With the much anticipated release of Stage 2 from a series of amendments being made to the regulation, on December 14, 2018 a webinar was held by Service Alberta to highlight the changes. Below we share this review from that webinar, the questions/answers that followed, reference to the annotated bylaws and our comments with how this affects our industry and its providers. Please reference the recorded webinar and the annotated stage 2 changes for the actual presentation.
- Stage 2 seeks to improve governance of Condominium Corporations, insurance, corporate documents and reserve fund requirements.
- Approved by cabinet December 3, 2018.
- The annotated amendments can be found at the following: link
- Due to the volume of changes, sections will come into effect July 1, 2019 and January 1, 2020 to allow time to prepare accordingly.
- Once in effect, it remains to be seen the unforeseen impact these changes might have that will need to be monitored with feedback provided to Service Alberta.
- A recording of the webinar will be provided on Service Alberta’s site.
Corporate Documents (“Condo Docs”):
New documents to be provided:
- loan disclosure statements for current loans
- package of board and AGM minutes for a fiscal year
- a consolidation of the rules and policies created
- a list of names and addresses for service of the board members
- the text and results of an ordinary or special resolution
- copies of reports prepared for the corporation by professionals, including professional engineers but excluding reports requested and obtained by the corporation’s legal counsel in relation to actual or contemplated litigation
- Owners are permitted to make copies of documents.
- Base fee for a document has been set at $10.
- An estoppel will now cost $100.
- A rushed document can cost $30 for a 3 day turnaround excluding holidays.
- Costs will not be applied to documents that are required to be provided to the ownership such as “annual financial statements” or “budgets”.
- Corporations must keep specific documents for a specified period.
- Corporations may retain documents electronically.
- Corporations will not be required to retain documents that they did not have access to as of December 31, 2018.
- Documents can only be purchased by owner, purchasers or a mortgage company. Furthermore, a “purchaser” has now been defined as someone that has entered a purchase agreement.
- This will reduce costs to the buyers of these documents.
Annual General Meeting (AGM):
- Meeting minutes for the year to be provided to the ownership along with the Annual General Meeting (AGM) packages.
- Corporations will be required to send preliminary notice of an upcoming AGM at least 60 days in advance of the AGM. This notice must contain the date of the meeting, a call for agenda items with a deadline for submissions which must not be more than 30 days before the meeting, a statement that a proposed agenda item submission must include, a statement that owners at the meeting will be voting on the contents of the agenda by majority vote at the beginning of the annual general meeting and lastly if the corporation accepts electronic submissions of proposed agenda items, the specific electronic address to which the proposed agenda items may be submitted.
- Final AGM notice must include a summary of the agenda items that will be used to be voted on at the start of the meeting.
- Polls votes may be taken for an ordinary resolution and must record number of units and unit factors present in person and by proxy voting in favour and not in favour of the resolution. If votes by show of hands was conducted, a record of result.
- For election of board members determined by a vote, the number of votes in favour of each candidate.
- If a special resolution was proposed, record number of units and unit factors in favour and not in favour of the resolution.
- AGM minutes to include a record of votes.
- Written voting results to be shared with the ownership 30 days afterwards in a manner that does not identify a unit or a person who cast the vote.
- AGM minutes and the list of board members to be provided to the ownership 30 days after the AGM.
- Those seeking to be elected must disclose any potential conflict of interests.
Regulations set restrictions that anyone can be a proxy, except:
- A business, company, corporation, etc.
- A manager or employee, “except” for the purposes of establishing quorum.
Proxies may be submitted electronically or in hard copy format and to include:
- Name and unit number of the person granting proxy
- Name of the assigned proxy
- Date that the proxy was provided
- Expiration of the proxy with a date, maximum of 6 months in advance
- Signature of the owner (electronic signatures is accepted)
- Instructions, limitations or restrictions the owner placed on the proxy
- AGM’s held after July 1, 2019 must advise the ownership in their preliminary notice that the requirements governing proxies have been amended and that proxies given on or before July 1, 2019 may no longer be valid.
- Corporations can develop further rules for proxies for the purpose of allowing meetings to run smoothly.
Rules (Policies) and Violations:
- Owners can change or overturn an existing rule by passing an ordinary resolution.
