Condo Adviser Episode 42: Modifications to common elements

[AUDIO LOGO] RODRIGUE ESCAYOLA: Let's do it.

[MUSIC PLAYING]

Hello, good evening, everybody. My name is Rod Escayola, and I am your condominium lawyer with Gowling WLG. Welcome to the November episode of the Condo Advisor. I can't believe it's November already. I'm actually-- every time I wrote the date today I was kind of having a bit of a moment here.

Now, the topic today, you may recall that when we met in September we polled you folks at home to see what it is that you wanted to talk about. And that gave us tons of great ideas, actually. And so we had to pick one. We picked nearly the most popular topic. I say nearly because the number one topic that people wanted to hear about was Graeme's special hot dog recipe, and the second one in line was they wanted to hear Nailah interpret various Walt Disney favorites.

But we kind of saved those for later, and we went for the next best thing. We're going to focus today on changes to common elements. And there's lots of layers to this, actually, when you think about it. So there's owners wanting to change common elements, and there's when the corporation wants to change a common element.

And then there's all the moving parts that get into the equation, do we need a Section 98 agreement? Do we need to consult with the owners? Do we need to have a meeting? Do we need to have a vote? Et cetera. And just when it wasn't getting any simpler, then the last moving part will be, well, how does that apply to EV and charging stations? And so on and so forth.

So that's what we're going to talk about today. And to tackle this topic, I've called upon a panel of experts as I often do. And I'll introduce them to you in a second, and the question I'm going to be asking them tonight is, what costume did you wear yesterday? Or what costume you would have worn yesterday if you had walked Halloween. So that's going to be the question.

And if for whatever reason they don't feel comfortable sharing the costume that they were wearing, I mean, we're not going to judge, they can answer by just giving us their favorite candy. That's going to be the question. So without further ado, we've invited-- oh, first, I need to-- well, yeah, let me introduce people and then I'll do the chat and all of that usual housekeeping. So as a manager, I've invited Yawar Khan, he is with Apollo CI Management, it's a management firm here in Ottawa in full expansion. And we're very excited to have him here. I think you came in the past already. This is not the first time I think, Yawar, right?

YAWAR KHAN: Yes. That's correct, Rod. Thanks for having me again. I thought after that time you wouldn't want me back. So I'm very excited to be back.

RODRIGUE ESCAYOLA: Come on, come on. So what did you look like yesterday? What costume were you wearing?

YAWAR KHAN: Actually, I was wearing a costume. So I had to dig deep and I was basically forced to wear one at work to just to get that company spirit going. So I wore my daughter's old bumblebee costume. So it fit, thankfully. It's a little bit tight but it was good, and had the wings, I had the little antennae, and everything. So that was my costume.

RODRIGUE ESCAYOLA: OK, we want to see pictures.

[LAUGHTER]

YAWAR KHAN: There are actually pictures. So--

RODRIGUE ESCAYOLA: Don't mind.

YAWAR KHAN: --I'm trying to suppress them, but they're out there, I think so.

RODRIGUE ESCAYOLA: Nice. OK, well, thank you for joining us tonight again. And then of course, our condo dynamic duo with Gowling WLG we have Graeme MacPherson. Graeme, what were you wearing yesterday?

GRAEME MACPHERSON: Yesterday I didn't wear a costume, unfortunately. But whenever I do wear a costume at Halloween, I always try to pick things that I can incorporate the beard into so I don't have to shave it. So the next one on my list for whenever that does happen, might be dating myself here, but I think I'm going to dress as Bob Ross. You know the painter guy? We're going to put a nice little bush there. Ain't that lovely? I think that's-- so I'll get an afro, I'll wear the beard, I'll do the painter thing, so Bob Ross.

RODRIGUE ESCAYOLA: OK, we'll have to explain to Nailah who that is. And what about you, Nailah? Were you wearing a costume yesterday?

NAILAH RAMSOOMAIR: I was wearing a costume yesterday, Rod. I was the Grinch that stole Christmas.

RODRIGUE ESCAYOLA: [LAUGHS] That's my favorite. I love it. Fantastic. OK, perfect. Cool. OK, so let's go back to the housekeepings very quickly. Graeme, I'm not sure if the chat is alive, actually. I keep forgetting to ask you to turn it on.

GRAEME MACPHERSON: I will make it alive. Hold on.

RODRIGUE ESCAYOLA: OK. So Graeme is going to turn the chat on.

GRAEME MACPHERSON: There it is.

RODRIGUE ESCAYOLA: It's on? Oh, perfect.

GRAEME MACPHERSON: Yeah.

RODRIGUE ESCAYOLA: OK, so the first question for all of you at home, you can either tell us what you were wearing as a costume or tell us what's your favorite candy. My favorite candy are the rockets to the point that when I put my hand-- get my hands on them, I can't stop eating them until I actually get a headache. So that's my favorite. OK, so the chat is on, feel free to share your costume, feel free to share your candy, favorite candy.

But also, if you have any questions or comments about what we're discussing tonight, that's fantastic, go right ahead. We'd love to hear from you. Housekeeping, before we jump in, the usual disclaimer, you're watching a webinar it's for information purposes only. We cover general information. If you have a specific question about how to do this at home, you would need to speak to your favorite condo lawyer or advisor in order to get guidance that's going to be of use to you.

The second thing I'd like to confirm is that the data, the recording, so this is November 1. And it's important simply because if you watch this on demand later on, you need to keep in mind that whatever we share with you today is as up to date as possible, as up to date as of today, November 1. OK, so this is for that. What else do I have to--

Yes, speaking of watching on demand, it takes me longer than before to upload the webinars on the website. We're now all caught up. All of our past webinars are on the website, so feel free to go and have a look at them. But it takes me a bit longer, so this one you'll have to give us maybe a week or two before I can put it on online. And that's it, I think. OK, fantastic. Let's go. Let's jump in.

Let me move the slides here. This is the topics. We're going to go-- right. So I mean kind of put examples. The first segment will focus on owners wishing to change common elements. And that may feel a bit odd initially when you think about it because, I mean, common elements are for all to share.

