Should the board consult the owners before implementing changes ? (Part III)

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Mechanical shovel Ottawa May 1 2011 R. Escayola.JPGIn our previous posts on this topic, we looked at the level of consultation required when the board contemplates renovation to the condominium or changes to the services provided to the owners. Last post dealt specifically with the kind of work or changes that could be undertaken by the board without owner consultation or notice.

In other cases, the corporation must give notice to the owners and must obtain their approval prior to making an addition, alteration or improvement to the common elements (as opposed to repairing or maintaining what is already in place) or prior to implementing a change to the corporation’s assets or to the services provided to the owners. The board’s obligation will vary depending on whether the nature and scope of the proposed change is considered to be “substantial” or “non-substantial” in nature.

Substantial Changes – Owner Approval Required

If the contemplated change is “substantial”, the corporation will be required to submit the question to the owners at a meeting duly called for that purpose and the corporation will be required to obtain the approval of 2/3 of all owners (not just those present at the meeting).

A change will be “substantial” if it exceeds 10 per cent of the annual budgeted common expenses for the fiscal year or if it exceeds an amount prescribed by regulation, if any. In addition, a board may elect to treat a change as “substantial” even if it does not meet this financial threshold (thus still requiring the approval of 2/3 of the owners). For example, the closing of a swimming pool may not meet the technical budgetary definition of a “substantial” change as there is no cost involved, but that decision could be very controversial. It may be wise to treat such a change as being substantial in nature.

Too many condominium communities have been plagued by situations where one group is attempting to impose a project on the others. This may result in in-fighting, meetings aimed at removing the board or, worse, in costly litigation. The best way to deal with controversial changes is often to submit the questions to the owners for approval by a 2/3 majority vote. But the board should carefully consider the ramifications of doing so - if the requisite approval is not obtained, then the board cannot go ahead with the change.

Non-Substantial Changes – Notice to Owners Required

For changes that are neither routine nor substantial in nature, the board is required to give notice to the owners of the corporation’s intention to implement the change.

The notice must:

  • Describe the proposed addition, alteration, improvement or change;
  • Specify the estimated cost of the proposed change, indicating the manner in which the corporation proposes to pay the cost (i.e. reserve fund, common expenses or special assessment);
  • Specify that the owners have the right, within 30 days of receipt of the notice, to requisition a meeting of owners; and
  • Contain a copy of sections 46 and 97 of the Condominium Act.

If no meeting is requisitioned by the owners within 30 days, the corporation can go ahead with the proposed change. If a meeting is requisitioned by the owners, the board can proceed with the change if a meeting is held and the owners of the majority of the units do not vote against the change. Proper quorum is required at the meeting.

Keep in mind that a corporation cannot use the method applicable to non-substantial changes to attempt to push through a decision that in reality constitutes a substantial change. When the change contemplated is of a substantial nature, the corporation must treat it as so, must call an owners’ meeting for that purpose and must obtain the approval of 2/3 of all owners.

Well-intentioned boards may be tempted to implement a variety of changes in order to improve the condominium. However, they must keep in mind that they are not managing their personal homes but rather the homes of all of residents. The board has a duty to follow the procedures set out in the Act relating to required notices or approvals. In addition, proper communication to the owners is often the key to an harmonious community.

 

Published In: Administrative Agency Updates, Business Organization Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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