Newly released data from Statistics Canada shows that investors owned more than one fifth of houses in British Columbia, Manitoba, Ontario, New Brunswick and Nova Scotia in 2020. Condominium apartments topped this list in Ontario and B.C., with 41.9 per cent in Ontario being investor-owned, followed by over a third in B.C. The majority of owners were living in-province.

As condos supply the surging demand for rental housing, which continues to trend lower in cost than home ownership, many corporations may be experiencing a rise in tenant-occupied units.

“There can be tenants that fit right in and engage with the interests of the community and there are tenants that are quite the opposite,” said Sheila Krivsky, property manager with Shore to Slope Management Services, during an online discussion on tenants in condos, hosted by CCI Huronia.

Property managers are often on the receiving end for complaints and requests that should be directed to the landlord. Before entering into a lease agreement, this is just one issue to consider. There are many others, namely, clarifying what the corporation is responsible for versus the unit owner, what items to include in a lease agreement, and ensuring adequate insurance coverage.

The corporation-landlord-tenant relationship

As tenants settle into their homes, it is imperative to solidify their sense of place in the community, whether through events or newsletters.

“Some buildings are highly tenanted, and leaving the majority of the residents out of the loop doesn’t encourage the feeling of a single community,” said Krivsky, “What you don’t want to encourage is an owner-tenant divide between residents.”

“We want to encourage tenants to care as much as an owner who has an invested interest in the property. This makes it more likely for a tenant to reach out to management about corporation-directed issues.”

Corporations could also build a tenant welcome package for owners to hand out, which includes what contact information to provide to management. “Really helping owners gain the knowledge they need to become landlords and leasing their units and also knowledge for tenants to fit into the community is the goal.”

Unit owners are responsible for ensuring their tenants comply with the condo’s governing documents, and any communication should be directed to them. Corporations are to address tenants’ concerns directly with the unit owner, and should do so in writing, in case an owner doesn’t remedy a situation, which could lead to legal action, said Krivsky.

When it comes to interior repairs or maintenance and requests for common elements changes, owners must request those changes to the corporation. If the tenant makes unapproved alterations, the accountability to restore falls upon the landlord. Other rules pertain to homeowner meetings. Tenants can attend them, but only if the owner assigns their proxy to the tenant for the particular meeting.

Owners must notify their condo corporation within 10 days of entering into, renewing or terminating a lease, according to Section 83 of the Condo Act. They must provide their own address, the renter’s name and a copy of the lease, renewal or a summary of either, and give the lessee a copy of the declaration, bylaws and corporation’s rules.

Insurance considerations

Tricia Baratta, commercial insurance professional at Gallagher and vice-president of CCI London and Area, cited three policies for condos with rental units. Section 99 and 102 of the Condo Act outline what the condo corporation policy should insure. A more recent addition is cyber-privacy and liability.

A unit owner’s coverage should include anything above the standard unit description and bylaw, their contents that aren’t attached to their unit, extra living expenses for vacating in the case of repairs, deducible and loss assessment and their own personal liability. However, when transfering to a leased-unit agreement, while all the same coverages apply, the tenant should take on additional living expenses and some of the contents. Owners can lower the contents limit as their personal property is no longer inside their unit, apart from appliances that require repair.

Unit owners should require that tenants show proof of insurance, Baratta stressed. “We want to make sure that content, should it be damaged in a loss, can be removed from the unit and that there is coverage for that. We don’t want the condo corporation or unit owner to take care of that bill.”

While the condo corporation’s coverage remains the same during a leased arrangement, the higher the ratio of rentals to owner-occupied units, the greater the impact on a corporation’s premiums, Baratta noted.“If you have 50 per cent rentals in a condo you are definitely going to see an increase in the premiums that are allocated to that property coverage and liability coverage. Some insurance companies won’t even write a condo policy if they are above that threshold.”

Section 83 notices

Corporations are obligated to keep records of notices of these leases. Natalia Polis, condo lawyer with Lash Law, explained how knowing who residents are comes in handy for security purposes. When armed with the condo’s declaration, bylaws and rules, tenants are made aware of what is not permitted within a corporation.

In case of infractions, notices contain a tenants’ contact information, so management, the corporation and solicitor can directly communicate with them.

Notices also clarify off-site owners. “This is important, especially when there is an owner-occupied position up for election,” she said. “ Off-site owners would not be entitled to vote for that election. It also affects the eligibility of some owners to run for the election if there is a specific qualification in their bylaws that requires them to be an owner occupant.

“In some circumstances, I’ve seen an owner get elected onto the board and then subsequent election they found out that he’s not an owner-occupant and that’s the specific qualification in the corporation’s bylaws. So, that owner was immediately disqualified. This could leave the corporation in a precarious position. It could lead to a vacant position or worst case scenario— if there are not many directors on your board you could be without quorum.”

