New Condo Law Passes First Reading

Will the new Bill provide a solid foundation for condo owners' rights?

Condominium legislation was introduced in Alberta in the 1960's.  Although popular acceptance of this form of home ownership grew slowly, there are now more than 8,000 condominium corporations in the province, and condos make up 20% of homes sold in Alberta every year.  With rapid increases in population and rising real estate prices, the province faces a potential shortage in affordable homes, a problem that is particularly acute for the large numbers of young couples and families moving to Alberta for jobs.  Municipal governments in the larger cities are implementing policies that favour urban density in an effort to combat sprawl, and the construction of condominium buildings is consistent with that goal.

Need for Reform

Many new condominium buildings and condo conversions have appeared on the market in recent years, but condo owners, developers, realtors, and lawyers have suggested that the existing legal framework is out of date.  The Alberta Condominium Owners Association is concerned about the lack of professional standards and licensing for building managers.  Purchasers and their realtors complain that it is difficult to obtain documents on a property in a timely fashion from boards and building management.    Purchasers of new units don't always get all the information they would like to have, and existing owners can be hit with unexpected special levies for building repairs and other costs.  Condo owners and condo corporations have to resort to costly court proceedings to resolve disputes.

The Condominium Property Amendment Act

In May of this year, the government introduced a bill to improve the protections provided to condo owners under the Condominium Property Act.

According to Doug Griffiths, Minister for Service Alberta at the time, "Buying a condo is an affordable option for Albertans entering the housing market and is often their first real estate experience.  After careful review and discussion with stakeholders and Albertans, our government will update the Condominium Property Act to make it easier for owners and builders to understand their responsibilities on the sale of condos."

The original bill died on the order paper when incoming Premier Jim Prentice prorogued the Legislature in the fall, but the amendments were reintroduced as Bill 9, the Condominium Property Amendment Act, which passed first reading on December 1.  Stephen Khan, the new Minister responsible for the Bill, has expressed the hope that the Bill will pass in the current sitting.

New Disclosure Requirements

The amendments would improve disclosure requirements to include a final date by which the unit is to be ready for occupation and a proposed budget for the new condominium corporation.  The developer is also to provide a copy of the New Home Warranty where the corporation is to be covered by the warranty.

Where an existing building is being converted into condominiums, there is a concern that repairs that are needed due to the age of the building may not be apparent to buyers.  Under Bill 9, the developer has to obtain a Building Assessment Report and summarise the findings for unit purchasers.

Special Assessments and Caveats

Under the current law, condominium owners can be required to pay substantial assessments for building repairs, and there have been cases in which owners complain of a lack of notice regarding impending levies.  Various charges imposed by the board can be registered against an owner's title, even if the amounts are in dispute, and the registration of a caveat makes it difficult for the owner to sell or finance his unit.

These problems are addressed in Bill 9.  Existing owners will be protected by amendments that limit the situations in which the condo board can impose a special levy.  The board will be required to provide owners with information about a proposed levy in advance, and the board will have to hold a special general meeting if 15% of the owners ask for one.

In addition, the registration of a caveat for unpaid contributions will be restricted to those contributions that are permitted under the Act, and that have been found by a court to be valid.  The legal fees and other charges that can be included for the preparation, registration, and discharge of a caveat are capped by the amendments.

Condominium Management

Under Bill 9, the Real Estate Council of Alberta is appointed to regulate condominium managers.  It is intended that RECA will establish standards for education and training for property managers in this sector, and that building managers will have to be licensed.

The specific licensing requirements and professional standards for managers are not set out in the amendments, however.  These matters will be dealt with in regulations that are to be implemented after consultations among RECA and various stakeholders.

Dispute Resolution

The amendments would establish a new Tribunal to hear disputes between unit owners and condo corporations.  The Tribunal will start in a limited geographic area (probably Edmonton and Calgary), but could eventually be expanded to other parts of the province.

It is intended that disputes involving money issues such as common area charges, as well as parking, pets, noise, and other operational issues, will be dealt with by the Tribunal.  Disputes over title, such as foreclosure or changes to the condominium plan, will continue to be dealt with in court.

Important details regarding the jurisdiction of the Tribunal are left to the regulations, so it is unrealistic to expect that the Tribunal will be up and running as soon as the amendments are passed.