And common elements every owner in the corporation owns and benefits as tenants in common of the common elements. And so you can't let the neighbor come and go and modify it. I mean, that would kind of defeats the purpose, right? I mean, do whatever you want in your unit within reason following the governing documents, but you can't go outside and decide that you'll plant a flowerbed that you prefer or that you'll put a flagpole because you want to put a flagpole.

And so what kind of changes are we talking about when we say that some owners may be entitled to modify common elements? And we just kind of put a list. I mean, it's obviously not a restricted list, but the items that came to mind were-- and often, more often than not this modification deals with town homes, I would think.

So imagine if you're installing a generator or if you want to install a mailbox, or if you want to change the front door or the back door. Imagine if you want to install a deck in your common element, and you and your exclusive use common element yard. Imagine if you have two units that you want to connect. That could also be in a high rise. The space between these two units is a common element. So I mean, you're going to be modifying the common element to connect them.

Imagine if you're installing a skylight. Imagine if you want to install a retractable screen door. That could also be high rise. So those are just examples of modifications to common elements that people could think of. A modification to your balcony, let's say, for whatever reason one is required. So that's what we're going to talk about in the first segment when owners want to modify common elements. And I think Graeme you're the first one to tackle this, are you?

GRAEME MACPHERSON: Yeah, yeah. So like Rod said, it sometimes happens in condominiums that owners do want to make some sort of modification to common elements. It's quite common. And normally, the default setting is naturally that owners can do things in their units but they can't do things in the common elements.

So the way around this is through Section 98 of the Condominium Act, and the aptly named Section 98 agreement. And what these documents do allow owners to make modifications to common elements if certain boxes are ticked and certain hoops are jumped through, and certain I's are dotted and T's are crossed.

But essentially, the starting position is that an owner is going to be able to alter or modify common elements through any of the examples that Rod just gave or anything else you could maybe think of. If the A, board approves that common element modification by a resolution. And B, the owner and the board enter into an agreement, and that agreement has to cover the costs of the modification, who's going to be responsible for it, who's going to insure it, who's going to maintain it, and all of those sort of responsibilities that come along with it.

And the important thing about these types of agreements, these Section 98 agreements they're not like any normal contract between two parties because these agreements are registered onto the title of your unit. And that's significant because it means it applies to the unit going forward. If you leave and then somebody else takes over ownership, they're still going to be bound by that Section 98 agreement.

And also because it's registered on title, it means that any future buyers who pull the title to your unit and want to look and see if there's anything to see there they'll see that there's a Section 98 agreement. So they know that they're not only buying the unit and the responsibilities that come with that, they're also buying the responsibility to maintain and repair and insure this portion of modified common elements be it a railing, or a new patio door, or what have you.

Now, these agreements typically they don't require any vote or notice to the other owners especially since they tend to be with respect to just the common elements that the unit owner has exclusive use over. But if they're not, if it's something that is going to include a modification to the common elements that affect everyone generally, if the cost is high enough, it might be that some notice or vote is required. And we're going to talk about that later when we talk about another section of the Act Section 97.

But the default setting is that's not usually required. Usually all we need are the agreement between the board and owner, and that agreement is registered. Now, it's important to also note that these agreements they'll set out various duties that the owner has mostly with respect to how it's constructed and how it's maintained.

And the Condo Act specifically states that if an owner fails to abide by the terms of this Section 98 agreement, they can actually be charged the costs that are incurred as a result, and that can be charged to them in the same way as a common expense. In other words, it can be leaned for. And if we go to the next slide, I think this is a little more on this.

RODRIGUE ESCAYOLA: Yeah.

GRAEME MACPHERSON: It's also quite typical in I'd say 99% of cases that whenever one of these agreements is being proposed, all of the associated costs are going to be borne by the unit owner, and that includes not only the cost to install and maintain and ensure the alteration, but also the legal fees associated with preparing the agreement, and having it registered.

And as a final piece of advice before we move on, just something for boards to always keep in mind and managers to always keep in mind is that you want to be consistent when it comes to Section 98 agreements. If one owner wants a Section 98 agreement for something like a railing or a patio door and it gets granted, you're going to want to make sure you treat like cases alike or don't differentiate different owners based on the same criteria because then you can end up in trouble and potential oppression problems which we'll talk about in a bit. But the main advice I can give is just be consistent with how these Section 98 agreements are entered into.

RODRIGUE ESCAYOLA: OK. Yawar, maybe I can turn to you now. In practicality, so Graeme covered the legalities and how these Section 98 agreement work, and so on and so forth. But like in practicality, so how do you-- do managers handle this? What should they be looking for? What information do they need? So like walk us through from the moment that the owner calls you and says, I want to implement change x.

YAWAR KHAN: OK, so normally, owner gets a hold of us typically by email or by phone. Most probably by email nowadays and they say, I want to do these things. And there's very little information that's generally given. Generally, it's a broad scope to say I'm going to make these changes, and whether that's adding that AC unit or renovating their kitchen which means also renovating the common element plumbing or touching the common element plumbing.

As a property manager, you need to get the full specification of what is going to happen. And you need to ask for as much detail as possible especially in terms of where those changes are touching the common elements. So using example of let's say implementing a furnace or an AC, where that element vents out you need to know the size of the vent, the type of venting being used, all of those kinds of things. You have to make sure that they're using proper and insured contractors.

So again, they're going to get their own contractor to do this. And ask for the name of that contractor and any other contact information of the contractor just to make sure that they're using licensed plumbers and electricians that they're using certified HVAC professionals, all of those kinds of things. So all of those things should be in the documentation provided.

And generally, most of our properties have specific forms for these things. So they have to use the form, append as many documents, spec sheets for various different types of materials that are going to be used if those are going to be relevant to this. And so all of that package then is reviewed by the manager. The manager ensures that it complies with the bylaws and governing documents of the corporation.

And then it's usually brought to the board for approval. And the property manager should also be thinking of the effects on the common elements, and down the line costs. So that for example, we have a number of townhouse condominiums that are replacing cladding, and siding, aluminum siding, vinyl siding, and so on.

