Ontario condo buyer protections held in legislative limbo

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Ontario has failed to follow through on commitments it has made over the last eight years to crack down on practices that can artificially boost the common expenses charged to buyers of new build condos.

In a situation that’s been raised by the Auditor-General and has come up in several court cases, buyers and condominium board members sometimes discover hidden costs when a new building goes through its first years of operation.

“In some buildings, common expenses have gone up 100 per cent in year two,” said Audrey Loeb of Shibley Righton LLP, who in addition to being a condo law expert has advised governments of all political stripes on condominium regulations going back almost 40 years. “The cost of everything has skyrocketed, so it’s a double whammy: these huge increases fall on the first buyers. I don’t know what the solution is, but at least the buyers should be aware of the true costs.”

One method developers have used to hide costs is a practice where builders create apartment units for superintendents or guest suites, and then force the incoming condo corporation to buy that unit. In a 2019 case pitting Toronto Standard Condominium Corp. No. 2051 and builder Georgian Clairlea Inc., the Court of Appeal for Ontario upheld a ruling that the 112 owners at the Clairlea Gardens project in Toronto should not be forced to pay large sums imposed on them by the builder. The court found a reasonable profit is acceptable, but Georgian Clairlea charged the new condo corporation $2.2-million for an HVAC system that cost them about $525,000 and charged $1.026-million for parking spots worth just $73,000.

In 2015, the Ontario Legislature under former Liberal Premier Kathleen Wynne passed a series of amendments to the Condominium Act of 1998 that would cracked down on such practices. But in a move that has become common in the Ontario legislature, large sections of the legislation were not “proclaimed” by the Lieutenant-Governor. This vice-regal proclamation – which typically comes at the direction of the governing cabinet – is necessary for legislation to obtain its force in law. In some cases a proclamation delay is a temporary condition to give civil servants and governments time to craft regulations that will enable the enforcement of new laws. In other cases, the failure to push legislation forward is a kind of veto where a law passed by elected members of provincial parliament languishes without any force or effect.

In the case of Ontario’s Condo Act, as of the end of 2022 there remains 286 occasions when the phrase “On a day to be named by proclamation of the Lieutenant-Governor” relates to an unproclaimed section of the Act.

One such unproclaimed section is 26.1, which would ban a builder from having a newly created condo corporation buy accessory units until there was an owner-elected board in place to ratify such a decision.

There is also language in the Act, as yet unproclaimed, that would bar a builder from including provisions in the condo by-laws that would serve as a litigation shield, such as requiring that condo owners pay the builder any costs it incurs if the condo owners sue it over defects or defaults.

“This government, when it wants to move quickly, it moves,” said Thomas Rakocevic, the NDP’s consumer protection critic and MPP for Humber River–Black Creek. “In other cases, it drags its feet.”

A number of new additions to the Condo Act were passed and proclaimed in 2020 in a COVID-19 measures package that allowed for, among other things, electronically hosted virtual meetings. Mr. Rakocevic is a supporter of consumer-friendly moves such as expanding the Condominium Authority Tribunal to include more types of disputes and to make it cheaper for owners to get a hearing on legal conflicts in their buildings. He’s also been pushing a private member’s bill that would create a provincial consumer watchdog to monitor all the various agencies and authorities that oversee separate parts of the consumer protection legislation.

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“In Ontario, the way it stands, we don’t have fulsome consumer protection,” he said. “We have a ministry that doesn’t have teeth and we have measures sitting there gathering dust. These [measures] need to be proclaimed, absolutely.”

In a 2020 “value for money” audit, Auditor-General Bonnie Lysyk noted the issue as well: “Many of the relevant 2015 amendments to the Condominium Act, 1998, that would provide more consumer protection giving condo owners and boards a stronger ability to manage their ownership interests and/or responsibilities effectively, are not proclaimed and therefore are not in force.”

The Auditor-General described a case where a condo board said there was a 38-per-cent increase in the condo fees collected from owners from the first to the second year, rising from $678,000 to $935,000. Among the budget items not disclosed in the first budget was an annual elevator maintenance contract of $15,000 and annual mortgage payments of $40,000 for a guest suite the condo corporation was forced to buy.

Denise Lash, of Lash Condo Law and president of condo board lobby group Community Association Institute Canada, has been pushing the government to proclaim the Act’s changes, not least because practices the government legislated against years ago are still common.

“Some condo lawyers that act for developers are including provisions in their agreements of purchase and sale and condominium documentation that incorporate some of the proposed [but unproclaimed] changes assuming that they will take effect soon,” Ms. Lash said. “Others are drafting documentation without incorporating those changes, like still requiring the purchase of guest and super suites and collecting reserve fund contributions from purchasers on closing.”

In 2022, the Auditor-General published a follow-up report that found that little or no progress had been made on 14 of its 46 Condominium Act recommendations. As for the unproclaimed measures, the Ministry of Public and Business Service Delivery outlined in responses to the Auditor-General that in some cases it would take until the end of 2023 just to “seek the government’s policy decision on whether to proceed with developing changes to implement this recommendation” and in other cases it projected no work would be completed until the end of 2024.

For Mr. Rakocevic, the delays are beyond frustrating.

“Who does the status quo serve in this situation? In this case it’s to the benefit of builders and developers and it’s to the detriment of home consumers,” he said.