The Regulations

Minister Khan hopes that regulations will be put in place within a year of the passage of the Bill.  A consultation process has to take place first, however, so it is unclear when the reforms promised by the Government will be fully implemented.

Representatives of condominium owners have expressed concern that the amendments in their current form are incomplete, and that too much has been left up to the regulations.  The Alberta branch of the Canadian Home Builder's Association has given its blessing to the new Bill, however, and expressed a willingness to work with Minister Khan to develop a set of regulations that "meets the needs of homebuyers".

The Conservative government is in a position to move Bill 9 through the legislative process quickly, provided it makes this a priority, and the government's intentions should become clear over the next few months.


Contact Richard Hayles at Billington Barristers:

(403) 930-4106

RHayles@BillingtonBarristers.com

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Any legal information provided is general in nature and may not apply to particular situations. It does not constitute legal opinion or advice. Please consult your lawyer regarding your specific legal issue.

Insurance Agents Can't Compete Against Former Brokerage

In Renfrew Insurance Ltd. v. Cortese, the Alberta Court of Appeal upheld an interlocutory injunction that prevented two insurance agents from soliciting customers and employees from their former employer.


Enforceability of Non-Competition Agreements

In cases in which an employer asks the court to stop a former employee from competing, the key issue is usually the legal validity of the non-compete clause in the employment contract.  Since a non-compete clause restrains trade and can prevent the former employee from earning a living, courts often declare them unenforceable on public policy grounds.


The law does recognize that there are circumstances, however, in which a non-competition agreement is needed to protect the employer's interests, such as when the employee has gained access to trade secrets and developed relationships with long-term customers in the course of employment.  Seeking to strike a balance between the interests of the employee and the employer, the courts scrutinize non-competition clauses carefully, upholding them only when they are reasonably necessary to protect the employer's legitimate business interests.

This analysis normally focusses on the geographic and temporal scope of the non-compete.  If the clause would prevent the employee from working in areas where he was not engaged by the employer, or seeks to keep the employee out of the market for a lengthy period of time, it can be struck down.






In the Renfrew Insurance case, insurance agents Cortese and Reed each signed a Unanimous Shareholder Agreement (the "USA") in order to become part owners in the broker, Renfrew.  The USA contained a restrictive covenant that prevented them from competing in the insurance business within 60 km of Renfrew's Calgary office for 6 months after the termination of employment.  The covenant also stated that they would not solicit any of Renfrew's customers or employees for 18 months.






In January of 2014, both agents took jobs with one of Renfrew's competitors, BFL Insurance Services ("BFL").  They immediately started to work out of BFL's Calgary office, claiming however that they were servicing customers in Edmonton, Canmore, and elsewhere in Alberta and not within the 60 km radius prohibited by the covenant.  Two Renfrew customer service representatives who had previously worked with Cortes and Reed joined BFL.  Furthermore, at least two former Renfrew clients switched to BFL, although these clients were being served by another BFL agent and not by Cortese or Reed.






Test for Injunctive Relief




In order to obtain a pre-trial injunction enforcing a non-compete clause, the employer has to pass a three part test:






1.     Is there a strong case that the clause is legally valid, and that the employee is in breach?






2.     Will the employer suffer "irreparable harm", meaning losses that can't be adequately compensated by an award of monetary damages, if the employee is allowed to compete until trial?






3.     Does the balance of convenience between the employee and the employer favour the injunction?






The judge who heard the original application concluded that the covenant against competition was reasonable in scope.  In reaching this conclusion, he took note of the fact that the clause appeared in a shareholders' agreement rather than in an employment contract, so the contract was more like a commercial transaction between partners in a business than a conventional employer-employee relationship.  He also concluded that the agents were not pressured to sign the USA, that signing was not a condition for their continued employment, and that they had independent legal advice.






The application judge held that the restriction on soliciting Renfrew customers was reasonable, having regard to the importance of the "book of business" in an insurance brokerage business.  It was also significant that the two agents had built their "niche" in the business with Renfrew's assistance.






Given that two other Renfrew employees had left to join BFL, and that two customers had switched brokers, the application judge was prepared to infer that the agents were in breach and that the threat to the Renfrew business was serious enough to constitute irreparable harm.






