If the federal Income Tax Act can be fairly described as the “heavyweight champion” of ponderously intricate legislation in Canada, the law relating to condominium records in Ontario could be seen as challenging for the featherweight belt on November 1, 2017 at 12:00 AM EDT.
At that time, when the relevant provisions of the Protecting Condominium Owners Act, 2015 (the “New Act“) and the general regulation made under the New Act (the “New Regulation”) will take effect, the law of Ontario with respect to condominium records will drastically change in both substance (what the law requires) and procedure (how the law applies).
This article only discusses the upcoming changes in the substance of Ontario law in respect of each of the following questions:
- What’s a “record”?
- How long must the condominium corporation keep records?
- Who can access the condominium’s records and for what reason?
- Are there exceptions to the right to examine records?
- Can the condominium corporation disclose certain records?
- What’s the remedy for a failure to produce a record?
Please note that the New Act and New Regulation are referred to below as if they have already taken effect, albeit that the date of writing is October 20, 2017.
What’s a “record”?
Section 55(1) of the Condominium Act, 1998 (the “Old Act“) required a condominium corporation in Ontario to keep “adequate” records and provided a partial, non-exhaustive list of which documents and things are “records”. It left open the prospect that the regulations made under the Old Act could provide that documents and things not otherwise listed in section 55(1) would be considered “records”, but since the regulations under the Old Act were generally silent on that issue, the courts (and particularly, the Small Claims Court) were left to fill the void and decide whether a document or thing, if not specifically listed in section 55(1), was a “record” or not.
Under the New Act, the list provided in section 55(1) remains partial and non-exhaustive but significantly expands the number of documents and things that must be treated as “records” of the condominium corporation. There is much less room for debate around the issue of which documents and things are required to be kept as records.
To provide only two examples, the corporation is required to treat as a record and keep, for the periods of time established in the New Regulation and further discussed below, a copy of all insurance policies that the corporation has obtained, current and expired, as well as a copy of all warranties that it receives in respect of any part of the condominium property, including expired warranties.[i]
In addition, the New Act imposes a duty on the corporation to keep records relating to requirements being introduced for the first time under the New Act, such as all returns and notices that the corporation files with the Condominium Authority under Part II.1 of the New Act, and records that it may not have previously possessed, such as a record of all disclosures made by a person for the purpose of qualifying to be elected or appointed to the board.[ii]
How long must the corporation keep records?
Other than financial records (at least six years from the relevant year-end) and instruments appointing a proxy (at least 90 days after the meeting in respect of which the instrument was provided), the Old Act did not specify a period of time for which a condominium corporation was required to keep records. The lack of specificity implied that the corporation was required to keep any record not expressly listed in section 55(1) for however long it determined to be “adequate”.[iii]
The New Act and New Regulation establish all periods of time for which the corporation must keep all records, each of which is ascertained according to the nature of the record in question.[iv]
To again provide only two examples, the corporation is required to keep a copy of all expired warranties for at least seven years after the date on which the relevant warranty expired, and continues to have a duty to keep all proxies (and, under the New Act, ballots) for at least 90 days after the meeting at which the proxy or ballot is submitted, unless, within that time, or otherwise before the proxy or ballot is destroyed, the corporation receives notice of “actual or contemplated litigation” relating to the proxy or ballot, in which case the applicable retention period varies according to the latest date on which any of six events occur in respect of the actual or contemplated litigation.[v]
Who can access the condominium’s records and for what reason?
Under section 55(3) of the Old Act, the owner, purchaser or mortgagee of a unit had a right, subject to the exceptions noted below, to examine records of the condominium corporation “for all purposes reasonably related to the purposes of the (Old Act)”.
The New Regulation modifies the purpose for which an owner, purchaser or mortgagee may examine records of the condominium corporation by requiring that purpose to be solely related to the person’s interests as an owner, purchaser or mortgagee, having regard to the purposes of the Act. This requirement may be viewed as a legislative attempt to limit “fishing expeditions” on the part of owners (and purchasers and mortgagees, however uncommon their expeditions may be).[vi] The New Act further provides that the owner, purchaser or mortgagee is not required to specify the purpose for which the record is sought, however, and thereby creates a question regarding the extent to which the requirement as to purpose is enforceable.[vii]
Additionally, in keeping with the newly-introduced Condominium Management Services Act, 2015, the New Act imposes a duty on the condominium corporation to produce, to any condominium management provider or manager with whom the corporation has entered into a management agreement, any of the corporation’s records that the provider or manager reasonably requires.[viii]
Are there exceptions to the right to examine records?
The Old Act established certain exceptions to the right of an owner, purchaser or mortgagee of a unit to examine records of the condominium corporation: under section 55(4) of the Old Act, the owner, purchaser or mortgagee was not entitled to examine a record if the record related to (a) an employee of the corporation, and did not comprise the employee’s contract of employment; (b) “actual or pending litigation” or insurance investigations involving the corporation; or (c) a specific unit or owner, subject to the “exceptions to the exceptions” provided in section 55(5) of the Old Act.
