Appearance of Tom LePage FRI, CPM, ARP, RCM, Founder of Condo-Ology®, before the Ontario Legislative Standing Committee on Finance and Economic Affairs (Including Handout)

Re: Bill 106, An Act to amend the Condominium Act, 1998

Thursday, October 29, 2015

Standing Committee on Finance and Economic Affairs Re: Bill 106, An Act to amend the Condominium Act, 1998 Good morning Chair and Committee Members

My name is Tom LePage, and I have been in condominium management since my enrollment in a two-year George Brown Property Management Diploma Program in 1982.

Looking back I wonder where the profession would be if the industry continued its support for the program.

In today’s terms I would have been considered an Independent Portfolio Condominium Provider/Manager for the majority of my career; meaning, I was personally managing various condominiums corporations and shared facilities through my limited company.

Today I consider myself a Condominium Consultant another term for the Review to figure out.

Thank you for this opportunity.

Condo Ownership

In 1967 our Province passed condo legislation that allowed for a new kind real estate ownership in Ontario – Condominiums.

The concept was sold to the public including the government as affordable home ownership with the benefit of a carefree lifestyle since the maintenance and upkeep were done by others.

The concept had not been proven, and now some 45 plus years later, the long-term success of condo ownership remains unknown and continues to be a work in progress.

BUT what we have learned of condo ownership is that it is;

 

  • unnecessarily complicated,
  • expensive to own – the most expensive manner in which to own real estate,
  • has unlimited financial liability,
  • behaviorally restrictive
  • being used as an investment vehicle for many condo owners (originated as affordable home ownership)
  • an additional level of government (the Board) – The only difference between a condo government and the other levels of government in Canada is that a condo government has no ability to increase its tax base.

 

But other than that, condo ownership can work and does for (I hope) a majority of condo owners.

In the last few years, I have studied condo ownership in other legislated areas of the globe and regardless where – condo ownership is difficult. I am very pleased to report, with no hesitation what so ever; Ontario has the best overall legislation and soon to be even better, thanks to our Province’s proactive engagement review process and the incredible ongoing work of the provincial officials. So why so many issues? The simple answer is that there has been zero enforcement – Zip! It has been the Wild Wild West since condo legislation was introduced. The proposed amendments will create two necessary self-funded Delegated Administrative Authorities. These two Authorities are necessary if we want to see condo ownership maintain a strong presence in the real estate landscape of Ontario.

I am here today to express a few concerns, but my number one concern is the NonCondo Owner Stakeholders’ influence on the,

  • review process,
  • drafting legislation,
  • drafting regulations and implementation.

There are multiple stakeholders but only one shareholder – “the Condo Owners”.

The proposed Protecting Condominium Owners Act is consumer protection legislation for current and future Condo Owners and not for the benefit of NonCondo Owner Stakeholders. In particular the Boards of the Canadian Condominium Institute CCI

(Toronto) and their side kick, the Association of Condominium Managers of Ontario ACMO.

I was disappointed but not surprised that these two organizations Boards hired Lobbyists at the expense of their members to push their self-interest agendas.

In 1977 the Association of Condominium Managers of Ontario (ACMO) was formed and in 1982 the Canadian Condominium Institute (CCI) was established. These two organizations have had a combined 70 plus years to maintain and enhance condo ownership in Ontario and instead (in my opinion) they have become no more than very powerful, self-serving, marketing and networking organizations and the interest of condo ownership is secondary.

I am particularly pleased with the proposed attempt to separate CCI and ACMO with the creation of the Condo Authority and going forward, all of our concerns should be the influence in which CCI will have on the Condo Authority and ACMO with the Condo Manager Licensing Authority. Over the years CCI and ACMO have become intertwined, and I believe resulted in unhealthy relationships that are not in the best interest of condo ownership. There is a possibility that both of the newly created Authorities will have similar personas as Tarion if CCI and ACMO and their self-interest influence continue. Allowing this would be a disaster for condo ownership in Ontario

I ask all Committee members and government officials to continue to work as hard as possible, so this proposed legislation, future regulations and the implementation of the two Authorities is 100% for the benefit of future and current Condo Owners and not for the NonOwner Stakeholders, regardless of their influence and their paid lobbyists.

Upon reading the transcript of the second reading, it appears you will have your work cut out for you as it seems lobbyists have already been somewhat effective.

There were two particularly disturbing comments.

1. Mr. Pettapiece commented that ACMO education program is a proven system with a high set of standards for condo managers.

Not true – Maybe according to the Board of ACMO but just ask any Condo Board Member who has been involved with the fee management ‘merry go round’ and ask if they feel the RCM designation is proven?

ACMO education program is not proven and in my opinion, the RCM courses are designed for quantity and not for quality to fill underpaid positions of management companies.

I would like to share a quote from a long-term Director of ACMO,  “We CEO’s know what we can pay the managers based on the budgets set by the Boards of Directors.”

 

I do not call this professionalism.

