Amending the Condo Documents
Lately our firm has been working on a lot of revisions to condominium documents: the declaration, description, by-laws and rules. Cannabis has been a very popular topic these past few months. Some condominiums are updating their condominium documents to reflect changes to the Condominium Act, 1998. Others are making changes to the number of directors or their qualifications. Many clients complain that the process to change their documents is confusing. The main reason for the confusion is that each type of document has its own process to change it. The purpose of this post is to describe the basic process to change each of the documents. Declaration and Description There are three ways to amend a declaration and description. One of the three methods requires the approval of the owners. Two methods do not require approval of the owners, but are only available in limited circumstances. None of them are easy or inexpensive, especially if they include changes to the description. The most popular method of amending the declaration or description is to do so with the consent of the owners. This method may also require the consent of the declarant if the declarant has not transferred all of the units (except telecommunications units) and less than three years has elapsed from the later of the registration of the condominium and the date the declarant first entered into an agreement of purchase and sale for a unit. The process for amending the declaration and/or description is as follows: Once the board of directors are satisfied with the proposed amendment they must call a meeting of owners to present the proposed amendment. The normal process for calling a meeting is used, including the use of the prescribed forms (i.e. preliminary notice and notice of meeting) and the normal timeline (i.e. preliminary notice at least 35 days before the meeting). The notice of meeting must include a copy of the proposed amendment. The board must collect the written consent of the owners, but the consent does not need to be collected at the meeting. The amendment must be registered in the land registry office before it becomes effective.
Tip: remember to keep a list of the owners as at the time the board approved the amendment. This is the group of owners that must consent. This can be important if many units sell during the process.The level of owner approval depends on the nature of the amendment. If the amendment includes a change to the proportions of ownership or contributions to the common expenses, the exclusive use common elements, or maintenance and repair obligations, it requires the consent of the owners of 90% of the units. All other changes require 80% of the units. You should ask your lawyer for their opinion on whether it is all of the units or if certain units (i.e. parking, storage) are not required to consent. The other two methods to amend the declaration and description are rarely used. The two methods are only available to correct errors or inconsistencies in the declaration or description. One requires a court order of the Superior Court of Justice and the other an order of the Director of Titles. By-laws The process to approve a by-law is similar to the process to amend the declaration or description, but the voting portion of the process is different. The same process is used to make, amend, or repeal a by-law. The process starts with the board approving the by-law. Once satisfied, the board must call a meeting of owners and distribute a copy of the proposed by-law. The standard process for calling a meeting is used. At the owners' meeting the owners must vote in favour of the by-law with or without amending it. The by-law is effective once it is registered in the land registry office. Prior to the recent amendments to the Condominium Act, 1998, all by-laws required the approval of the owners of a majority of the units (i.e. more than 50%). However, the Act now has different voting thresholds depending on the type of by-law. Most by-laws still require a majority of the units in the condominium, but some can now be passed by a majority present in person or by proxy at the meeting. The by-laws with the lower threshold include matters related to the new information certificates, record requests, and material to be included in meeting packages. An example may help to illustrate the difference in the two thresholds. Say a condominium has 80 residential units and no other types of units. A majority of units in the condominium would require 41 units to be in favour of the by-law. A majority of the units present at the meeting could be as few as 11 owners (if quorum for the meeting is 25%). The condominium's lawyer should be able to provide advice as to the threshold required. Rules The process to amend the rules is the easiest of the documents as it only requires the approval of the owners if they want to be involved in the process. The same process is used to make, amend, or repeal a rule. The process starts with the board approving the rule and giving notice of the rule to the owners. There are prescribed requirements for the content of the notice, but there is no prescribed form to be used. The owners may requisition a meeting to vote on the rule within 30 days of the notice. If no requisition is received within 30 days of the notice, the rule becomes effective the day after the 30th day. If a requisition is received the following process applies: To requisition a meeting the owners of at least 15% of the units must request the meeting in writing and serve the requisition on the condominium. If a requisition is received within 30 days of the notice, the board must call a meeting of owners. The rule becomes effective if there is not a quorum present at the meeting, or if there is quorum, the owners do not vote against the rule. It is important to use the proper process when amending a condominium document or the document may be unenforceable. The condominium should keep adequate records of the steps taken (i.e. notices sent) to amend the documents. These records will be vital to defending a claim from an owner that the condominium did not follow the process required by the Act.