- If the rules conflict with a resolution, whether that resolution was passed before or after the rule, the resolution always prevails up to the conflict or inconsistency.
- At least 30 days written notice of a new rule must be provided to the ownership and residents before it can come into effect.
- Rules can come into effect if they are addressing a safety, security or during emergencies.
- If there is a noncompliance with the bylaws, the notice(s) must be sent to the owner in addition to the tenant (if applicable).
- Provide a notice to be delivered to the owner and resident (if applicable) that is to be sanctioned for a bylaw violation and must include details surrounding the issue such as unit number, name of the person, bylaw that has not been complied with, a rule, date and time (if applicable), other relevant details, monetary sanction (if applicable), description of the corrective action and a deadline of at least 3 days (excluding holidays) for which an owner can respond to or take corrective action against the alleged noncompliance.
- If the owner and resident (if applicable) do not take (satisfactory or any) corrective action after the warning and the deadline to respond has expired, the corporation may serve a notice containing the monetary sanction, instructions on how to pay and a deadline for the payment. This notice must also include a description of the sanction and the date and time at which it will come into effect, reasons for the sanction and the date of the board resolution approving the sanction.
- Corporation can no longer allow their managers to sanction on their behalf. A resolution must be passed to levy a financial sanction.
- Delivery may be as per the notice provision, if electronic means has been approved, personal service, recorded mail addressed to the unit, or by left with a person apparently over the age of 18 years at the unit.
- For residential units, the first violation has a maximum of $200 the first week and subsequent violations for a maximum of $500 per week thereafter. After 6 occurrences which equates to $2,700, corporations will have to file for an application in court.
- For commercial/industrial units, the first violation has a maximum of $1,500 the first week and subsequent violations for a maximum of $2,500 per week thereafter. After 6 occurrences which equates to $13,500, corporations will have to file for an application in court.
- Limits the total fines for breaches of a single event.
- Clarifies that corporations are not allowed to levy financial penalties for rules (policies) infractions if the infraction is not in the bylaws.
- Caveats registered against units may include reasonable costs such as for registering caveats or incurring legal fees. Costs cannot exceed the cost of the actual charge(s).
- All rules must be provided to the ownership and all occupants within 90 days from July 1, 2019 or else they become invalid.
- Rules may not have monetary penalties.
- Unless it is mentioned in the bylaws, rules cannot be created for what happens within the unit.
- Corporations must provide the annual budget 30 days in advance of the new fiscal period.
- Units owned by the corporation are deemed to have been allocated zero unit factors for the purposes of calculating condominium contributions.
Establishes a maximum deposit as follows:
- $250 for leases of 6 months or more
- $1,000 for leases of less than 6 months
Deposits that currently exceed these amounts before this section comes into force can be held until the end of the tenancy of the owner’s unit.
When deposits are returned and itemized list of deductions must be conveyed for which each deduction was made.
- An ordinary resolution will be required to borrow money if the total loans exceed 15% of the annual operating budget for that year.
- A bylaw may be passed through a special resolution to authorize borrowing instead.
- The corporation may directly issue a statement to lenders showing the corporation is authorized to borrow.
Reserve Fund Study (effective January 1, 2020):
Only someone with a specific qualified profession or designation can prepare a reserve fund study.
- Professional engineer or technologist
- Registered architect
- Member of the Appraisal Institute of Canada holding the designation of Accredited Appraiser Canadian Institute
- Person accredited by the Real Estate Institute of Canada as a certified Reserve Fund Planner
- Person who has completed training or possesses qualifications recognized by the Director of Condominiums
The regulation mandates methods to be used when conducting a reserve fund study, including:
- An onsite visual inspection of all visible components
- Interviews of the condominium board, manager and others
- Reviews of relevant documents including the condominium plan, construction documents and maintenance records
- Provider must not have a conflict of interest.
- Existing contracts will not be voided when the regulations come into effect.
- A developer or interim board must use an independent reserve fund study provider.
- The study must cover “at least” a 30 year time frame.
- Corporations to forecast the reserve fund expenses for the next year as part of the reserve fund annual report.
- A corporation may update their reserve fund plan as they feel necessary but keep updates to minimum of every 5 years.
