Condo development and COVID-19: bonding, limitation periods and turnover

24 avril 2020 | Eric Laxton

( Disponible en anglais seulement )

UPDATE: Late in the day on April 24, 2020, the Government of Ontario passed an Order amending Ontario Regulation 107/20 to permit condominium corporations to hold meetings and cast votes virtually (by telephonic or electronic means), notwithstanding any current requirements or restrictions, including whether or not the condo by-laws so permit.

 

Condominium development and construction have been affected in a number of ways as a result of the provincial Orders in Council and other measures implemented in connection with the COVID-19 pandemic.

In an earlier post, we looked at the pandemic as an Unavoidable Delay and answered common questions from home builders.  Below we will look at other ways condominium developers are being affected and at potential workarounds to keep moving forward with their projects.

Tarion and other Surety Bonds

It is common for vendor/builders registering with Tarion to post security by way of a surety bond.  The surety bond provides protection from risk and losses related to purchaser deposits.  Surety bonds are also applicable in construction contracts.

Preparing, sealing and delivering properly executed bonds has become a challenge as many workers and employees are working remotely and without physical contact.  It is possible, however, to replace a paper bond with a digitally issued “e-bond”.  The e-bond would be a secure electronic document with an identifiable and traceable digital authentication.  Bonding providers are responding to create simplified e-bonds that do not necessarily require a specific platform, but can instead be transmitted by email.

Security and reliability will remain paramount considerations as this system evolves, which may become the status quo in the future.  For now, you should confirm that your contracts permit delivery of an e-bond and inquire with your surety about proceeding in this way.

Applications for Land Titles Absolute

Upgrading title to Land Titles Absolute is a necessary precondition for all condominium registrations; however, as a result of the Ontario Order in Council suspending limitation periods (the “Order”), many applications will be put on hold indefinitely.  The effect of the Order, which was retroactive to March 16, 2020, is that unless your notice was registered and served, and the objection period thereafter expired before such date, it will remain open.  As a result, condo registration may be delayed, which will also mean a delay in purchasers getting ownership of their units.

Fortunately, builders are not left without alternatives.  While it can be impractical and time consuming, securing waivers and consents from the required parties can permit the builder to move forward with the application.

The Director of Titles has recognized this potential issue but is not making any changes to the process at this time.  One would suspect that the greater the backlog of condominium registrations, and the greater number of Ontario residents left in a state of occupancy without ownership, the more likely a response will be.

Turnover Meetings

Social-gathering restrictions have resulted in the postponement of condominium owners’ meetings across the board.  Annual General Meetings are being delayed, and so too are turnover meetings, where the builder turns over control of the condominium corporation to the owners.

Traditionally, such owners’ meetings have been held in person. While the amendments to the Condominium Act, 1998 (the “Act”), were undoubtedly drafted with a view to the future, the Act does not explicitly contemplate owners’ meetings being held virtually or by technological means.

The Act and its regulations do, however, provide some basis for holding a virtual meeting.  Firstly, the Act provides that unit owners may vote at an owners’ meeting by electronic means, provided the condominium corporation has a by-law to permit it.  Secondly, it provides that the board may pass a by-law to govern the manner in which an owner may be present at a meeting of owners.  Builders should discuss with legal counsel whether their by-laws contain the required language.

Under the Act, and provided an electronic voting by-law has been registered, the quorum and voting requirements for an owners’ meeting can be met by electronic means, and therefore, provided the other formalities are met, a properly constituted meeting can be held without physical attendance.  Further, online web-conference platforms have been used effectively to conduct meetings of all kinds, and contain features which can closely replicate an in-person meeting (face-to-face video, real time communication; break-out rooms; hand-raising and instant messaging chats), sometimes with even better results (ex. greater attendance due to never having to leave home). Undoubtedly, the Chair of the meeting would benefit from having virtual meeting experience and should be comfortable with the tools in advance, but the availability of these features does mitigate some concerns over the exercise of democracy in this novel forum.  Nevertheless, careful consideration of all factors, including the demographics of the community, is warranted.

Going Forward

If one thing is clear (and not much is at these times), it’s that creativity and technology, properly implemented, can help carry businesses through these difficult times, and with a silver lining: the efficiencies developed to make ends meet now can be carried forward post-pandemic to even greater results.

While there will remain challenges for developers as the COVID-19 situation evolves, we are committed to keeping condominium projects moving forward together. We encourage you to contact a member of our condominium development group if you have questions.

 

Miller Thomson is closely monitoring the COVID-19 situation to ensure that we provide our clients with appropriate support in this rapidly changing environment. For articles, information updates and firm developments, please visit our COVID-19 Resources page.

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