Changes To The Condo Act = More Government Lip Service

It’s not a Friday unless I pull up my stars-and-stripes socks, and complain about government.

Okay, so I’m a far cry from a tea party member down south, but I’ve been told, on at least one occasion, that I have a habit of making many things political.

So forgive me in advance today when I suggest that the “big changes” to the Condominium Act that the Liberal government is spoon-feeding us, is simply more rhetoric, and nothing but lip service…

LipService

I’ve been calling for changes to, and in a perfect world – a rewrite, of the entire Condominium Act.

I’ve written numerous blog posts on the subject, and as an exercise, I decided to go back into my archives and see just how long I’ve been calling for it.

“Changes To The Condo Act” – June 12th, 2012.  My first blog post with that title.

A quick excerpt:

“On June 8, 2012, the government announced that the Ministry of Consumer Services will launch a review of the Act through a public consultation to identify a comprehensive set of issues and long-term solutions.  The consultation involves working in a new way, through an innovative public engagement approach, with people from the condominium community.”

Right.

So that was, for those of you playing along at home, FIVE YEARS AGO.

And since then, what has changed?

I need not answer that, since it was highly rhetorical.

Interestingly enough, I penned a second blog on this topic a year later:

“Changes To The Condo Act” – July 22nd, 2013.  A second blog, with the exact same title, so maybe I lose points for creativity.

However, this was more than a year after the first blog, and still, nothing had been done.

Oh yes, a “comprehensive review” had been completed, but nothing tangible had been done.  But that’s our government, right?  Form a board, to select a committee, to assemble a panel, to conduct a study, to provide a review, for another committee to deduce findings, and then another panel to provide recommendations.  And that should create a hundred jobs, and spend several million dollars of taxpayers money…

Now I’m sure somebody, somewhere, could tell me what the government actually has done to “change” or “update” the Condominium Act, and as the popular political buzz-words go, “protect consumers.”

But as a real estate agent who lives and breathes condominiums in every way, shape, and form, I can tell you that nothing tangible has been done, and the biggest problems still, and always will, exist.

Take a look at Tuesday’s press release from the Ontario Government, and tell me that this is exciting news for Ontarians who are utterly powerless when it comes to all things condominium…

 


 

Ontario Implementing New Protections for Condo Residents this Fall

New Laws to Build Healthy and Sustainable Condo Communities

Ontario is moving forward to better protect condo owners and residents by increasing consumer protections in Ontario’s condo communities.

Today the Minister of Government and Consumer Services, Tracy MacCharles, announced new protections for condo communities taking effect this fall. Changes will include:

-Regular mandatory updates about the condo corporation to help improve communication between boards and owners

-Improving condo corporation governance and addressing conflicts of interest by introducing new disclosure requirements for directors, including whether they are not owners or occupiers of -units in the condo or if they have interests in contracts involving the corporation

-Mandatory training for condo directors to improve how condos are managed and operated

-Clearer rules to make it easier for condo owners to access records of their condo corporation

-New notices, quorum and voting rules to make it easier for owners to participate in owners’ meetings

-Mandatory education requirements for condo managers applying for a general licence.

The government will also designate two new administrative authorities:

-The Condominium Authority of Ontario (CAO), when designated on September 1, 2017 will provide education and promote awareness of condo owner rights and responsibilities, as well as provide important information for condo corporations. On November 1, 2017 it will also be responsible for managing the Condominium Authority Tribunal which will resolve disputes about access to condo records. Going forward, Ontario will consult with the public to identify other disputes the Tribunal could resolve.

-The Condominium Management Regulatory Authority of Ontario (CMRAO), when designated on November 1, 2017 will regulate and license condo managers and providers.

Protecting condo residents in Ontario is part of our plan to create jobs, grow our economy and help people in their everyday lives.

Quick Facts

-There are currently 1.6 million people living in condos in Ontario and more than 50 per cent of new homes being built in the province are condominiums.

-There are more than 750,000 condo units in Ontario, up from 270,000 units in 2001.

-The CAO and CMRAO were created as part of the implementation of the Protecting Condominium Owners Act that was passed in 2015

-The government received about 200 recommendations for condominium law reforms through its public consultation process.