And this is affecting let's say the venting of these HVAC units that were put in there. Some of them have changed the venting in terms of where it goes. So as a manager, you got to think of what's coming down, and how this change is going to impact any future projects, and make sure that the owner understands that they're responsible for costs related to, let's say if that venting has to be moved or removed or this other work to be done so that they're fully aware of their obligations and responsibilities moving forward.

RODRIGUE ESCAYOLA: Wonderful. OK, perfect. I actually really like your example about a modification to common element in a high rise. And I can't believe we didn't put it on the list. But I mean, if people wanted to modify the electric panel, if people want it, needed to move pipes around, let's say you need to move the toilet or need to move the bathtub.

Or you want to convert it from a tub to a shower and you may or may not need to touch or connect the common element pipes, so that's a good example. OK, let's move on to the next, I think Nailah you're up. Which is-- and Graeme spoke about that. He spoke about the need to have a Section 98 agreement. Maybe you can shed more light on that. Like when do we need them? Do we always need them? And so on and so forth.

NAILAH RAMSOOMAIR: So this slide is essentially-- it'll be a bit of a summary for you of what Graeme spoke about. When he spoke it's the process of how to go about a Section 98 agreement. That it's an agreement between the corporation and the unit owner outlining the particulars of the modification that is going to be made or the modification that's being proposed.

So when you ask the question of when you would need a Section 98 agreement, you would always need one no matter how big or small the modification is that you are proposing. So for example, even if you wanted to make a modification to, for example, a doorbell on your door, you would still need to enter into a Section 98 agreement in order to go about that modification.

Now, whether that Section 98 agreement needs to be so in-depth as in including a diagram and tons of particulars, probably not. You could probably have a lighter version of a Section 98 agreement in those circumstances. But it is advised that you would always need a Section 98 agreement no matter what modification that you are proposing.

RODRIGUE ESCAYOLA: Let me stop you for a second because-- I mean, I can just feel the reaction. There was a gasp, a virtual gasp from in the audience. And that's something that a lot of people would react to which is the concept or the suggestion that you need a Section 98 agreement even if what's going to be installed is very minor, the modification. So installing a doorbell is a perfect example of something where we think you really want a Section 98 agreement for that. Or other examples that I saw in the Q&A or in the chat is what about if somebody wants to install--

GRAEME MACPHERSON: Like an electric outlet.

RODRIGUE ESCAYOLA: Yeah, an electric outlet on outside on your balcony. Like do I really need a Section 98 agreement or can I just ask Bob, my handy brother-in-law to come and install it? And that's exactly why you need a Section 98 agreement because of the last example I gave. That you have to think about the fact that people don't own the common elements. People, the owners they have to also think about the long term ramifications of allowing various changes.

You need to ensure that it's going to be clear whether the obligations of the corporation versus the obligation-- and I think you'll talk about that or maybe Graeme spoke about it. But so the purpose of the section 98 agreement is to formalize what is being changed? Why? How? Who's going to pay for it?

And you don't want to allow people to make mini changes and a small change, and the other one makes a small one. And eventually, I mean, it's just a circus out there. Like no longer have common elements. You have just extension of units. So anyways, back to you. I'm sorry I jumped in here.

NAILAH RAMSOOMAIR: That's all I had on that slide, Rod.

RODRIGUE ESCAYOLA: That's all you have? We all sort of-- what about this slide? Is that you? That's me.

NAILAH RAMSOOMAIR: Yeah.

RODRIGUE ESCAYOLA: That's me. Yeah, OK. OK, well, I just want to go back to whether we need a Section 98 agreement when it's something simple because it's a good segue into what I'm going to cover now. The fact of the matter is that owners don't own the common elements other than as tenants in common. They collectively own them.

And the Condo Act specifically requires that if an owner will make a change to common elements, they need a Section 98 agreement. It doesn't say, oh, if it's a small change you don't need to, you just need it if it's a big change. It doesn't quantify the change. We'll see in a minute when we talk about changes by the corporation there's a cost threshold. But in the case of a Section 98 agreement, it says that the only way you can make a change to the common elements that an owner can make a change is through a Section 98 agreement.

I agree with Nailah that you can have very, very light basic sort of simple versions of that. But the question we often hear is, well, could I instead-- could the corporation instead have a bylaw in place? And the purpose of that bylaw would be to pre-approve a bunch of very simple regular changes to common elements. For instance, the doorbell example. So I mean, we're not going to have a Section 98 agreement every time somebody wants to install a doorbell. This is something that's common, or a lot of people want to install a retractable screen.

Can we go with-- can we agree collectively that we're going to pass a bylaw? And so I've heard this, I've seen these bylaws that are called modification to common element kind of bylaws. So I know that other lawyers do them. We're going to have to agree to disagree on whether that's a proper use of a bylaw. And I'll say for this reason. Every time I look at this, and again, before this webinar I said, well, let me just have a look to see-- maybe I'm not reading this properly. So the Condo Act specifically tells you what you can adopt a bylaw on. And that's under Section--

GRAEME MACPHERSON: 56.

RODRIGUE ESCAYOLA: 56, yeah, 56. I'm going to come here. There's a list of what a bylaw can be about. The bylaw cannot be about who to give the Stanley Cup to this year. The bylaw cannot be about whether we're going to allow a Christmas tree for the holiday season. The bylaw has to fit in one of these categories. And as you can see from the categories, it usually deals with qualification, disqualification of directors, it deals with how to vote, it deals with the insurance deductible, it deals with the standard unit bylaw, it deals with all sorts of very specific issues.

And I don't see which heading is the heading where we could say, yeah, it kind of fits there. So for instance, you could have a bylaw, and this is probably the closest one. You could have a bylaw to govern the maintenance of the units and common elements. The Section 98 agreement doesn't do that, but I mean this is kind of the closest we get to that. Or to govern the management of the property I don't think it fits there either. That's to govern the management as in hiring a manager, and so on and so forth.

To govern the use and management of the assets of the corporation, maybe. Maybe if you really squish it and twist it you may be able to fit there. In my view, a bylaw is not the proper mechanism. But I do know that people do it, and I'm going to say this. If your advisor convinced you to go with a bylaw that would pre-approve certain changes, you want to be very specific on, what are the changes that are being approved?

