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Cutting More Red Tape: Long-Awaited Clarity on Legal Costs, Voting for Condominiums

UPDATE: On May 5, 2022, Bill 19 is now in Second Reading. (CORRECTION: On May 5 we advised Bill 19 had passed Third Reading, however on that day Bill 19 was adjourned in Second Reading on amendment, and we apologize for any confusion.)

On Thursday, April 21, 2022, Service Alberta Minister Nate Glubish introduced Bill 19, the Condominium Property Amendment Act, which proposes long-overdue clarifications on how condominium corporations conduct simple votes, and more significantly addresses the ability of condominiums to recover costs associated with an owner’s misconduct, including legal and administrative expenses incurred by the corporation. You can read more about the Bill and the Government’s announcement here: Modernizing Condominium Laws and Changing Condo Laws to Save Albertans Time, Money.

If passed, these changes to the legislation would mean condo corporations in Alberta won’t be forced to go to court for a judicial determination on who is responsible for payment of these additional costs, particularly legal and administrative fees.  In a quote reported by the Edmonton Journal, Minister Glubish stated “this is all about protecting responsible owners from having to bear the costs of irresponsible owners.”

Changes to Voting

One of the proposed amendments would redefine the term “ordinary resolution” and clarify how voting is done generally. For the most part, all votes by a condo corporation are made by ordinary resolution (simple majority) unless a special resolution is required. An ordinary resolution was previously defined as a resolution:

i)    passed at a properly convened meeting of a corporation by a majority of all the persons present or represented by proxy at the meeting entitled to exercise the powers of voting conferred by this Act or the bylaws, or

(ii)    signed by a majority of all the persons who, at a properly convened meeting of a corporation, would be entitled to exercise the powers of voting conferred by this Act or the bylaws and representing more than 50% of the total unit factors for all the units.

The new wording of subsection i) specifies that a resolution at a meeting will be passed “by a majority of the eligible votes cast by persons entitled to exercise the powers of voting conferred by this Act or the bylaws.” Section 26 of the Act also has substantial changes defining an “owner vote” as a vote on the basis of one vote per owner, and this is set as the default voting method unless the condominium’s bylaws set out another process. If a unit is owned by more than one person, each owner is entitled to one vote. Owners will still be able to request a unit factor vote before the result of an owner vote is announced.

Previously, it was unclear how voting was to be calculated (one vote per person, one vote per unit, one vote per owner, etc.) and condo corporations across the province have addressed this in various ways through their bylaws. The lack of legislative clarity has led to a patchwork of approaches to the issue and numerous disputes. It has also sometimes allowed developers and others who own multiple units in a corporation exert an unfair degree of control over their condominium’s decision-making.

These changes are also expected to reduce the time required to conduct votes at the condominium’s general meetings.

Redefining Contributions, Legal Expenses and Administrative Costs

Major changes are being proposed to sections 39 through 42 of the Act. In recent years these sections have received a great deal of judicial attention and scrutiny in determining what can be included as a “contribution.” Since condominium contributions have a special status and attract super-priority over previously registered encumbrances such as mortgages, a number of cases have been decided on the basis of whether expenses can or cannot be considered contributions. A contribution, unlike other amounts such as monetary sanctions, can be protected by a caveat registered against a certificate of title. If unpaid, a condominium corporation has the power to foreclose just like a bank or other mortgagee.

For the first time, the Act uses the expression “chargeback” and expressly allows condominiums to assess these costs against individual owners if the owner or an occupant of the owner’s unit causes property damage for which the corporation is responsible to repair. In a manner consistent with the developed case law, such chargebacks are only permitted if provided for in the condominium’s bylaws. That is, the bylaws must specify that in these circumstances the corporation is entitled to assess or charge back the costs incurred to repair the damage as a contribution against the owner’s unit. A chargeback can also include the amount of an insurance deductible (up to the limit of $50,000 in the Regulations), irrespective of whether an insurance claim is made in respect of the damage.

New limitations have been set out on the corporation’s ability to assess chargebacks, including that the amount levied must be the lesser of the corporation’s actual costs to repair the damage or the deductible amount. Again, this is consistent with developments in the case law. Owners are also permitted to dispute chargebacks, and it is expected that new Regulations will be announced setting out the process for doing so.

Most importantly, the amendments include the following provision:

39(6) Subject to the regulations, a contribution may include relevant reasonable administrative costs and reasonable legal fees, including expenses and interest, incurred by the corporation.

This new section clears up any remaining confusion over whether or not legal expenses and administrative costs (such as fees charged by a condominium manager or insurance adjuster) can be included as condominium contributions. We have written previously on the divergence in the case law on this issue, particularly between northern and southern Alberta (see: Legal Costs for Condominium Corporations: A Refresher).

Other changes to section 42 also expressly add that “all reasonable administrative costs” and “all reasonable legal fees … including expenses and interest, incurred by the corporation in collecting the amount of the contribution owing” can be recovered “in addition to the costs and fees … in section 39(6)”.

The need for legislative intervention of this type is long overdue, and has finally settled the issue. Condominium corporations can include reasonable and relevant legal expenses as contributions and are permitted to disproportionately assess these amounts against the unit owners responsible.

Coming into Force

The amendments must still pass second and third reading and will only come into force on proclamation, which is not expected until new Regulations required to implement the changes have been prepared and finalized. But this is a clear sign that the government has been responsive to the needs of the condominium industry. The changes represent a significant step forward in protecting law-abiding condominium owners and ensuring that those few bad actors responsible for a condominium’s additional costs are held financially accountable.

If you have any questions about the proposed changes and what they could mean for you as a condominium owner, board member or property manager, please contact me.