Part 54 published on 01/05/16
Termination of agreement entered into by developer-controlled Board was a change to the common elements requiring a vote of owners
Prior to turnover, the developer-controlled Board entered into a “Renewable Energy Agreement” for geothermal services. Following turnover, the new Board purported to terminate the agreement pursuant to Section 112 of the Condominium Act, 1998.
The developer and supplier challenged the termination of the agreement, arguing that, in addition to the special procedures (to terminate such an agreement) under Section 112 of the Act, the termination would also involve a substantial change to the common elements requiring a two-thirds vote of the owners (under Section 97 of the Act). The Court agreed. The Court said:
The purpose of s.97 is to require a condominium corporation’s board to obtain approval from the unit owners before it authorizes work that is outside the ordinary course of simply maintaining the condominium building. In this case the Court finds that what is being contemplated here falls outside the ordinary course of simply maintaining the condominium building…The Court notes that s.112 permits the board of a condominium corporation to terminate certain contracts within one year of the turnover meeting. However, there is nothing in that section or in s.97 or any other part of the act that permits the board to ignore or override s.97 when the termination of the contract at issue would result in a substantial change within the meaning of s.97…[If the agreement is terminated] The applicant will have to purchase the existing geothermal system from the supplier or purchase a new geothermal system, which by any measure will cost hundreds of thousands of dollars and will far exceed the 10% threshold for what constitutes a “substantial change” under s.97.
The Court ordered that a meeting of the owners be held. If the required two-thirds vote did not pass, the agreement would remain in effect.