You want to be very specific on the scope and the specs. These are the kinds of doorbells we're going to approve. This is the kind of power outlet that we're going to approve. It needs to be 110 volts, it needs to be this, that, or the other, it needs to be CSA approved, this is the process that you will need to follow, and so on and so forth. And you to make sure that board approval is always required before this is allowed.

And then of course, you add this to the status certificate. I'll tell you one of the reasons why I think the bylaw is not the proper way. The purpose other than the fact that the legislation doesn't specifically provide it, the purpose of the Section 98 agreement is for it to be registered on title of your unit. So when I go to buy your unit I pull the title, and I see right away that there's a Section 98 agreement, and that I am bound by it.

If instead there's a bylaw that says some units may have installed the doorbell or some units may have installed a skylight, how do I know if this affects this unit? How am I bound, the new owner, by the obligations that you've undertaken? There's a problem there. You may not be able to bind the next unit owner.

And so when you go back to the next unit owner to tell them you need to remove this deck because we need to dig, to do whatever, they may say, well, I'm not bound by that. I'm not going to pay for that because your agreement if there was an agreement was with the first person, with the first owner. So I would caution against using bylaws to kind of replace Section 98 agreements. That would be my view. I don't know if Yawar, I should have asked you before, I told you how awful that was. But like do you encounter that often these kinds of bylaws?

YAWAR KHAN: Many of our condo clients have the bylaws, and it's a mixed blessing sometimes because people go ahead and do these things, they don't notify us. And that's the big challenge that we have is that typically in these bylaws you have a modification form that you have to fill out and send in, but nobody does that.

They just said they just go ahead and do whatever is indicated in the bylaw, and we're as management we don't have it on file. So when we issue a status certificate, we have to use that kind of nebulous wording to say this may-- they may or may not have another modification that we don't know anything about. And so as the buyer of that unit, you you're walking into an unknown situation unless you specifically look for these kinds of things. So I'm with you, Rod, I think if you can have a Section 98 agreement it makes things just much more clear.

RODRIGUE ESCAYOLA: Right. Yeah, agreed. OK, I need to change the color of my light. It looks like-- I look like a ghost now. I am hungry. OK, moving on to the next one, can we adopt a bylaw? We did this. People making changes without permission. That's a good segue from what Yawar was just discussing now. So what do we do, Graeme, when people make changes without permission?

GRAEME MACPHERSON: And I think this is very much a question of when rather than if. The reality is that a lot of the time these things are done with ask for forgiveness rather than permission attitude. So it frequently happens that the board or management will discover that it looks like someone's modified these common elements and nobody has any records of when that was done or why that was done, or by who.

And so if you discover that a unit has done some sort of modification to common elements, there's a couple of different ways it can be handled. And I think before deciding how you handle it, you have to consider a couple of factors. It's important to consider, is this modification something that's plain and visible and that everyone can see?

I'm talking something like a deck. If a deck has been set up and it's been there for years, it becomes a little difficult after everyone's been walking by and waving to the guy after he's barbecuing on it for years and years to suddenly decide, no, it needs to go. Now there's no Section 98 agreement.

The other questions to consider, can we keep this? Is it causing any damage or is it setting some sort of bad precedent? Is it an eyesore that is lowering property values, potentially? Another consideration of something that sometimes occurs is when an informal agreement has been reached but not a Section 98 agreement that's been registered on title.

And so all of these things kind of have to get weighed in the equation, but ultimately there's really two main solutions. Solution number one is reinstating the common elements to the way they were before. Or solution number two is imposing a Section 98 agreement that has retroactive effect. That sets the expectations for, OK, this has been built, here is who is responsible for it, and it's going to be the owner and future owners of the unit in question.

If it's a situation where we're going to be forcing the modification to be removed and to return the common elements to their original state, the next question becomes, well who's going to be responsible for the cost? And I think in most circumstances that is going to be the owner.

But again, it can always be affected by different factors. Like if the owner had permission from the board at one point, and then they decide to take that permission back. It might be a different set of scenarios. And Rod, before I get into the cases, I saw you did change the screen to the Condo Act. Did you want to address that quick or was that [INAUDIBLE]?

RODRIGUE ESCAYOLA: No. No, no. That was just a misfire.

GRAEME MACPHERSON: OK, well, I've got two cases here. And I'm not going to go into great detail about them. But basically they're both situations where an owner made modifications to the common elements without a formal Section 98 agreement. In the first case, the owner owned two units and they made basically an entrance between the two units, so they could use both at the same time. That had been something that had been previously agreed to informally by the board, and in fact that condo had a bit of a habit of allowing these types of modifications without a Section 98 agreement.

The board ended up changing hands and they went through trying to correct all of this and imposing Section 98 agreements on everyone. This case was a little unique because it seemed like the board and this owner had a really quite tumultuous relationship. And so the board did a lot of things to single the owner out, and make life difficult for the owner and put really onerous terms in the Section 98 agreement.

It was found ultimately that the board had been oppressing that owner with how differently they were treating them. But even still, the court ordered that, well, look, I mean, the board might have been acting a little heavy handedly here, but you need to enter into a retroactive Section 98 agreement for this. Whereas in another case, a more recent one so that was Noguera versus MCC 22.

And in a more recent one, Carleton 132 versus Newton, that was a case where an owner changed their door unilaterally. And the corporation kind of got on it quick and said, we can't have the door look like this. We can have it look like this perhaps, or we can help you install a new one. And the corporation kind of tried to do what it could to correct the situation and acted fairly and acted quickly.

And in that case, the owner was ordered to just reinstate the common elements to how they were before. So there's no one-size-fits-all answer. It's going to depend on what your situation is. But the moral of the story in both cases is just act reasonably. Don't act heavy handedly for the sake of it, and evaluate the situation fairly and on its own facts.

RODRIGUE ESCAYOLA: Right. OK. There's a lot there to unpack, actually. And so-- and I've posted it in the chat a link to both of these cases. And this is something that may very well happen in many corporations where you realize that there's been a change. One of the myth I want-- a change to the common elements by an owner.

