compensation from the developer for any losses the purchaser incurred if the developer does not comply with the "material change" disclosure requirements of the Act.

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

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