“Water, water everywhere,” is not what you want to be thinking as you’re standing in the living room of a townhouse condominium unit or peering into the lobby of a high-rise. Water inside any attached housing structure means likely damage – furnishings and fixtures, floors and walls; it also means the possibility of rotting wood and mold risks; it means potential liability, and that something has gone terribly wrong.

When property managers and board members worry about weather-related water damage, they are usually thinking about the damage caused by flooding at the bottom of a building, or by a leaky roof at the top. But engineers think in terms of “water intrusion,” which may result from a flood or a leaky roof, but is more likely caused by construction flaws in a building’s envelope – the components that separate the interior from the exterior. Flooding is an act of nature. The conditions that permit water intrusion are man-made. Windows and doors sliding, balconies and surface “transitions” are particularly problematic.

Windows and Siding

It is not the type of windows or siding you select that matters most; it’s how well they are installed. A low-quality product installed correctly can be perfectly water-tight; the best quality product installed poorly will imitate a sieve. One of the most common installation mistakes is the incorrect laying of building envelope materials, such as the house wrap, the flashing, or the siding itself. When this occurs, water isn’t shed properly from one material to another; it accumulates behind the materials and penetrates the structure. Incompatible materials in the building envelope can also permit water intrusion by creating temperature variations that can cause sealants to fail. Failing to recognize how different products perform is another common problem. Brick veneer can certainly look quite nice on buildings but brick isn’t watertight, and if the contractor fails to install “weep holes” through the veneer, the water will not drain properly. If water accumulates behind the veneer, there is a good possibility for mold to form.

Balconies

Outdoor balconies are a common feature. Many balconies are on the same level as the living room floor due to an accessibility requirement, to permit ease of access for someone in a wheelchair. But in a heavy storm, wind-driven rain may be forced under the door sill and into the living room. Some balconies have walls on all sides. A system of drains and pipes conducts water to the ground when it rains. These same pipes may possibly freeze in the winter causing the water to accumulate on the balcony and then flood the attached living rooms.

Cool Designs

Varying materials, using different shapes, and inserting angles all add architectural interest to a building; but every angle you create, every transition you make from one shape or material to another creates a point at which water may intrude. Transition or termination points represent a tiny portion of a building’s envelope, but they account for much of its vulnerability to water. And they don’t always receive the extra water-proofing they require.

 From the Inside Out

While many water intrusion problems result from something builders fail to do, some are caused by what builders, or the subcontractors working for them, do. Consider the plumbers, electricians, and HVAC mechanics who come into a building that has been framed, wrapped, and made water-tight and poke holes through that nice, water-tight surface. The wall penetrations are necessary to make connections that run from the inside out, but they also have to be properly waterproofed, and they often are not. That’s why the small details that can create immense water intrusion risks are so often overlooked.

Controlling the Risks

Water intrusion is a potential risk that the boards and managers of communities can reduce by being mindful, diligent, and proactive.

1. Don’t ignore early signs of water intrusion.
2. Bring in experts at the outset.
3. Don’t assume water intrusion in one unit is an isolated problem.
4. Take care of preventive maintenance.
5. Consider flooding risks.
6. Don’t look for shortcuts.

If the problem is systemic, you will have to deal with it systemically. There are no Band-Aids for water intrusion. If transitions on the building’s surface weren’t set properly, you have to re-do them. If the windows weren’t installed properly, you may not have to replace them, but you will have to re-install them. These measures are going to be expensive. But they will be far less expensive than dealing with the damage water intrusion can do to buildings, to the personal property, health of residents, and to the finances of your condominium. 

Reach out to your condominium board, property manager, or engineer today if you have any questions, or need further guidance on handling water intrusion and potential damage.

On September 23, 2021, the Ontario Government announced that the Condominium Authority Tribunal (CAT) would have its jurisdiction expanded again in 2022. As a recap, its jurisdiction was originally limited to disputes related to record requests when it first opened its doors on November 1, 2017. On October 1, 2020, its jurisdiction was expanded to include disputes about parts of the declaration, by-laws or rules of a condominium related to 1. pets or animals; 2. vehicles, parking, and storage; and 3. indemnification of the condominium, an owner or mortgagee in relation to these disputes.

On January 1, 2022, the Condominium Act, 1998, was amended to expand the jurisdiction of the CAT to include certain nuisances. Section 117 now reads:

Prohibited conditions and activities

117(1) No person shall, through any act or omission, cause a condition to exist or activity to take place in a unit, the common elements or the assets, if any, of the corporation if the condition or the activity, as the case may be, is likely to damage the property or the assets or to cause any injury or an illness to an individual.

Same

(2) No person shall carry on an activity or permit an activity to be carried on in a unit, the common elements or the assets, if any, of the corporation if the activity results in the creation of or continuation of,

(a) any unreasonable noise that is a nuisance, annoyance or disruption to an individual in a unit, the common elements or the assets, if any of the corporation;

(b) any other prescribed nuisance, annoyance or disruption to an individual in a unit, the common elements or the assets, if any, of the corporation.

