Helpful Recent Decision About Condominium “Changes”

When a condominium corporation makes a “change” – which essentially is something that goes beyond maintenance and/or repair – involvement of the owners may be required under Section 97 of the Condominium Act.

But the required involvement of the owners (in relation to a change) also depends upon the estimated cost of the change.

For instance, under Section 97 (2) (c) of the Act, if the estimated cost of a change, in any given month, is below a certain threshold, the Board has the mandate to proceed (without owner involvement).

On the other hand, under Section 97 (6) of the Act, if the estimated cost of a change is greater than 10% of the corporation’s annual budget, the change must be treated as “substantial” requiring a 2/3 vote of the owners.  If the estimated cost lies somewhere between the threshold in Section 97 (2) (c) and 10% of the annual budget, the Board can decide to treat the change as non-substantial (requiring notice to the owners, with an opportunity for owners to requisition a meeting to consider the proposed change by ordinary vote).

Here’s the point:  The estimated cost of a proposed change is a critical ingredient in determining if, and how, all owners must be involved in the decision to proceed with the change.

 That leaves the following question:  How does one calculate the estimated cost of a change?

In the Zordel case, the corporation had an existing agreement for bulk cable television service (for all units) – with the related cost added to the common expenses.   The Board decided to enter into a new agreement that provided BOTH bulk cable AND internet services.  The Board did not involve the ownership in this decision.

Certain owners objected.  They said that the new Agreement required owner involvement – that the Board couldn’t go ahead on its own.  And they said that – based on the cost of the new Agreement – there was a “substantial change” (requiring a 2/3 vote).

The Court said:

• Even though new technology was being introduced for the cable television service, there was no change to that service. The only change related to the new internet service.

• The cost (of the change) was therefore the cost for the new internet service. The cost of the cable television service did not figure into this calculation, because it was not part of the change.

• The cost was therefore below the threshold in Section 97 (2) (c). As such, there was no need for the Board to involve owners in the decision.

Further notes:  The threshold in Section 97 (2) (c) will change (increase) when amendments to that section come into force (expected sometime over the next two years).   But the amendments to that section will also introduce some additional criteria for the Board to consider (for that section to apply).  So, the law will change somewhat in these areas.  But that shouldn’t change the basic principle expressed in the Zordel case (namely, that the cost of a change is not the cost of the entire transaction…..but only the cost of that part of the transaction that constitutes a change).

We’re also expecting that the “cost” will be further defined in a future phase of new Regulations….but I would similarly expect that the principles in the Zordel case will be confirmed in those new Regulations. We’ll have to see.