And so one of the myths I wanted to dispel is if it's been there for long enough where you're stuck with it, that's not accurate. I mean, the fact that even if it was kind of tacitly approved or accepted, or allowed to happen, and I would even say even if many units have because the first one installed the deck and then everybody else goes and install the deck, and then at one point you need to realize there's a new board or they get a new manager, or they get a new lawyer.

And then suddenly, you're faced with all these modifications to common elements that weren't really approved properly. So you're not stuck with it forever. You do need to treat everybody the same way. And I think what the choice that people will have in front of them is to either remove the modification and reinstate the common elements. Or B, if the change is a change that is acceptable to the corporation, enter into a Section 98 agreement.

And I mean, give them that choice. These are the choices. And they may say, well, I bought it like that. Well, you may have a claim against the other individual that sold it to you. You may have that claim. So anyways, always very difficult situations because people feel that they had this in place all along. And even more difficult if in fact, the board was involved in the modification itself.

I'm thinking of a case where at one point the board let's say goes to people in the high rise and they say, OK, well, some of you would like to enclose your balcony. So this is kind of what we have in mind. And we looked into it, and this is how much it's going to cost for each of you. And they're kind of involved in that modification, and somehow that modification never ends up being formalized in the Section 98 agreement.

The first thing we're going to hear is, well, in '86 Bob was on the board, he was the president and he was the one sort of pushing this forward. OK, let's go back to my agenda here. What's the next one? Oh, I think I stole your thunder there, Yawar. What about in the trenches? How does that happen? Like have you faced these situations before and how do you deal with them? What's the best practices here?

YAWAR KHAN: Absolutely. The best-- we have to-- so these are generally unknown to us until somebody reports them. So either a neighbor says I've got this neighbor with this issue and/or this has just gone up, and this has just happened. So then we go and explore, we have to investigate, or we do unit inspections and we find these. And so in high rises we do unit inspections every year to check the door closers.

In some cases, we have a rule where you're not allowed to have any floor coverings on your balcony so we do want to check that before the winter comes to make sure nobody leaves those floor coverings on their balcony, or that they're not glued on, so depending on the rule and where you are. So through these unit inspections we find out about these changes.

And in one case, we found out about a bathroom that was installed in a closet, and we had to-- in that case, we had the modification removed. And again they had through some means connected that bathroom to the common element, that the plumbing of the unit. So they weren't allowed to do that and make that modification.

The process to deal with it, I mean, you need a lot of communication, a lot of transparency here. And I think also the unit owner has to feel that they're not being unfairly targeted, right? Because generally, the case is that I didn't put this in. The person before me did this. Or somebody else or I bought the unit like this, and they have to understand that whatever they bought they've now taken responsibility for.

So that's a difficult conversation to have. And in most cases, we're able to do a retroactive Section 98 because most of these modifications aren't damaging. They don't create an unusual precedent. I mean, that bathroom had to be removed because there's no way that could continue. Also, we have buildings that don't have washer and dryers in units. They have laundry rooms in the building, and so they don't allow these in units. And that creates a plumbing issue. So we can't allow these washer/dryers to persist.

So we have to logically tell them why. Explain to them the documentation, the governing documents, and why they can't do this. And then try and get as much cooperation as possible to either have the modification removed, or have them enter into a retroactive Section 98. Most of the time I've not encountered any problems with both scenarios. When they understand what's happened and what the ultimate-- what the ultimate ramification is, they're usually happy to comply because they understand the rationale why they can't have this, or why they have to enter into that Section 98.

RODRIGUE ESCAYOLA: OK, wonderful. We got to switch topics because we focused so far on owners having made changes. What about now corporations wanting to make changes to common elements? Whether it's reorganizing the lobby, whether it's installing different tiles with a different pattern, whether it's creating an area to plant herbs and vegetables, whether it's-- whatever it is.

All sorts of reasons why creating a room where you can store bikes. I mean, there's tons of changes that a corporation may be considering along its history. And so how does that work then? And the first person that's going to tackle this is Nailah. You're going to give us the overview of, how does it work when a corporation wants to change common elements?

NAILAH RAMSOOMAIR: Yeah, so on this slide, you'll find the law and the legal theory behind the process of a corporation modifying a common element. So Section 97 of the Condominium Act will essentially speak to that and that process. So what you'll find there is that there's three levels of owner consultation that's required when the corporation wants to make a modification to a common element.

And you'll see them on the screen here. So the first one is when there's no consultation. So that means that the proposed change is less than $1,000 or less than 1% of the annual budgeted common expenses, so whichever is greater in that circumstance. Or if the work is required to ensure the safety of people on the property, or to prevent some kind of imminent danger. Or if it's required to comply with for example, a mutual use agreement. In those cases, you don't need any notice.

The second option is when there's a possibility of consultation. And that happens when the cost of the project is over $1,000, but less than 10% of the annual budgeted common expenses. So in this case, notice is required to be given to owners. But the change is only submitted to a vote if it's requisitioned by the owners of at least 15% of the registered unit.

And should the change be submitted to a vote through the requisition, the change can be only implemented if you receive at least 50% of the owners participating at the meeting if they vote in favor of it. And then the last level of consultation is mandatory consultation. And that's when you have a substantial change.

So that's when this is going to be more than 10% of the budgeted common expenses. So in this case, notice is required. And it's mandatory to be given to owners. The change has to be submitted to an automatic vote, and it can only be implemented if you receive at least 66% of the units that vote in favor of it.

RODRIGUE ESCAYOLA: All units, right? All registered units.

NAILAH RAMSOOMAIR: Yeah, in favor of it. And if you visit the Condo Advisor blog that we have on this, we actually have a little app at the bottom of the page. Well, that will help you determine whether that modification is considered a substantial change.

RODRIGUE ESCAYOLA: OK, let's try one of those. So what would be a change, Yawar, that you've recently encountered? And we'll put it through this fancy app.

YAWAR KHAN: Well, one of my buildings wants to add an elevator that goes from their P1 garage level to their P2. They don't have that in place right now.

RODRIGUE ESCAYOLA: OK, perfect. So let me ask you a couple of questions here. Are you doing same for same kind of renovations or maintenance?