 


 

Honestly, folks, four words come to mind: grade eight book report.

Is this the best they can come up with?

I love the “Quick Facts” at the end.  It really gives it that Primary School feel!

So first and foremost, I find it humourous that in my lead-in, I joked about the government’s constant creation of new committees, panels, groups, organizations, and other useless make-work government jobs, created out of thin air, with tax-payers’ money, and OF COURSE, these “upgrades” to our out-dated Condominium Act include the formation of two new “administrative authorities.”

Perfect.

But the bigger issue, in my opinion, is that just as the Ontario Fair Housing Plan contained 16 points, 14 1/2 of which were aimless rhetoric, this news release also contains nothing of significant value.

The problems with the Condominium Act are not how the board of directors and property management get along.

The problems with the Condominium Act are with how condominiums are built, and sold.

And the irony is – buyers are so desensitized to the process, that they don’t even know they should complain anymore!  It’s like finding a hair in your soup, every single day at lunch, and simply coming to expect that as part of the service that’s provided.

I grew so frustrated with the pre-construction condominium industry, that I basically stopped writing about it altogether.

For the first six or seven years on TRB, it was a constant topic, and I would argue until I was blue in the face that buying a pre-construction condominium meant exposing yourself to a mountain of unmitigated risk.

Eventually, as people continued to buy, and sales soared, I gave up.

I tried my best to explain the pitfalls of buying in pre-construction.

In fact, I figured that if people weren’t listening to a well-thought-out argument, then perhaps I needed to dumb it down.

In 2011, I did a video comparing pre-construction condos and resale condos, to cake mix and cake.

The audio is bad, and my hair is longer and a lot less grey, but the message still works:

In 2015, in what I consider the best explanation possible of how condos are bought and sold in the pre-construction condominium industry, I compared buying a pre-construction condo to buying pre-construction jeans.  The idea was simple: you would never buy jeans like this, and they cost $100.  So why would anybody buy a $500,000 condo like this?

I’m kind off hurt that a random 15-year-old from Alabama can rack up 1,000,000 views with a Youtube video on how she’s braiding her hair, and yet I haven’t even cracked 50,000 yet, but I digress…

In any event, if I were king for a day (ie. the Liberal government who can do whatever they want with zero repercussions since nobody will ever vote in a Conservative leader…), here are three ways in which I would update the condo act, in lieu, of course, of a complete re-write, since that will never happen.

1) Occupancy vs Ownership

The idea is insane.

You’ve contracted to purchase a condominium, in a building, lock, stock, and barrel.

And yet years down the line, when your individual condominium unit is finished, but the rest of the building is still under construction, you are expected/forced/obligated to start paying an “occupancy fee” to the developer, which is to say that they have completed their end of the bargain.

You don’t own the unit at that point; you are the legal occupant.

And you can’t say “no” to the occupancy, and not pay, or the developer will slap you with breach, and can take your condo back and force you to sue them.

Your unit is finished, save for all the defects (which we’ll talk about), but the hallways are jagged concrete, covered in dust.  The amenities are years away from being finished, and the unit directly above you is still under construction, meaning you get to hear noise all day.

You then wait for the building to be completed, and for the city to do their inspections, so that the developer can “register” the building as a Condominium Corporation, and turn over ownership to the residents.

That wait, in some cases, has taken up to 2 1/2 years.

Those residents have paid rent on a condo they’re supposed to own, every month for 30 months.

Why the HELL do people agree to this?

Pre-construction condos are sold via fear, or more specifically, fear of missing out.

Don’t buy, and get left behind!  These condos are selling like hot-cakes!  Buy now!  BUY NOW!

The tactics used to sell pre-construction condos are a topic for another day.  But bottom line – people buy into these projects, and take on the BS idea of “occupancy,” either because they don’t know about occupancy, or because they do, and for whatever reason, they don’t care.  A large portion of pre-construction condos are bought by overseas investors who don’t want people living in the unit, so they don’t care about paying the fees.  But for the end-user, Toronto resident, renter-becoming-owner, it’s an absolute nightmare.

Would it be crazy for me to suggest that occupancy of the condo is not given until the condominium is registered?