Corporations must identify how many units are leased for their status certificates and periodic information certificates. Owners are also requesting these records. “We’re seeing, ever since the CAT received jurisdiction over records disputes, owners are bringing these disputes left, right and centre, especially with the terms of Section 83 notices,” Polis said.

According to what a corporation is to maintain with Section 83 notices, Polis relayed clarification from the CAT in Chai v. Toronto Standard Condominium Corporation No. 2431. “This decision held that Section 83 requires a corporation to maintain a list of each unit for which one or more notices under Section 83 have been received.”

This includes the type of notice and date it was received—for all units that have ever submitted a notice.

The CAT ultimately ordered the condo to provide a copy of the updated record within 30 days, except for information relating to specific units/owners under section 55(4)(c).

The case also underscores the importance of leased units equaling the notices received, said Polis. “If the corporation has not received a lease, it should not include the information about the unit being non-owner occupied in the information certificates or status certificates, or disqualify the person before they are even a candidate for owner-occupied positions. Even if the board and management know the unit is leased, you do not enter that number unless the corporation receives that notice.”

Another lesson learned for record-keeping in relation to Section 83 is maintaining adequate and accurate notices. Not all owners may submit them, but corporations can reach out requesting updates.

What goes into residential leases and governing documents?

Residential leases should correctly identify the premises and acknowledge that the tenant is bound by the Condo Act, declaration, bylaws and rules, as amended from time to time, said Patricia Elia, senior lawyer with Elia Associates.

As she further noted, “you want to confirm the fact that a unit owner cannot grant a greater interest in land than what they themselves hold.”

The landlord is responsible for enforcing compliance in relation to the tenant. There also should be a robust indemnity clause to ensure the tenant acknowledges they will be responsible for the consequences of their actions according to the leasing obligations

According to the corporation’s framework, “the declaration, bylaws and rules should contemplate, where you do have tenancies possible, that your corporate governance is actually meeting that possibility,” said Elia, adding that the declaration should include indemnification obligations by the unit owner (and their guests and tenants) for any costs incurred by the corporation that deal with compliance.

Bylaws can create parameters for mischief and should anticipate tenancies. Rules should encompass all residents living in the condo. Another essential element is the provision of emergency contact information. In case of an emergency, owners should be first to take responsibility, but if they live outside the country then request a tenant’s emergency contact be someone located in Canada.

“You may want to include in your rules or set of policies, in the case of a tenancy, please provide us with a contact person other than the unit owner to contact quickly,” said Elia. To make communication easy and fulfill the obligation as a landlord under legislation, a tenant can sign an email authorization form via a permission slip in the welcome package.

Tenants should also acknowledge they have read the governing documents. “You have to comply with the Act, but it’s important to show, in your contractual relationship, that you’ve actually delivered that because that is the standard you are going to be held to as a landlord.”

As Elia noted, there must be clear boundaries between the corporation’s duty and the owner’s responsibility, while embracing all the relationships that form the community as a whole.

If recent news is any indication, enforcement continues to be a hot topic. Sonja Hodis, a litigation lawyer at Hodis Law, relayed her top 10 enforcement considerations.

1. Notify the tenant and owner of the breach and corrective action that must be taken so they are both part of the discussion from the very beginning.

2. Never breach rule number one. Failure to notify all parties from the beginning will cause problems for corporations when seeking reimbursement for their costs against the owner. There have also been issues around getting enforcement orders against tenants. Don’t rely on the owner to communicate breaches to the tenant.

3. Update indemnification provisions. Use specific language in governing documents, stating the owner is responsible for any costs incurred by the condo, even if the tenant is in breach, and the condo is not required to collect from the tenant. Costs ordered against tenants are difficult to collect; however, costs ordered against owners can be added to the common expenses.

4. Obtain completed owner and tenant information forms and update them on a yearly basis.

5. Give owners a reasonable opportunity to take steps to fix the problem. If not, there is a good chance it will affect your ability to be reimbursed for costs.

6. Cooperate with owners who are taking steps to evict a tenant under the Landlord and Tenant Board. Provide them with evidence and information they require.

7. Know your boundaries when it comes to enforcement and dealing with tenants in condos. There is no contractual relationship between the condo and the tenant. The condo’s ability is limited to breaches of the Condo Act and governing documents.

8. Name the correct parties in legal proceedings. Tenants are not allowed to bring applications against owners or condos under the CAT. Only owners and condos can bring applications against the tenants. Name both tenant and owner as respondents in those applications.

9. Eviction is a very strong remedy. The CAT has no authority to evict a tenant. Courts can remove tenants under Section 134 (4) of the Act if the tenant has contravened an order under Section 134 or has not paid the amounts due under Section 87.

10. The Condo Act’s Section 87 is a ‘secret weapon’ for collecting expense fees. It is another enforcement tool that condos can use only when a unit is a rental unit. If common expense fees go unpaid, it allows corporations to notify the tenant to direct their rent to the condo to cover arrears.