YAWAR KHAN: No, this is a new addition.

RODRIGUE ESCAYOLA: OK, let's click on that. Is the work necessary to ensure the safety, security of persons using the property?

YAWAR KHAN: That's a difficult one. So no, it's not in just in black and white. It's not for the safety, security. But we do have a number of mobility challenged people that can't get to that lower level by using the stairs. So I think in this case I would say no because those people are accommodated on the first floor, but it's nice to have to make sure they can get down.

RODRIGUE ESCAYOLA: Yeah, I think when you-- to benefit from this exception of security of the person, I think something needs to be like there's imminent danger. Like if we don't put a fence where there's no fence, I mean babies are going to fall off.

YAWAR KHAN: OK. So no.

RODRIGUE ESCAYOLA: OK, so the answer is no.

YAWAR KHAN: Yes.

RODRIGUE ESCAYOLA: OK. Is the work required to prevent imminent damage to property or assets?

YAWAR KHAN: No.

RODRIGUE ESCAYOLA: OK, did I click on this? Is this to comply with the cost sharing agreement?

YAWAR KHAN: No.

RODRIGUE ESCAYOLA: I'm on the edge of my seat. Will the estimated costs be more than $1,000 or 1%?

YAWAR KHAN: Yes.

RODRIGUE ESCAYOLA: Yes. OK, is it less than 10% of the annual budget or more?

YAWAR KHAN: More.

RODRIGUE ESCAYOLA: It costs more than that. This is a substantial change, my friend. You knew that.

YAWAR KHAN: I knew.

RODRIGUE ESCAYOLA: So what does that mean? It means that you need to-- the corporation has the onus of calling a meeting, they must call a meeting of owners, they must put the question to a vote, and the corporation has the onus of securing the support of 2/3 of all registered units to vote in favor of it. So if you are looking for this app, should condo owners vote on changes to the common elements? But I think legalities aside, as a manager, your first and real battle, Yawar, when you are considering a change to a common element it's got to be communication, I would assume.

YAWAR KHAN: Absolutely. And what happens, typically, is the board is going to go through a number of different meetings, discussions on this topic. And so they're convincing themselves of what has to be done, they're getting information from professionals, and so on. And they need to involve the owners in their thinking as much as possible.

So I think as soon as you think of this and you think it's going to be a reality, as a board be good to let your owners know through a newsletter or some kind of communication piece to say, the board is thinking about this. Let's talk about my elevator example. Here's-- we want to put an elevator, the pros and cons of that is this, this is how much it may cost.

And we're going to be gathering more information, so stay tuned. And so and then to increase that communication as you get closer to your imminent decision, you bring the owners along with you. So I think that communication is so key to making sure that this passes if that's where you want to go because you do have to get that vote. So as much communication as possible. Bringing in various experts to allow people to do a question and answer with them, and just I think being as transparent as possible when it comes to this kind of thing.

RODRIGUE ESCAYOLA: Yeah, and so I want to go back because I see the question in the chat. I want to go back to-- I made a passing reference to same for same kind of thing. So if the corporation is maintaining or repairing its assets using materials that are similar in quality, keeping in mind that the construction industry has changed, that's what I call same for same.

So I mean, your tiles are short you need to put more tiles. Technically, you're just maintaining and repairing a common element. Even if you change the feel and look, you should consult if you change the feel and look because you're going to have a French Revolution on the hand if you don't. But that aside, if what you're doing is you're changing carpet for carpet because it's reached the end of its useful life, or you're changing tiles for tiles, or you're changing window for window, that's what I mean same for same. And it doesn't have to be identical.

In fact, even if you were to change the railings, let's say you have different railings and what you had was MDF wood and you want to go for aluminum, that may not be a change. That is you maintaining and repairing the common elements keeping in mind that the construction standards have evolved over time.

So that's kind of same for same. But again, the more there is people can feel a change, the more you want to consult. Because as I said, you don't want to get people upset. It's their lobby, it's their balcony, it's-- so for sure, you need a level of consultation. But that's not a legal requirement. It's just a very, very wise thing to do.

OK, Graeme, who pays for these modifications? Or how do we pay for these modifications? If we're going to make a change to the common elements, I want to install a sundial right in the center of my lobby. It'll look fantastic. You'll feel like you're in Vegas. So who pays or how do we pay for that change?

GRAEME MACPHERSON: Well, I think the first thought that we like to skip to is, oh, well, geez, that's what the reserve fund is for. Let's dip into that. But we have to be careful with that because the Condo Act tells us what specifically we are able to do with the reserve fund. And it is only able to be used for the purpose of major repair and replacement of common elements and the assets of the corporation.

And so again, we're talking about only for repair and replacement. So if we're thinking about installing a sundial, installing a life size statue of rod, if we're talking about really adding an upgrade or changing things, then we can't bring the reserve fund in. I know we're talking in these circumstances about adding something to the common elements and shouldn't. The reserve fund be there to repair and replace the common elements. And the answer is yes, it can repair and it's there for repair and replacement of common elements when it's needed. But it's not there to add to the common elements. So accordingly, reserve fund is off limits for these things.

RODRIGUE ESCAYOLA: Right. OK. Oh, I like the next one. First, I like the fact that a life size statue of rod is in the upgrade category. I really like--

GRAEME MACPHERSON: Yeah, of course.

RODRIGUE ESCAYOLA: --that. Yeah. So what about special assessment versus loan and surpluses?

GRAEME MACPHERSON: So when we get this statue, how do we pay for it if we can't dip into the reserve fund? And there's a couple of options. Obviously, option number one is special assessment whereby everyone will be sent the portion of the expense that they're going to have to pay that's collectible in the same way as a common expense. You're going to want to check your operating bylaw on that for the procedure that your condominium has.

Another option for the corporation if it wants to avoid special assessments or even lower the amount of the special assessment required is to take out a loan or borrow money. But again, you got to be careful before jumping right into that off the deep end because you do need a bylaw before engaging in any borrowing as a condominium.