Crazy, yes.  Because that’s the way it’s always been done.

But it was also crazy for somebody to suggest back in 1,500 A.D., “Hey, maybe we don’t need to burn this woman alive, for fear that she might be a witch, and casting spells on all of us?”

To do so today, would probably be poorly-received…

2) Pre-Delivery Inspection & Deficiencies

I hate TARION.

You guys knew that, right?

For years, I’ve been saying, “TARION is run by developers,” and it seems as though I was at least partially vindicated this year, when the government took away some of TARION’s power, as (gasp!) it was suggested that they can’t be trusted to govern and discipline themselves.

When your condominium is ready for occupancy, you do a Pre Delivery Inspection with one of the developers’ lackeys, and point out any and all deficiencies as you see fit.

That list, which is usually of menial items, is submitted to TARION by the developer.

And that is how those items are rectified.

Yes, in many cases, the developer comes in and paints here, tightens a screw there, and crosses items off the list.

But what if you walked into the unit and the horizontal backsplash had been installed vertically?  The developer is not going to fix that; they’re going to submit that to TARION.

Why in the world does TARION get involved with this, when the easiest thing to do, is have the developer fix it?

Well, because TARION is run by developers!  And in this case, they’ve created a buffer between themselves (and their responsibilities), and the buyer/owner/occupant.

Would it be crazy for me to suggest that buyers should have more leeway with whether or not to close a transaction, in cases where the deficiencies are egregious?  And that the developer has to fix the issues before occupancy?

Crazy, yes.  But when the automobile was first invented, public perception was that it would never replace the bicycle as the most commonly used method of transit…

3) Material Changes

Material has many meanings.

It can be a noun, ie. matter from which an item is made, or information of substance for a designated purpose.

And it can be an adjective, ie. of physical objects rather than intangible ones, or something deemed important or relevant.

It’s the last definition what we need concern ourselves with in the condominium world, since the definition of “material” means something completely different to a buyer versus a developer.

A “material change” with respect to a pre-construction condominium is a drastic alteration from what was contractually agreed upon, usually resulting in negative value for the buyer.  And by “usually,” I mean always, since no developer has ever called a buyer and said, “Unfortunately, we’ve changed your floor plan from 925 square feet to 975 square feet, and we hope you’ll be okay with the change.”

The problem I have with material changes are twofold:

1) The definition of “material” is set out by the developer.

2) Material changes only correspond to the unit, and not the building.

If a developer sells you a condo with 9-foot ceilings, and then lops a foot off every one of the 40-storeys, to create five new storeys, all with 8-foot ceilings, they can simply say, “We don’t believe that the difference between 8-foot and 9-foot is material, so you get no financial compensation, and you’re not allowed to opt out of your deal.”

It’s like the batter in baseball calling his own balls and strikes.

But the bigger issue is the second point – with respect to the entire development.

Remember Emerald City Condos?

This was one of the worst examples of why not to buy a condo before it’s ready, that I’ve ever seen.

People lined up to plunk down their deposit, in order to secure a condo in this unprecedented building which would have direct access from the building, down to the Sheppard TTC subway.

And guess what happened?

The developer basically just said, “F@#& it.”

The developer did not build direct access from the building down to the subway, because he didn’t have to.

Buyers of pre-construction condominiums are buying the unit, and nothing more.  There are no obligations on behalf of the developer to actually deliver what was promised or advertised, and any deviation from, say, brochures, sales centres, websites, or lists of features, are not considered “material changes.”

It’s a legal bait-and-switch, and I can’t understand why it’s permitted.

Imagine paying for a Toyota Corolla, and upon delivery, it only has two wheels?

Can your masseuse quite 20 minutes into your sixty-minute massage, and just say, “It ain’t material bitch!”

For the life of me, I can’t understand why legalized-lying is allowed under the Condominium Act, and yet here we are, with the goddam Ontario government spoon-feeding us BS about dispute resolution between condominium residents and their board of directors.

Folks, I could take that list of three, and flush it out to twenty, but I get really agitated when I write this stuff, and I need to get some sleep.