Insurance (effective January 1, 2020):
- Corporations can require owners to purchase deductible insurance through a bylaw change.Corporations to insure a “standard insurable unit” (base specs before upgrades were installed) to be described.
- Corporations must insure units, fixtures and finishing as determined by the definition, but not improvements (betterments) to units.
- The standard insurable unit must include certain categories of information.
- If the developer does not provide a definition, the corporation may adopt one by bylaw, resolution or board decision.
- Keeps the existing requirement that property is to be insured at replacement value.
- Deductible must be reasonable.
- Ownership must be advised of changes such as standard insurable unit description, the insurer, or the amount of insurance obtained for the owner’s unit.
- Corporations are responsible for repairs of insured part of the unit and owners are responsible for other repairs.
- Repairs must be made to the standard insurable unit description unless the owner has insured improvements or will pay to vary the standard of the rebuild.
- If the owner fails to make repairs, creating risks, the corporation may do the repairs and chargeback the costs.
- A corporation can claim back the insurance deductible from an owner if the damage originated in the that owner’s unit, unless the damage was due to: (1) Construction defect, (2) Act or omission of the corporation, (3) Normal deterioration of the common property.
- The maximum chargeback is $50,000.
- Corporations can still sue for amounts over $50,000 if the owner deliberately or negligently caused damage.
- Corporations are required to obtain fidelity bonds giving them coverage against malfeasance by members of the board or by the property manager. This bond must cover the reserve fund balance and the operating account balance.
- Multiple definitions of a “standard insurable unit” may be defined for this in a mixed-use setting (eg. Apartment style with town homes, residential with commercial, etc).
- Owners seeking to change the deductible may organize an ordinary meeting or submit an agenda item for the AGM to advocate changes; such as change to the deductible amount set.
- Significant changes that increase insurance requirements for the corporation that will impact budget requirements.
We are passionate advocates for owner’s obtaining insurance coverage that is properly tailored to include items such as the deductible insurance, personal contents including betterments, living accommodations, tenant insurance, etc. Many owners have been caught without insurance creating financial hardship for most; this is easily avoided.
Regarding deductibles depends on the preference of the board. Holding a higher “reasonable” deductible allows the Corporation to minimize to eliminate great variances to their budget in case of a losses originated by an owner. On the other hand a smaller deductible allows the Corporation to file a claim using minimal funds.
Transfer, Lease or Sale (effective January 1, 2020):
- Requires the corporation to get 75% of persons with registered interests on units before selling or leasing common property or winding up.
- If interest holders do not respond the corporation can go to court.
- Requires a corporation that intends to sell the building as part of winding up to hold an information meeting.
- Corporation-owned units are not counted when dividing up proceeds of a sale.
Notices (effective January 1, 2020):
- Corporations must send electronic notices to owners that request them.
- If the corporation sends the notice to the most recent address provided by the owner, it is considered received 24 hours after sending.
- Electronic notices have to be sent in a format the can be retained.
- The registration status of existing bylaws registered by a corporation before the repeal of the previous section 33 of the Act continues notwithstanding the coming into force of the new section 33 of the Act.
- For those corporations that have not yet passed their bylaws, Schedule in the Regulations will be available with the latest changes.
One of the many lessons from this webinar was that owners looking for specific changes may call for an ordinary meeting or add a resolution to be passed at an AGM to effect changes, if successful during the vote.
To contrast this another way, the hierarchy that exists in priority that cannot contradict top-down is as follows:
- Condominium Property Act C-22
- Condominium Property Regulation
- Condominium Bylaws
- Special/Ordinary Resolutions
- Board Resolutions
As you will see, Special/Ordinary Resolution takes precedent over Rules and Policies. Owners now have a much louder voice.
With the passing of this new amendment, there is a fair amount of work that Condominium Corporations must undertake to start preparing immediately such as updating your rules (polices), defining your “standard insurable unit” (if applicable), proxies, AGM’s, corporate documents, insurance and other items such as consideration to your finances, budget, systems and procedures. In the meantime, many are expecting to see adverse effects and unplanned consequences from these changes. We encourage owners and industry providers to retain their feedback so they may be voiced to the government for when that opportunity arises.