External Vents, Balcony Enclosures, Insurance Trustees and Short-term Rentals

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1 ASK THE PROS External Vents, Balcony Enclosures, Insurance Trustees and Short-term Rentals By the ACMO Associate Members Committee A panel of experts answers questions of interest to property managers and condominium boards of directors. The following are some of the questions submitted and the responses provided. Q. Each unit of a 21-unit condominium townhouse complex has a gas-fired furnace and water heater. The air intake and exhaust for these systems extends through the exterior side walls to the outside. The exterior of the side wall is a common element. The furnaces, water heaters and interior portions of the vent piping are not common elements. All systems and piping were installed by the builder. Would the portion of the vents outside the exterior wall be common elements? Does the condominium board have the right to modify the external portion of the vents in a manner that subsequently causes severe damage to the water heater, without consulting with or notifying the unit owner? A. The first question is whether those sections of the furnace and water heater vents that extend beyond the unit boundaries form part of the unit or part of the common elements. This answer can be found in the condominium plan and in Schedule C of the declaration. It is common to find a provision to the effect that such vents, where they serve one unit only, are part of that unit. In the absence of such a provision, or some other provision that clearly answers the question one way or the other, I would suggest that the boundary is decisive and the extensions of the vents are part of the common elements. Regardless of the ownership of the vents, you should also check the text of the declaration for provisions that might assign maintenance responsibilities to the corporation or to the unit owners. These provisions may well have a bearing on the second question posed, regarding the right to modify the vents. The second question addresses damage done to water heaters as a result of modifications carried out to the vents by the corporation. This raises, I believe, two issues. Firstly, does the corporation have the authority to make modifications to the vent? Secondly, is the corporation responsible for improper modifications? The corporation s authority to make modifications to the vents depends on the terms of the declaration referred to above, including any provisions of the declaration that assign relevant maintenance obligations. Other circumstances, such as any effect of the vents on other components within the common elements and original design or installation defects, may also be relevant. With respect to the second issue, the corporation would always have potential responsibility for any repairs or modifications carried out improperly, with or without proper authority. These are general comments on a situation that appears to be very dependent upon specific facts and documents. I would strongly recommend that these parties seek legal and technical advice. Response by Barry R. Scott, a lawyer who practises law in London with Scott, Petrie, Brander, Walters & Wright LLP. He is currently a national and Chapter director with CCI.

2 Q. Can the sliding glass doors on fully enclosed balconies be removed between the balcony and the living room of a unit and still be in compliance with the fire code? A. The fire code does not have any requirements with respect to enclosed balconies; however, Ontario s Building Code (OBC) is relevant with respect to this issue. It is not clear from the question, but for the purposes of this discussion, the assumption is that the unit is located in a highrise building (six or more stories) and the balcony enclosure already exists (whether part of original design or a retrofit). When considering the removal of the sliding doors between the interior of the unit and the enclosed balcony, three main issues must be addressed. Structure of the Enclosure. The exterior wall (including glazing systems) of the balcony enclosure must be reviewed to determine if it was designed to meet the requirements of the OBC in regards to insulation, air/vapour barrier and water penetration issues. If the sliding door is removed, the exterior wall of the unit is moved out to the plane of the balcony enclosure wall. If the enclosure wall was not constructed as an exterior wall, it is not likely to provide the required levels of insulation, nor will it incorporate proper air and vapour barrier systems. It may also lack the required protection in terms of water and moisture penetration from the exterior (e.g., rain and snow). The OBC requires that interior spaces be insulated from exterior spaces to minimize heat loss. This includes the window or glazing system utilized in the enclosure. Many balcony enclosures utilize single glazing only, as they were not intended to serve as the exterior wall of the building. If this is the case, the glazing systems may have to be upgraded prior to removing the sliding door. The enclosure may not be equipped with air or vapour barriers to aid in reducing air and vapour movement through the wall assembly. If the balcony is opened up to the interior of the suite, warm, moist air from the unit may easily pass through the assembly, resulting in high amounts of heat loss. This in turn may create moisture condensation within the assembly, causing damage to structural or insulated components. Heating, Ventilation and Air Conditioning. Depending on whether the enclosed balcony was part of the original design for the building, the balcony may not have been considered part of the floor area of the unit when designing the heating, ventilation and air conditioning systems. Before removing the sliding door, the HVAC systems should be reviewed to determine if the existing systems have the capacity to condition the additional space in the balcony area. Fire Safety. On highrise buildings, external balconies are often used to satisfy the OBC requirements in terms of areas of refuge from smoke during a fire. If the balcony enclosure was constructed around an existing exterior balcony and the building is not equipped with the necessary systems, removing the sliding door may reduce the building s fire safety provisions. This would normally not be a consideration if the enclosed balcony was part of the original design. Whether you are considering enclosing an existing balcony or removing the sliding door between a unit and a previously enclosed balcony, it is important to review a number of important technical issues to ensure the continued enjoyment of the unit and adjacent balcony space.