Bottom line: the Condominium Act of 1998 is a weeeee bit out of date!  It needs a full re-write, which is something I’ve been blogging about for the better part of a decade.  The “changes” that were promised back in 2012 and 2013 were nonsense, and simply political posturing for a few MP’s trying to gain re-election.

Updates, revisions, additions, alterations – this won’t fix what’s broken.

And when I see lip service like that press release the Ontario government sent out this week, I’m insulted as a realtor, condo owner, and constituent…

8 Comments

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  1. TOCondoNews says:

    What does any of this have to do with the Condo Act?

    This legislation, good or bad (the jury is still deliberating on this), serves a purpose unrelated to the issues you bring up.

  2. Not Harold says:

    Bad builders get away with far too much yet it’s a balance. There are many unreasonable buyers and those who can’t accept necessary adjustments that were unforeseen.

    And in some cases it’s a pox on both your houses situation (see Trump’s marketing of ROIC when they were explicitly told by the OSC not to do it, and the idiots who bought highly levered with no guarantee of a mortgage based on those laughable ROIC projections).

    The most egregious issue is that building amenities can’t be relied upon. Yet the actual damages are minimal per unit – what is the value per unit of a PATH connection or a specific designer doing the lobby? A 10% hold back attributed to the condo corp releasable 2 years after registration may be in the right direction of creating a useful incentive and a rational negotiating party ( voting threshold and what constitutes substantial performance would be important and challenging details to get right).

    Reputation is perhaps the best incentive but unsatisfactory when dealing with such large and infrequent purchases and incredibly large projects. Not like delivering a subdivision 20 houses at a time where you can see already delivered product vs show home and how happy other buyers are.

  3. Max says:

    I have no experience with preconstruction but having lived through a slew of issues at my condo, I can tell you that there can be many issues between owners, boards and property management. Many of them are not visible to owners, who can’t get responses when they inquire. It’s one thing to vote someone as a board member, it’s another to have them make dumb or self-serving choices. Now they are accountable if they don’t inform owners. Now they are (hopefully) more educated on how to properly obtain bids for major repairs, etc. Enforcing is another issue but it’s law and on paper. Licencing property managers and training board members may in the future open the door to better management of condo funds and increase the general knowledge of the regular Joe to keep board members in check. If I was a board member/property manager and found out the owners at my building are savvy and keep track of the goings on, I would think twice about trying to pull a fast one. It’ll take time but the more that comes out into the clear, the less market share there is for the bad guys. If I was a good board member but with no experience, the courses would be useful. I won’t just be learning from existing board members.. who may have biased or self serving agendas themselves.

  4. crazyegg says:

    Hi All,

    Hilarious video!

    However, I would lead a contrarian view and support the new construction view (if you are investor).

    The main reason is due to the fact that the down payment is typically spread out over the course of several years to be paid in instalments. That alone frees up my cash flow and gives me more options and flexibility in the mean time (i.e. sell off a current asset now or later, etc.).

    In addition, and perhaps most important, I (generally) do not need to secure a mortgage until occupancy (which can be many years away). In the mean time, my initial 10% down payment is (hopefully) making a positive return as the value of the condo is increasing. Plus you also have the option of selling via assignment.

    All things being equal, it is generally more difficult to have a superior positive return on investment for a resale condo vs a new construction, IMHO.

    Regards,
    ed…

  5. Libertarian says:

    Careful David….some people could construe your thoughts as being anti-real estate and anti-capitalism. hahaha!!

    Have a great weekend!

  6. Darren says:

    Agree with all you say. Bought 3 new condos, definitely wouldn’t do it again.
    Thought you would like to know though, I did get a material change in my favour. Bought a 690sqft unit and they had to build it larger for some reason so it became 715sqft. Also changed the ensuite bath to a large shower which I was going to pay to have done anyway. A big win for me.

    1. Derek Lau says:

      Why wouldn’t you buy precon again? What problems did you run into?

      1. Darren says:

        I wouldn’t buy one again because of the hassle of “renting” your own unit while the building is still under construction. On top of that all the extra closing costs that come along with a new place and the uncertainty of how bad the management might be (meaning possibly large increases in condo fees). I’d rather buy in a well run, established building with units that are designed to live in rather than just be a temporary stop over.

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