The Condominium Act, 1998 contains pathways for solving many complicated issues related to condominium operation, like governance, repairs and maintenance, sale or lease of units, meetings and voting and more. But there's one important way that the Act falls short. It fails to address the complexities and inefficiencies associated with levying, disputing and collecting chargebacks of certain costs as additional common expenses.

Let’s examine where we stand, how we got here, and what needs to be done.

Critical need for legislative changes for chargebacks

At present, amendments to section 84 of the Condominium Act, 1998 (as set out in section 77 of the Protecting Condominium Owners Act, 2015) remain unproclaimed. These amendments are at risk of automatically expiring some time in 2025 (the 10 year mark) unless they are proclaimed soon. Industry groups, including ACMO and CCI, worked hard for the amendments, which would simplify the chargeback process and ensure continuity, reduce administrative burdens for condominium managers, and foster a more harmonious condo community environment. By streamlining the chargeback process as expressed in amended section 84, we can ensure fairer and more transparent management, ultimately enhancing the quality of life for all condominium residents. It would be a shame if these significant amendments were lost.

Impact of proclaiming legislative changes to s.84

Handling chargebacks is, and has always been, a sticky subject. Chargebacks are a common source of disputes and friction between corporations and unit owners. They are handled differently by management firms across the province and, as a result, with different levels of success. Many condo corporations, therefore, write off recoverable costs because there is no easy or economical way to deal with them short of using the lien process, which merely escalates and complicates a simple dispute, usually over a small amount.

In addition, a common feature of chargeback disputes today is that owners often do not dispute the chargeback soon after it is posted. Instead, they only emerge with a challenge after the condo corporation starts or advances the lien process, by which point much time and cost has been wasted, making it harder to resolve the issue cheaply.

For these reasons, industry stakeholders like ACMO and CCI advocated for a sensible process to notify owners of chargebacks  in a uniform, simpler way and then provide owners a short but reasonable opportunity to make a timely, focused dispute over a chargeback, and finally provide a quick, easy and economical resolution of any disputes through the Condominium Authority Tribunal (“CAT”). See below for how CAT could handle chargeback disputes effectively.

What are some common chargebacks?

Under the Condo Act, certain costs incurred by condo corporations may be charged back to a unit owner as an addition to their common expense fees. Often, the costs involved are minimal – let’s say a $25 cleaning cost for failing to pick up after a pet. Small chargebacks typically don’t result in a lien. More substantial chargebacks, however, may include repairs or maintenance carried out by corporations on behalf of owners. Another common chargeback occurs when damage to units or common elements results from an act or omission of an owner or resident and the cost of repair is charged back by the corporation to the owner. Finally, and perhaps the most common (routine) chargeback is for damages and costs arising from an owner’s or resident’s violation of the declaration, bylaws or rules, including legal fees paid by the corporation to secure compliance.

How CAT can handle chargeback disputes effectively using its established negotiation, mediation and adjudication methods

In summer 2024, the government proposed that CAT be tasked with handling disputes over unit owner meetings. Instead, CAT should be assigned jurisdiction over more common and pressing disputes like chargebacks per the process contemplated by the unproclaimed section 84 amendments discussed above. This major condo law improvement is critically important and long overdue. Proclaiming the improved section 84 of the Condo Act would:

a. Set a fixed and predictable way for condo corporations to post chargebacks to units, notify the owners of the amounts, reasons and supporting documentation in a certain fixed way (perhaps with a good prescribed form, and then allow owners a certain time (like 30 days)) to pay them or dispute them effectively and cheaply, after which the owner is deemed to be liable to pay the chargeback.

b. Permit resale transactions of units with disputed chargebacks to take place in an orderly way, with certainty for vendors and purchasers – and condo corporations.

c. Avoid condo lien scenarios for unpaid chargebacks. Liens add major cost and complexity to collection of most chargebacks and are burdensome to unit owners.

d. Help unclog our courts by diverting low-value money cases while they are still small to CAT, a specialized body well-suited (indeed, designed) to settle and decide such cases quickly and affordably – this is precisely what CAT was built for.

e. Address a daily friction point for condo corporations and unit owners, as chargebacks are currently not handled universally nor in a streamlined way, which makes costly liens and court challenges inevitable, or leads to condo corporations foregoing small chargebacks that may not be worth pursuing in the current dysfunctional system, involving condo liens and superior court cases and high legal bills.

f. Address a very common class of dispute that presently cannot be resolved easily, quickly or cheaply. This is a more pressing and impactful access to justice issue for all stakeholders, compared to disputes over owners’ meetings, as recently proposed by government and strenuously opposed by ACMO and CCI.

g. Advance CAT’s evolution toward the goal envisioned by the working groups, expert panels, stakeholders and parliamentarians who supported its creation.

h. Develop the law about chargebacks and encourage developing and following best practices for handling chargebacks. This makes condo operation more predictable, transparent and equitable.

In conclusion: The status quo is not tenable

The fact that chargebacks, related disputes and collection of such chargebacks cannot currently be handled in a streamlined, efficient way is a major disservice to condo corporations and unit owners alike, and needlessly adds costs and complexity to these cases, which, as mentioned above, are often very simple and involve small amounts.

All condo stakeholders need to loudly voice their concerns and call for government to enact the section 84 changes. Condo boards, managers, unit owners and the public at large deserve better than the current inefficient state of affairs.

There are many proactive ways you can participate, including answering all government requests for feedback, making your own personal submission to the government, supporting the efforts of CCI and ACMO by joining their legislative committees, and, during election years, asking your local candidates if they support adopting unproclaimed changes to the Condo Act.

In the end, a consistent process for chargebacks will result in a bold win for all stakeholders.

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Chris Jaglowitz of Common Ground Condo Law has practiced condo law for over 20 years. He assisted the government with its review of the Condo Act, which led to many amendments in 2015, and he continues to recommend improvements.
         
About Chris Jaglowitz: https://commongroundcondolaw.ca/about-us-chris/
 

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