Changes to the Common Elements

Changes to the Common Elements

From the Summer 2021 issue of the CCI Toronto Condovoice Magazine.

Basic Guidelines for Corporations and Unit Owners Planning Changes to the Common Elements

One area that continues to be a cause for confusion is changes to the common elements. Whether the changes are to be made by the condominium corporation or by unit owners, the rights and obligations that attach to each party vary considerably. What follows is a basic guideline for both condominium corporations and unit owners contemplating any changes to the common elements.

Changes to the Common Elements by the Corporation
The condominium corporation can make changes to the common elements provided that, in certain circumstances, it gives prior notice to unit owners.

Section 97 of the Condominium Act, 1998 (the "Act") sets out the procedure for how the board of directors should approve changes to the common elements, assets and/or services of the condominium corporation and identifies the circumstances where prior owner notification and/or owner approval is required to implement such changes.

The circumstances requiring notice and owner approval largely relate to the estimated cost of the proposed change to the common elements.

Pursuant to section 97(2) of the Act, a notice to owners and a vote of owners are not required where:

a) the change to the common elements is required by law or to comply with a mutual use agreement (such as a costsharing agreement);

b) the change to the common elements is necessary to ensure the safety or security of persons using the property, or if it is required to prevent imminent damage to the property or assets; or,

c) the estimated cost in any given month of the change to the common elements is no more than the greater of $1,000 or 1% of the annual budgeted common expenses for the current fiscal year.

Once the new amendments to the Act come into force, the $1,000 or 1% threshold will increase to $30,000 or 3% of the annual budgeted common expenses and will be based on the estimated total cost of the change.

On the other hand, pursuant to section 97(3) of the Act, if the cost of the change to the common elements is more than $1,000, but less than 10% of the annual budgeted common expenses, then the condominium corporation is required to give notice to owners together with the opportunity to requisition a meeting. The condominium corporation may only proceed with making the changes to the common elements where the owners failed to requisition a meeting within 30 days of receiving the notice, or, if a meeting of owners is requisitioned, then the owners have not voted against the proposed changes to the common elements at the meeting.

However, if the estimated total cost of the change to the common elements is more than 10% of the annual budgeted common expenses for the current fiscal year, then the change is considered to be a "substantial change". A substantial change requires that notice be given to owners and that owners vote on the proposed change at a meeting of owners. To this end, the condominium corporation can only implement the change to the common elements if at least 66 2/3% of the units to vote in favour of the proposed change.

The board of directors can also elect to treat any change to the common elements as a substantial change, and provide notice to owners and hold a vote of owners.

Under the new amendments to the Act, which have yet to come into force, the condominium corporation will be required to provide notice to owners and obtain owner approval in circumstances where owners would regard the change to the common elements as causing a material reduction or elimination of their use or enjoyment of the units that they own, the common elements or assets of the corporation, even where there is a reduction in common expenses payable by unit owners.

That being said, it is important to keep in mind that a condominium corporation does not require the consent of the owners to make an expenditure out of a reserve fund for major repairs and replacements of the common elements, pursuant to section 95(2) of the Act.

Changes to the Common Elements by Owners
The Act does not vest a right in an owner to make changes to the common elements (including exclusive-use common elements). Instead, the Act provides for a mechanism whereby an owner can make changes to the common elements so long as the owner complies with the requirements set out in section 98 of the Act.

Section 98 of the Act provides that owners cannot make changes to the common elements unless they first 1) obtain the approval of the board of directors and 2) enter into an agreement with the condominium corporation (known as the "Section 98 Agreement") which:

a) allocates the cost of the proposed changes between the owner and the condominium corporation;

b) sets out the respective duties and responsibilities of the owner and the condominium corporation regarding the changes (insurance, cost of repair after damage, maintenance, and so forth); and,

c) identifies who will have ownership of the changes.

The Act requires that any Section 98 Agreement be registered on title to the unit so that any obligations relating to the changes will be binding on the owner of the unit, and his or her successors in title.

In order for the board of directors to be in a position to meaningfully consider an owner's request to make change to the common elements, it would be prudent for the owner to submit to the condominium corporation the plans, the specifications, and the permits (if any) setting out the details of the proposed changes to the common elements when seeking the board's consent.

The board of directors should then review the plans and specifications submitted by the owner, together with its engineers, and confirm that the proposed changes to the common elements:

1. will not have an adverse effect on units owned by other owners;

2. will not give rise to any expense to the condominium corporation;

3. will not detract from the appearance of buildings on the property;

4. will not affect the structural integrity of buildings on the property according to a certificate of an engineer, if the proposed addition, alteration or improvement involves a change to the structure of the buildings; and,

5. will not contravene the declaration or any prescribed requirements.

Pursuant to section 98(1)(c) and (d), and 98(2) of the Act, if the changes to the common elements relate to non-exclusive use common elements, and if the changes to the common elements will result in any costs to the condominium corporation, then a notice to owners and/or a vote of owners may be required in accordance with section 97 the Act, as discussed above.

It is important to keep in in mind that the Act only came into force in 2001. Prior to that time, under the predecessor legislation to the Act, there was no comparable mechanism governing owner-initiated changes to the common elements. In most cases, such changes were typically carried out in accordance with the condominium corporation's declaration.

And, most (if not all!) declarations require owners to obtain board approval before making any changes (including installations or decorations) to the common elements.

As set out above, both the condominium corporation and the unit owners have certain rights and obligations when it comes to making any changes to the common elements. It is recommended that each change be reviewed on a case by case basis, with help from legal counsel, to ensure that it is implemented in accordance with the Act.