And something else that can sometimes be considered but unfortunately I kind of need to pop the bubble on that as well, what if we have a surplus? What if we collected more money than we need it? And the Condo Act tells us that surpluses have to be applied either against future common expenses or paid into the reserve fund.

And the Act doesn't contemplate the ability to throw parties with it or buy statues. So unfortunately, we're kind of stuck with those options. And I've listed at the bottom hybrid because it may be that you can offer different options to different owners, or get a loan for a smaller amount if a special assessment will cover a portion of it. So there are options there, but the main point is that we can't just dip into the reserve fund for it.

RODRIGUE ESCAYOLA: I really like a question from David Crawford here because it's a good example here. So he says, Section 97 talks about changes in services because it's about the assets but the services as well. So he says, what if we wanted to close the swimming pool? It's both a change to the asset because the next sentence says, what if we need to fill it in? And so the question-- I mean, it's a theoretical question is the way it's presented now is, OK, so it's going to cost money to fill in the pool? Let's say.

But then we're going to be saving on a going forward basis forever. We're not going to have to pay for the lifeguard, we're not going to have to pay for the maintenance of the pool, we're not going to have to pay for the products, we're not going to have to pay for to change the motor, and the filter, and et cetera, et cetera. So I mean, there's a way to present that where in fact, this change is financially a strictly a positive. It's not going to cost the corporation any money.

In fact, it's going to save the corporation money. So does that allow us to escape these various thresholds that Nailah was talking about? Suddenly if, in fact, we're going to make money off it or save money, are we now in the-- it's costing less than $1,000 and we don't need to consult anybody. Do you want to tackle that, Graeme? Are you following me?

GRAEME MACPHERSON: Yeah, yeah. It's a tricky situation for sure because I think it's one that unfortunately the act doesn't really deal with. By setting up the definition of substantial change and setting up the thresholds purely based on financials, it sort of leaves you in that weird position. I will say that if you are as a board planning to do something, I know we've been harping on it, but communication is the key. And so even our advice tends to be that even if a vote or notice isn't strictly required, sending out notice is always a good idea.

RODRIGUE ESCAYOLA: Right. So there's two things here I agree with you. Even if it's not a change on notice, even if you were to fall within the category where we don't need to consult anybody. Another example is if you sell a unit. If you sell a unit that's owned by the corporation, you don't need to consult with anybody because in fact, you're making money. So it's not costing you a penny.

And so even though you're in the non-consultation category, at the very, very least, I would say treat it as a change on notice where you give notice to the owners, and they know what's coming down the pike, and they got 30 days to requisition a meeting and to force a vote. And I will say also this. If you fall within the category of on notice, in certain cases, you may want to treat it as a substantial change because it's going to be such a change that's going to upset so many people. That you want to treat it as a substantial change. Because you want to make sure that you get that required majority. So a board can always treat a change regardless of the cost. You can decide to treat it as a substantial change.

GRAEME MACPHERSON: There's also one more point that kind of a technicality or a loophole that sometimes gets brought up. And I think we should address it here too is well, Rod, what if we're going to do something and the total cost is going to be pretty big? But what if we only pay a part of it this year and we're going to pay the rest of it and spread it out? Then are we out of the threshold if we spread out the payment and we're not really getting that out of pocket right now.

RODRIGUE ESCAYOLA: Right. And so the definition of a substantial change based on cost is 10% of the budgeted amount regardless of the year in which it will be paid. It's something like that the language provides for. So you're not-- that loophole isn't a loophole. Let me just see if I can find a quickly the specific language. But basically, it's regardless of where you're going to-- when you're going to pay for it.

GRAEME MACPHERSON: Exactly, yeah, I think I can find it here. Regardless of whether the cost is incurred before or after the current fiscal year.

RODRIGUE ESCAYOLA: There it is, so that's 97(6)(a)(i) for those of you who are looking for that. OK, we're running out of time as usual. Rod again has put too much stuff on the agenda. Who's tackling this change?

NAILAH RAMSOOMAIR: That's-- this one's mine.

RODRIGUE ESCAYOLA: OK, well, tackle it then. So what about a corporation that wants to make a change to common elements? No. What about an owner that wants to make a change? What are you talking about? 98(2).

NAILAH RAMSOOMAIR: Yeah.

RODRIGUE ESCAYOLA: I'll let you-- take it away.

NAILAH RAMSOOMAIR: Yeah, so I'm starting with when owners make changes to common elements, and then Rod's going to speak about when the corporation makes changes to common elements. So this slide is essentially it touches a bit on what Graeme kind of addressed briefly in the beginning. So Section 98(2) deals with exclusive use common elements. And what happens when a unit owner wants to modify a common element that's essentially for their exclusive use? So for example, like a balcony.

So in this case, if you go to the legislation, you'll see that in many circumstances you won't need any types of approvals. If these circumstances are fulfilled that are on the screen here. So whether the change doesn't have an adverse effect on units owned by other owners, they won't give rise to expenses to the corporation, they won't detract from the appearance, they won't affect the structural integrity, and they won't contravene the declaration or any prescribed requirements. So that's just a lot.

RODRIGUE ESCAYOLA: OK. Yeah, so an exclusive use common element could be your rear yard in a townhouse, town home complex. It could be your parking space. It could be a balcony. And so there may be changes as Nailah was indicating now where the change really doesn't affect anybody else. And so it is a common element that you're changing, but it's kind of an extension of your unit almost. So it's kind of a slightly lighter treatment in that case. OK, perfect.

The next thing I'm going to talk about is very briefly, and I saw the question, I kind of expected that question is whether Section 98 and Section 98 agreements interplay and how it interacts with the concept of installing EV charging stations. In one minute or less I think it's Graeme that tackles this. What-- tell us a bit how we tackle the installation-- and we're going to have a full episode on this. But tell us a bit how we tackle-- what are the options when a corporation wants to see charging stations being installed? That was yours. No? Am I making that up?

YAWAR KHAN: You're muted, Graeme.

GRAEME MACPHERSON: Wouldn't be a Zoom meeting without that. The options are essentially that what's the corporation going to install and what are owners going to install? So in terms of the corporation, it's entirely possible for the corporation to install unilaterally the EV charging stations themselves, and/or the kind of backbone of the system or the required infrastructure.