3 Response by Kevin Shaw, BTech (Arch Sc), a project manager with the consulting engineering firm Coulter Building Consultants Ltd., Consulting Engineers & Building Scientists, based in Burlington. Q. For many years, several thousand Ontario condominium corporations have paid hundreds of thousands of dollars in annual retainers to insurance trustees. I have heard or read somewhere that in all those years, very few, if any, insurance claim settlements have been paid through trustees. The Ontario Condominium Act, 1998, section 114 states that despite the wording of an insurance trust agreement or anything in the declaration, the corporation may terminate an insurance trust agreement by giving 60 days notice. Does this mean that condominium corporations are no longer required to have an insurance trustee? A. There is nothing in the new Condominium Act that requires a condominium corporation to have an insurance trustee. You are correct that section 114 does state that a condominium corporation may terminate an insurance trust agreement with a trustee, providing 60 days notice. Before exercising this option, however, a condominium corporation would be best served by consulting with an insurance specialist to review the specific conditions of its insurance coverage. Response by Brian M. Jenkins, a lawyer dealing with condominium law at the law firm of Keyser Mason Ball, LLP, in Mississauga. Q. Please outline the steps that a condominium board can take to limit, control or even stop short-term rental of units. We have one unit in our complex that is rented out, fully furnished in much the same way as an executive suite, on short-term stays three months at a time. The owner boasts of getting much higher rental rates. Can we attach restrictions as to how long a unit can be rented or leased out? Other owners in this complex are not in favour of this happening at all. A. The use of residential condominium units for transient, hotel-like use is a growing concern for many Ontario condominium corporations and is no way limited to urban centres like Toronto. Although this issue was first litigated in 1985, it has really come to prominence over the past two years, spurred on perhaps by the generally favourable economic conditions. If transient use is a concern, and even if it is not immediately considered a problem, the condominium corporation should take active steps to address the issue immediately. If transient use is viewed only as a potential concern, the condominium corporation should consider taking steps to clarify its position on the matter. In condominium corporations where hotel-like, transient use has been a problem, residents have experienced elevators and hallways strewn with linen and maid s carts, buses unloading guests for mass registrations in the building s main lobby, breaches of security, increased staff turnover, the coming and going of escort service employees and the like. Unfortunately, the problem often becomes rooted during development of the condominium, and is already firmly in place by the time the declarant turns the corporation over to its owners. In the 2001 case of Skyline Executive Properties Inc. v. Metropolitan Toronto Condominium Corporation No. 1280, the court held that: The choice of location of

4 one s private residence is one that is influenced by many discreet factors including security, privacy and maintaining the value of one s investment. It is not unreasonable for the owners to say that the recreational facilities are less inviting when they run the risk of encountering absolute strangers. Nor is it unreasonable for them to say that the transient occupants treat the facilities as if they belong to a hotel. They have no interest in the long-term upkeep, maintenance and repair. They do not know the rules and they have no vested interest, as do owners and long-term residents, in abiding by them. There are four main steps that a condominium board can take to control, or even stop, short-term rental of units: STEP I: The condominium corporation s declaration should be reviewed for restrictions placed upon the use of units. Very generally, use restrictions are drafted in one of three forms: 1. Use as a private, single-family dwelling only. This is the safest wording, though the meaning of the phrase is currently before the courts. 2. Use as per municipal bylaws. The courts have held that residential-use restrictions in a city s bylaws do not prevent the hotel-like use of units. However, a rule passed by a condominium corporation can restrict hotel-like use and thereby clarify any ambiguity. 3. Use expressly permitting short-term, transient rentals. In this case, there is little that can be done to restrict the short-term, hotel-like use of units with the exception of amending the condominium corporation s declaration. STEP II: If possible, the condominium corporation should have a rule passed that would define and prohibit short-term tenancies (e.g., any tenancy of less than six months) but allowing for limited exceptions so any unit owners taking an extended holiday (e.g., snowbirds) would not be prevented from leasing their units. The condominium corporation would be well advised to have its solicitor draft the rule in order to incorporate specific court decisions on this issue in order to make the rule as bullet proof as possible to court challenges. STEP III: The rule, as with all rules, must be consistently and reasonably enforced. Failure to do this may make it difficult to rely on the rule later. STEP IV: A condominium corporation should maintain strict control, and keep accurate records, of who comes and goes from the building, and otherwise ensure full compliance with the condominium corporation s rules. With regard to any unit owner who may boast of receiving much higher than normal rent, bear in mind that this comes at a price, which is effectively being paid in part, directly or indirectly, by other owners. This price may include factors such as increased common expenses due to the additional wear and tear or other costs associated with increased turnover of transient guests who have no vested interest in the condominium, the payment of property taxes (a short-term, hotel-like rental operation should be required to pay hotel and related business taxes) and the efforts of voluntary board members and professional property management in operating the property. In addition, condominium owners should also consider the potential loss of property value associated with units in a complex where a hotel-like use is permitted, especially on a wide scale. Practically speaking, the economic interests of long-term unit owners and those offering short-term, hotel-like tenancies are diametrically opposed, in the sense that the latter are likely much more interested in exploiting the condominium complex for short-term income gain versus preserving the capital investment in the long-term.

5 In recent months, a coalition of condominium corporations has organized to bring attention to this matter, and generally to offer support to condominium board members on a variety of issues. Inquiries can be made to Mr. Cam Miller by (miller.cameron@rogers.com). Support on this issue has been received at the municipal level from City of Toronto Councillor Pam McConnell, and at the provincial level from George Smitherman, MPP. Short-term, hotel-like use of condominium units is also seen as eroding the viability of the hotel industry and the tourism and hospitality industry. Support has also been forthcoming by both the hotel industry and the United Food and Commercial Workers Local Union. At the municipal level, a team has been established to review this situation as it affects issues such as taxation and zoning. We also hope to see a private member s bill introduced to amend the Condominium Act, 1998 in order to establish parameters on this issue before the end of November Anyone interested in supporting change to the Condominium Act, 1998 to restrict the transient hotel-like use of residential condominium units should contact his or her local area MPP to insist on support of this matter. Response by Richard Elia, a Toronto-based lawyer who practises primarily in the area of condominium law. He also represents MTCC 1385 (Phase 2 to MTCC 1280) in its ongoing disputes with Skyline Executive Properties, and is assisting in the drafting of the private member s bill referred to in the above response. The information and advice contained in Ask the Pros are brief summaries of complex topics that are provided by the authors and the publisher without any liability whatsoever. Readers should obtain expert advice in specific situations.