Condominiums Need Facilities Agreement

Gerry Human has another article for the Toronto Star.  Let’s look at two of the questions asked:

QUESTION:  Our townhouse condo has two condominium corporations and two boards of directors. But we don’t have an agreement setting out how we share expenses like hydro, water and roads — which will soon require replacement. The boards don’t hold joint meetings, so questions about maintenance, repair and cost-sharing remain unanswered. Does the Condominium Act address a situation like this?

ANSWER:  A condo-builder, in a case like this, would normally prepare a shared-facilities agreement and have the two corporations sign it while they are still controlled by the developer. The Condominium Act does not cover either the need for this agreement or what happens when there isn’t one.

The agreement will usually deal with the sharing of costs and will also provide for a shared facilities committee made up of representatives from each corporation.

The two boards should be urged — and if necessary, pressured — to negotiate and sign such an agreement. Not having one will lead to repeated disputes about the responsibility of each corporation. Court action could eventually result.

This question brings up an issue that was not addressed by the recent changes to the Condominium Act, and needs to be addressed: the ability for two or more condominiums located on the same property need to be allowed to easily merge into one condominium.

Since 2001, developers can put up a complex of buildings on one parcel of land and create a single condominium corporation.  However, prior to 2001 when the current Condominium Act came into effect, any developer who built multiple highrise buildings on a single property almost always had to form multiple condominium corporations (one for each highrise) like in the question above.  There is an option under the current Act that would allow them to merge into a single condominium corporation so that issues like the one above would not occur.  However, the process is time consuming and costly – which means few condominiums will ever do so.  This process needs to be streamlined in order to make the process easier to handle.  This would then create a viable option, which in most cases is not the case.

The second question I want to discuss is this one:

QUESTION:  Our board wants to replace some common-area carpet with laminate flooring. Our management company insists that a $1-per-square-foot underlayment be used. The board has obtained three quotes, one for a 50-cent-per-square-foot underlayment. The management company is emphatic that their choice be used. Can the board make this decision?

ANSWER:  The board may make the decision but must comply with Section 97 of the Condominium Act dealing with alterations to the common elements. The Act states that the corporation may proceed with the alteration — without notifying unit owners or getting their approval — if the alteration is: 1) required by a mutual-use or shared-facilities agreement; 2) by a law; 3) is necessary to ensure the safety of persons using the property; or 4) is estimated to cost no more than the greater of $1,000 and one per cent of the corporation’s annual common expense budget.

Otherwise, the corporation must send a notice to each owner describing the alteration and provide an estimate of the cost and how the corporation proposes it will be paid. The cost estimate will reflect the corporation’s choice of underlayment.

The notice must advise that owners of 15 per cent of the condo units have the right, within 30 days of receiving the notice, to requisition an owners’ meeting to vote on the alteration. The corporation may proceed with the alteration if a requisition is not received, or if the owners vote in favour of the alteration at the requisitioned meeting.

If the corporation’s cost estimate for the alteration exceeds 10 per cent of the corporation’s annual common expense budget, it must be put to the owners at a meeting. There, an affirmative vote of 66.6 per cent of the owners is needed to approve the alteration.

Mr. Hyman goes on at great length discussing how the owners may be involved – yet fails to answer the question.

The Board is required to follow the Reserve Fund Study, and the opinion of the Engineer as to work that may be required to the common elements.  In that case, the Board has the right to choose between carpeting and laminate flooring when it is time to replace the hallways, main lobby, etc.  However, the owners should be given the right, with an estimate of the costs, between the two options.  This is not provided for under the Condominium Act, but should be.

As for the management company demanding the $1 underlayment, the Board is free to choose the cheaper option if it decides.  However, we need to know why the management company is recommending the more expensive option.  Perhaps the more expensive option will provide better sound proofing, so that the laminate floors will not make as much noise.  If so, the more expensive option should be used.

At the end of the day, the Board has the right to decide which underlayment should be used, and the Act needs to be updated – not to allow the owners to prevent the work from occurring – but to allow the owners to decide which option (carpeting or laminate) should be used.

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