The restrictive covenants in this case specified that damages would not be an adequate remedy, and this was another factor that favoured the injunction.






Standard of Review on Appeal




In granting or denying an interlocutory injunction, the application judge is exercising judicial discretion.  An appellate court will defer to the judge below unless he decided the case arbitrarily or applied wrong legal principles.  The interpretation of restrictive covenants is a question of law, reviewable on a standard of correctness, but where factual findings are needed in order to apply the clause, the findings of the judge should be upheld in the absence of palpable and overriding error.






In other words, in this kind of case, the Court of Appeal will uphold the decision of the application judge unless it is clearly wrong.  The Appellate Court felt that intervention was not justified, and dismissed the employees' appeal.




Renfrew Insurance Ltd. v. Cortese, 2014 ABCA 203

Contact Richard Hayles at Billington Barristers:

(403) 930-4106

RHayles@BillingtonBarristers.com

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Any legal information provided is general in nature and may not apply to particular situations. It does not constitute legal opinion or advice. Please consult your lawyer regarding your specific legal issue.



Condo Corp Ordered to Investigate Suspected Construction Deficiencies

The Condominium Corporation is responsible for the control and management of the common areas of the building, and has an obligation to keep the common property in a state of good repair: Condominium Property Act, s. 37.  In a recent case involving a condominium complex in St. Albert, a Master of the Alberta Court of Queen's Bench held that this duty includes an obligation to open up walls to look for suspected deficiencies in the original construction of the building.

 

The Applicants noticed cigarette smoke infiltrating their condominium unit from the unit below.  As one of the Applicants was allergic to cigarette smoke, they hired an engineering firm to investigate the problem.  When the engineers opened a bulkhead in the lower apartment they discovered that the fire separation between the two units had never been installed.  Proper fire separation was added in this area, which reduced but did not eliminate the smoke problem.  The engineering firm submitted a report indicating that the cause could be a lack of fire separation in a second bulkhead that had not been opened for inspection.

 

There were no "as-built" drawings for the complex, so the only way to determine whether or not the fire separation was in place was to open the second bulkhead for further inspection.  The Respondent Condominium Corporation refused to undertake the cost of this inspection on mere suspicion, citing a concern for the inconvenience the work would cause for the lower unit owner.

 

The Master concluded that the evidence did not prove, on a balance of probabilities, that there was inadequate fire separation in the second bulkhead, but it did raise a case for further investigation.

 

The legislation imposes a duty on the Corporation to "keep" the common property in good repair, and to "maintain" the property of the corporation.  Although on a literal interpretation this does not seem to extend to a duty to investigate for hidden defects, or to correct deficiencies in the original construction, it is well established that condominium statutes are remedial legislation that should receive a liberal interpretation.  The Master concluded that the corporation cannot just preserve the existing state of the building, or maintain the status quo, especially if this could endanger the safety of unit owners: "The statute and the by-laws impose not only a duty to maintain, but an obligation to correct deficiencies or, at the very least, to investigate and bring the conclusions to a meeting of the owners."

 

The Master issued a broad order requiring the Corporation to open and inspect the second bulkhead to confirm that there was adequate fire separation meeting all Building Code requirements.  In addition, if the fire separation proved to be lacking in this second area, the Corporation's Board was to consider whether additional investigations were required in other parts of the building.

 

Construction deficiencies in condominium buildings are unfortunately too common.  Defects may not be apparent at the time the condominium is registered and title to the common elements is transferred to the Corporation, however, as the building envelope and internal drywalling are normally complete by that time.

 

In a typical case a hidden defect affects multiple units, and the Board is prepared to undertake investigations to determine the nature and extent of the suspected problem.  Here, a problem that could be widespread in the building, with disastrous consequences in the event of a fire, was having an immediate impact on only one unit.  It will be interesting to see if this decision is applied in other cases, and if the principle established is extended from matters that could impact health and safety to cases in which a single owner is concerned about the comfort or the appearance of his unit.

 

Hnatiuk v. Condominium Corporation No. 032 2411, 2014 ABQB 22


Contact Richard Hayles at Billington Barristers:

(403) 930-4106

RHayles@BillingtonBarristers.com

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Any legal information provided is general in nature and may not apply to particular situations. It does not constitute legal opinion or advice. Please consult your lawyer regarding your specific legal issue.