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Condo boards have some wiggle room

Focus on: Condominium Law
|Written By Marg. Bruineman
Condo boards have some wiggle room
John De Vellis says a recent ruling confirmed condominium owners needed to approve a bulk cable television contract that included internet, and it was not valid without the agreement of the owners.

When it comes to making changes in condominium complexes, boards have to clear a number of hurdles. Often, those hurdles aren’t as insurmountable as some people perceive them to be.

Condo boards are permitted to make changes to the building or services without any input from unit owners to a degree.

But a substantive change, one that represents more than 10 per cent of the annual budget, will trigger the need for a vote, requiring two-thirds support for it to go ahead.

Condo boards have the mandate to make several types of modifications without notifying the owners, such as when they fall under repair and maintenance responsibilities, are required by law or is for the safety and security of those using the property — where they don’t necessarily have to fall within the monetary limitations and without having to give notice to unit owners.

“To me, it’s sort of a two-step process you need to go through,” says James Davidson, a founding partner at Ottawa firm Davidson Houle Allen LLP Condominium Law.

He begins by doing an analysis to determine whether what is needed is an actual change or if it is a necessary repair or replacement and whether an engineer is required to make the distinction.

If it is a change, the estimated cost will determine what the board has to do next. If the cost of those changes exceeds 10 per cent of the board’s annual budget, the Condominium Act defines that as being a substantive change, which triggers a vote of the condo owners, requiring the approval of two-thirds vote in favour of the change.

Utilities, management and maintenance contracts often represent more than 10 per cent of the budget but don’t require approval for their renewal, observes John De Vellis, partner with Shibley Righton LLP in Toronto, referring to his recent case Zordel v. MTCC No. 949.

De Vellis, along with Stefan Rosenbaum, acted for the condo corporation in Zordel in which Metro-Toronto Condominium Corporation No. 949 entered into a bulk cable television contract with a new service provider for all the units, adding internet services to the common expenses as well.

The plaintiffs, Heather Zordel and Jonathan Mesiano-Crookston, objected, maintaining the condo corporation didn’t have jurisdiction to enter into the contract.

They argued that the new contract, which offered no opt-out options for unit owners, represented a substantial change and was not valid without the agreement of the owners.

Using the marginal cost argument, De Vellis maintained that the addition of internet didn’t fall within any of the thresholds requiring notice or approval of owners because it was simply a renewal of an existing contract with an additional service that didn’t represent a substantial change.

“Now there’s case law for that. It also clarifies the jurisdiction issue,” says De Vellis.

The court agreed with De Vellis that the declaration included cable as a common expense similar to utilities and that the only change related to the addition was the internet service. The cost of the cable television service should, therefore, not be included in the calculation of the change, said the ruling.

And the addition of the internet service was below the threshold that requires the involvement of the owners.

“MTCC 949 acted within its jurisdiction by entering into the Frontline Agreement and it was not required to provide notice to unit owners or to secure the approval of 66 2/3 of unit owners before doing so,” wrote Justice Peter Cavanagh of the Ontario Superior Court of Justice.

De Vellis says the case provides a bit of clarity because previous case law only implicitly included cable and internet as equivalent to utilities, which are acknowledged in the common expenses. Zordel, he says, explicitly includes telecommunications agreements.

Cheryll Wood says the case confirms the approach beig used at her Ottawa firm, Davidson Houle Allen LLP Condominium Law.

The decision confirms that notice is required on only the cost of the change itself and not the entire transaction.

“That’s the advice we have been giving to our clients before, but it’s always more comforting to rely on a case and specific wording of the judge when it comes to these matters,” she says.

Wood says the judge “found that the wording in the general bylaw was broad enough to include both internet and television even though it didn’t specifically state internet.”

“That’s helpful if a corporation’s declaration isn’t completely clear and doesn’t explicitly state internet; it’s helpful to know there’s a case out there that we can rely on,” she says, if broad enough wording exists.

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