Apart from correcting the circular reference to “actual or pending litigation” (which has now been replaced, as suggested above, with “actual or contemplated litigation”), section 55(4) of the New Act preserves these exceptions and adds new exceptions for records of the method of electronic communication to which specific owners or mortgagees have agreed (i.e., records of e-mail addresses), records of privileged communications relating to a specific unit or to a specific owner, purchaser or mortgagee, and unless a by-law provides otherwise, every portion of a ballot or proxy form that identifies a specific unit or owner.[ix] The New Act also maintains the “exceptions to the exceptions”, such that an owner, purchaser or mortgagee of a unit is entitled to examine records relating to that particular unit, and an owner is entitled to examine records relating to that particular owner.[x]
Can the condominium corporation disclose certain records?
The answer to this question represents perhaps the most significant, albeit subtle, change in the substance of the law relating to condominium records in Ontario.
Under the Old Act, an owner, purchaser or mortgagee of a unit did not have a right to examine or make a copy of a record that related to some other unit or owner. This exception arguably implied that the condominium corporation had a duty to refrain from disclosing to “Owner B” a record that related to “Owner A” or to Owner A’s unit, but did not explicitly establish a duty of that nature.
The result was that if the condominium corporation disclosed to Owner B a record relating to Owner A or Owner A’s unit, and if Owner A was aggrieved by the disclosure, Owner A would have a number of options to seek a remedy against the corporation, but none of them were exceedingly useful.
The New Act provides, however, that despite the right of an owner to examine a record, and despite the exceptions to that right, the condominium corporation shall not disclose a record relating to a specific unit except in accordance with the New Regulation and the request of the owner, purchaser or mortgagee of that unit, and that the corporation shall not disclose a record relating to a specific owner except in accordance with the New Regulation and the request of that owner.[xi]
The implications are extensive: if the condominium corporation discloses a record relating to Owner A or Owner A’s unit to Owner B, and if Owner A is aggrieved by the disclosure, Owner A can apply for an order enforcing compliance, in which case Owner A could, upon demonstrating the fact of the disclosure, be entitled to an order directing the corporation to compensate Owner A for damages sustained as a result of the disclosure.
What’s the remedy for a failure to produce a record?
As most readers of this article will know, under the Old Act, if the condominium corporation, without reasonable excuse, failed to permit an owner to examine a record that the owner was otherwise entitled to examine, or failed to provide a copy of that record, the owner could advance a claim before the Small Claims Court for an order directing the condominium corporation to produce the record in question and pay a penalty of $500 to the owner.
The New Act and New Regulation authorize the purchaser or mortgagee of a unit (and not only an owner) to claim a remedy for the failure of a condominium corporation, without reasonable excuse, to permit examination or provide a copy of a record that the purchaser or mortgagee is otherwise entitled to examine.[xii]
In addition, the New Act and New Regulation require the claim for such a remedy to be made in the form of an application to the Condominium Authority Tribunal, which has the jurisdiction to order the condominium corporation to not only produce the record in question, but to pay a penalty that “shall not exceed” the sum of $5,000 to the person (i.e., an owner, purchaser or mortgagee of a unit) who is otherwise entitled to examine or receive a copy of it.[xiii]
The foregoing reference to “$5,000” is not a typo: the potential penalty for a condominium corporation that fails, without reasonable excuse, to produce a record has been multiplied by a factor of 10. However, given the provision that the penalty “shall not exceed $5,000”, it seems likely that the full penalty will only be ordered in the most egregious cases, and will otherwise be reduced to an amount commensurate with the relative importance of the record to the person who seeks its production.
Prepared by Michael Campbell
© Deacon, Spears, Fedson + Montizambert, 2017. All rights reserved.
[i] New Act, ss. 55(8) to (11) and 1.44(1); New Regulation, ss. 13.3 and 13.10
[ii] New Act, s. 1.44(1)(2); New Regulation, s. 13.10
[iii] The New Regulation suggests that “adequate” refers to any document or thing that is “necessary for the corporation to perform its objects and duties or to exercise its powers”: see New Regulation, s. 13.1(2) para. 23.
[iv] New Act, s. 55(2).
[v] New Regulation, s. 13.1(2), para. 17; s. 13.1(2), para. 18.
[vi] New Regulation, s. 13.3.
[vii] New Regulation, s. 13.3
[viii] New Act, s. 55(2.2)
[ix] New Act, s. 55(4); New Regulation, s. 13.11(2)
[x] New Act, s. 55(5)
[xi] New Act, s. 55(6). This section similarly prohibits the disclosure of records relating to employees of the condominium corporation, although one suspects that the significance of this prohibition will be relatively limited compared to that of the prohibition against disclosure of records relating to specific units and owners.
[xii] New Act, ss. 55(8) to (11) and 1.44(1); New Regulation, ss. 13.3 and 13.10
[xiii] New Act, s. 1.44(1)(2); New Regulation, s. 13.100