The other prescribed nuisance, annoyance, or disruptions described in subsection 117(2)(b) of the Act are described in section 26 of O.Reg. 48/01 as:

1.       Odour

2.       Smoke

3.       Vapour

4.       Light

5.       Vibration

To summarize, as of January 1, 2022, the CAT’s jurisdiction now includes:

1.       Noise

2.       Odour

3.       Light

4.       Vibrations

5.       Smoke

6.       Vapour

The CAT’s jurisdiction will also include disputes about the governing documents in relation to “any other type of nuisance, annoyance or disruption to an individual in a unit, the common elements or the assets, if any, of the corporation.” It will be interesting to see how this sentence is interpreted by the CAT and the types of other nuisances that may ultimately be heard by the CAT. For example, originally the proposed regulations included “infestations”. Will the CAT hear these disputes?

Like with the expansion of the CAT’s jurisdiction to include pets and parking disputes, the CAT’s jurisdiction has also been expanded to include disputes about indemnification related to the nuisance dispute. There has also been much talk lately about amending the CAT’s rules regarding cost recovery during disputes as the current rules discourage proceedings because the rules limit cost recovery even where condominiums are successful in proving an owner has not complied with the documents. As a result of the limited cost recovery, many condominiums have elected to ignore infractions rather than incur legal costs to enforce the documents. (Note: condominiums ignoring infractions should seek legal advice about the possible consequences).

Lastly, while the CAT now has jurisdiction over disputes in subsection 117(2) of the Act, it should be noted that the CAT does not have jurisdiction over disputes in subsection 117(1) of the Act. These disputes typically referred to as dangerous conditions or activities, continue to be heard by the Superior Court of Justice.  

Michelle Kelly
Lawyer, Robson Carpenter LLP

www.rcllp.ca

It’s that time of year again for the Annual General Meeting and the process of forming next year’s budget. The auditor happily noted that the condominium had a growing surplus in both accounts. A golden retriever with a goofy grin ran onto the stage. His owner read a flyer that showed the benefits of having a pet sanctuary.

Budgeting: Should last year’s surplus be used to fund a pet sanctuary? 

It’s that time of year again for the Annual General Meeting (AGM) and then comes the process of forming next year’s budget. 

AGM Meeting

The AGM began with the auditor taking the stage to present the audited statements. The auditor happily noted that the condominium had a growing surplus in both the general account and the reserve account. After the auditor had left the meeting, the president of the board opened the floor and asked the unit owners what they would like to do with the surplus funds. 

Unit Owner Discussion 

The serious accountant, fiddling with her laptop, informed the other unit owners that they could put the surplus into a GIC, but the interest rates had fallen since the pandemic started in 2020, so the benefit was minimal. She then suggested that they could decrease their monthly common element assessment fees for the next fiscal year or keep their fees locked at the same rate for the next few years.

The active triathlete piped up, suggesting that the condominium should install an Olympic-sized pool and gym with stationary bikes for spin classes. He went on and on about the health benefits of exercise until a golden retriever with a goofy grin ran into the room and escorted him back to his seat by tugging on his pant legs. 

The owner of the dog, a unit owner and humanitarian, took the stage. He read a flyer that showed the health benefits of having a pet sanctuary.

Pet Sanctuary

The room was abuzz with excitement, as many unit owners in that community loved pets. The board took this to a vote, knowing that they would need 66.67% of the owners to approve any change to the common elements. The vote was unanimous in favour of purchasing the pet sanctuary. 

Budgeting with a Surplus Balance 

At the next board meeting, the directors discussed how to form next year’s budget to plan for the coming year, as a budget is required by the Condominium Act to be included in the audited financial statements. The board followed these steps:​

1. They looked at the auditor’s financial statements. The auditor had let the board know that the corporation had one year’s worth of expenses as a surplus in the general fund. (Typically, accountants like to see ½ month to 3 months’ worth of spending as a surplus in the general fund). 
2. When forming the budget, they were told to work backwards. 
3. What were the known expenses? The landscaping contract was $35,520. Property management fees were $25,100. Insurance premiums were quoted at $9,000. 
4. What were the trends of increasing/decreasing expenses over the last five years? They saw a trend of water expenses increasing by $1,000 every year. Waste removal was also increasing by $2,000 each year.
5. The treasurer of the board added up the total expenses they were anticipating for the next fiscal year. 
6. The board member in charge of the pet sanctuary project had researched the costs of constructing the pet sanctuary and added the project, as a one-time expense line item to the budget. The board member had also researched the costs of maintaining the pet sanctuary and added another $1,000 to their budgeted utility expenses. The board debated decreasing security costs due to the additional security the pets provided. They decided to wait another year to get a more accurate measure of how the sanctuary impacted security costs. 
7. The treasurer observed the reserve fund study to see if there were any upcoming major repairs that they needed to consider. The corporation had been transferring the required amount to the reserve fund. There was appropriate funding for their reserve expenses and the treasurer saw no additional transfers required in the reserve fund study within the next three years. 

After doing this exercise to figure out their total expenses, the treasurer noticed that their budgeted expenses were higher than the total amount of fees that they collected in the prior year by $20,000. As a group they decided that they were comfortable keeping their monthly fees consistent with the prior year, resulting in a planned shortfall of $20,000 for the current year. After the initial construction of the pet sanctuary, they would have fewer costs in the subsequent fiscal year. Their plan allowed them to continue with a surplus of $80,000, which gave them enough cash flow to cover the costs of the year, paying all of their vendors on time.

Now that the board had the financial plan for the year, the pet sanctuary committee could start selecting which pets they would like to save. 

… If I was on the committee, I would definitely have chosen the monkeys first!

Jennie Buerkle CPA, CGA

Senior Accountant at RLB LLP

https://www.rlb.ca/