And it's able to do that unilaterally if it gives the owners 60 days notice. But it's able to do this when the cost of the installation is going to be lower than 10% of the annual budgeted common expenses. And in the board's opinion, looking at it reasonably, the owners won't regard this installation as a reduction in use or enjoyment of the common elements.

And so if these conditions are not met, the corporation has to give notice to owners alerting them that this can be requisitioned for a vote. But again, when we're talking about here is we're talking about the corporation either setting up EV charging stations themselves, or setting up whatever infrastructure is required to power those EV charging stations or to accommodate them.

RODRIGUE ESCAYOLA: Right. So the reason why we're talking about EV stations, very briefly here, is this is that you're implementing a change to the common elements. That's what you're doing, right? We're going to install-- we're going to modify the electric panel in the garage, we're going to install conduits that are going to bring it all, bring a wire all the way to Rod's parking, and in there we're going to screw on the wall some charging station of some kind. All of that is a modification to common elements.

And so it doesn't fall under Section 98. You have to look in the regulation, the general regulation. And specifically, you have to look at Section 24.3 or 24.4 of the regulation that explains the two avenues. One of them is when the corporation wants to make a change, Graeme just spoke about that. The other one is when an owner wants to install an EV charging station.

And so there's a different process to be followed depending on whether or not it's the corporation's initiative, or whether it's an owner's initiative. And so everything we said so far about Section 98 agreement doesn't apply. You have to go in the regulation to look at Section 24(3) and 24(4). We're going to talk about that some other day in greater details.

We actually had a webinar about this in 2021, so you can still see it and watch it if you want. But we're think we're going to have another sort of refresher one of these days. OK, so that's for this. Graeme, are you talking about-- oh, yeah, we spoke about that. What about selling or buying assets or land? Was it you, Graeme, that was tackling this?

GRAEME MACPHERSON: No, I think this one-- well, I'm talking about selling.

RODRIGUE ESCAYOLA: Selling, OK. So and you got 20 seconds.

GRAEME MACPHERSON: I'm going to skip the first part. We already talked about the difficulty that comes with selling things, and whether Section 97 is triggered. So the only other thing I'll talk about is, what if the thing we're thinking about selling is actual common element, land, real estate? And that's treated a little bit differently than just selling any normal asset of the corporation because it requires a vote with a threshold of 80% of all units in favor of it. So just this could again be an entire topic in itself, but we did just want to flag that selling land is a little different than selling any other asset because it requires a vote. No way around that.

RODRIGUE ESCAYOLA: Right. Whereas if what you're selling is a unit that's owned by the corporation as opposed to common elements, then you would typically fall under Section 97, and in this case there's no expense. There's only your revenue, and so technically you would have--

GRAEME MACPHERSON: The common example we see of this is like if the corporation's common elements include a whole big grassy area or something that adjoins a neighbor and the neighbor is interested in buying that, and the corporation's not doing anything with it. You can do it but you just have to make sure you follow this separate process.

RODRIGUE ESCAYOLA: OK, Nailah, in 15 seconds or less, what if we want to buy a unit, let's say. What's the level of consultation here?

NAILAH RAMSOOMAIR: Yeah, so again, if you're buying an asset, you're going to refer to Section 97 of the Condo Act. And like we spoke about previously, the same level of consultation will be required. So it's either going to be a change on notice, or it's going to be considered a substantial change which is it's more than 10% of the annual budget of common expenses.

RODRIGUE ESCAYOLA: Right, so buying a new swing for the toddler park, that's likely below your 10% threshold. Buying a new unit to set up an office or something, that's likely above your 10%. And so that would be a substantial change requiring a substantial change level of approval. OK, very good, oh my goodness, it went fast as usual.

OK, folks, November. In two Saturdays from now it'll be November 11, and I hope you have it in you to take a timeout to reflect on those who made it all possible. And these moments where we're-- I mean, we're in need of peace more than ever before for all sorts of reasons. So hopefully you'll have a minute to think about our good veterans.

If you want to buy a poppy, a virtual poppy to put on your social media or to put in your emails, you can do this by going to mypoppy.ca. It's a bit clunky, but it makes sense, actually. It's ultimately if you go through all the motions, you'll be able to get your virtual poppy. We haven't gotten ours yet, the one you see at the bottom of the screen is last year's. But I'm going to go and do that as soon as we're done with this webinar.

So I encourage all of you to do this if you find it in you, or to even join a Legion. It doesn't cost a lot of money, and it really helps this community center that is there to look after our veterans, young and old, they have all sorts of programs to help them with housing, with food, with retraining if they're injured.

So I invite you and encourage you to join your closest Legion. OK, so that's it for this. Next webinar apparently it seems like it's on December 6. We'll post it on the Condo Advisor webinar as we usually do. Usually at Christmas we try to have a fun one, and we may or may not try to redo the Jeopardy game show.

GRAEME MACPHERSON: Unlike all the others that are not fun.

RODRIGUE ESCAYOLA: [CHUCKLES] That's right. So anyways, something to mark in your calendar, and you'll have to register again by clicking on Webinar, and you'll see-- you'll get more information as it comes along. That's it, folks, fast and furious. Thanks so much for having stuck around. Most of you have stuck around even though we are three minutes over, so I'm going to thank everybody at home and I'm going to thank you, Yawar. The other ones, the other two had to be here as part of their contract. But thank you, Yawar, for taking the time [CHUCKLES] to share your expertise with us. Any parting words, Yawar?

YAWAR KHAN: No, no, it was my pleasure. Thank you for inviting me. And I think the only thing I can say is-- and I think Graeme put this on his slide, be reasonable, be consistent. I think that's the biggest thing. Forget your personal vendettas, and just try and to treat every owner equally. And think everything will go much smoother.

RODRIGUE ESCAYOLA: OK. Well, thank you, thank you, Graeme, thank you, Nailah, and thank you, everybody at home. It's 6:03, I can smell the food from the kitchen because today I'm not on cooking duty. Thank you very much, everybody. Have a great evening, have a great month of November, and lest we forget.

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