An excellent example of keeping the bar low is ACMO first proposal for licensing an individual;

  • 8 hours of instruction before passing an exam,
  • theft of under $1,000 is acceptable and
  • then five years to complete the existing ACMO courses of a Registered Condominium Manager

This, is to enhance the profession?

I believe the 8 hours is now 40 hours (same as a security guard) and conviction of theft under $1,000 is no longer acceptable.

In comparison;

  • In BC it takes approximately 250 hours through Saunders School of Business to obtain a condominium manager license.
  • An Ontario real estate license requires 175 hours before receiving a license.
    I have been both a Realtor® and a front line condo manager and from my experience being a manager requires much more education than that of a Real Estate Agent.                                                                                                                                                                                                                                                                   Additional information:
  • The majority if not all of ACMO’s Board Members are owners, executives or district managers of management companies.
  • Management companies’ owners and executives have different objectives and needs than those of the front line condo managers. (Employers vs. Employees)
  • ACMO Board has granted several management companies to teach the ACMO courses internally and directly compete with our Provincial Colleges.
  • In most cases, management companies pay for their managers ACMO annual dues.

2. Mr. Balkissoon stated, “…the bad apples we have out there who are condo managers, the ones who create the fraud, and everything else that has been going on that condo owners have been complaining about, are not members of that organization.”(meaning ACMO)

With all due respect, the above statement is simply false and misleading.

Facts                                                                                                                                                                                

  • During the debate, Mr. McDonell mentioned the most recent publicized alleged 1.5 million dollar fraud in Hamilton-Burlington area. Contrary to ACMO media alert on May 22, 2015, stating; “Neither Brett Leahey nor his company holds membership in the Association of Condominium Managers of Ontario, nor does Mr. Leahey hold the recognized R.C.M. (Registered Condominium Manager) designation.” While technically true that Mr. Leahey was not a member of ACMO on May 22, 2015; the Alert failed to mention that during 2012 when the alleged frauds were occurring Mr. Leahey was a member of ACMO as a Registered Condominium Manager.
  • There are many other examples of improprieties of Members of ACMO, and currently, I am unaware of the impropriety of non-ACMO members.

Additional concerns/suggestions beyond the influence of Non-OwnerStakeholders

  • Legalese – The Government passed legislation to allow condo ownership which relies on 100% volunteerism to manage. We have to assist these 30,000 plus exceptional volunteers, and we can begin with language that can be understood by all and should not need individual legal interpretations.If legalese is necessary, the Act should have layperson’s explanations of the provision directly below the legalese.
  • Reserve Funds – The focus here is to make sure funds are available when various common elements are in need of major work or replacement. It is acknowledged by almost all participants of the Review that reserve fund funding and planning. The 2011 high-profile fraud case involving 20 million dollars (could be North America’s largest Condo fraud) which Mr. McDonell also mentioned, was an owner of an ACMO 2000 Certified Company are critical to the financial well-being of a condominium corporation. BUT for whatever reason there is a significant push that will allow Boards, without input from owners, to use reserve funds for unbudgeted energy technology. Mandatory tendering is a step backward especially, with so many alternatives to finance.
  • Borrowing – Borrowing is a slippery slope as a means of raising funds. Example – all governments. I am not suggesting eliminating borrowing, but there must be guidelines prepared to curb the practice of borrowing. If an owner cannot raise their proportion of necessary funds on their own, why do we think owners can afford the ongoing cost of interest and repayments through their Corporation which is at a much higher interest rate? Other governments realize that eventually there will be a larger tax base to pay for their borrowing which reduces the individual impact, but Corporations do not have the luxury.What is the value of a condo unit if the common monthly fees are greater than market rent
  • The cost of the Condo Authority – I cannot speak on behave of other Condo Owners but I feel that most Condo Owners, like myself, have no issues in paying $12.00 a year, but our concern is what’s next?My only suggestion is to make it mandatory that any funds required over and above the 12 bucks per condo owner must be user fees.
  • Condo Authority must be Proactive – In addition to the proposed objectives of the Condo Authority the Authority must be proactive and be continuously be seeking better governance and guidance for condo ownership. In time, the Authority should be able to assist the 30,000 plus Director Volunteers with the sharing of analyzed data information collected from the mandatory annual reporting of all Corporations
  • Condo Manager Licensing Authority

All costs of the operations of the Condo Manager Licensing Authority will be that of those seeking the various licenses to practice condo management which is perfectly understandable.

Unfortunately, in my opinion, due to ACMO Board’s self-interest influence, it is being proposed that Condo Manager Licensing Authority will be created from scratch at a great cost to the government and for the newly licensed managers who will be paying for the ongoing operating costs.

There is a better solution, both a proven solution and an existing solution, which other legislative jurisdictions have chosen. The solution would place those wishing to practice condo management under the existing and proven real estate industry regulator; the Real Estate Council of Ontario RECO which is an existing Delegated Authority.

ACMO Board has gone to great length in dismissing any suggestion of being regulated by RECO, which I believe is ACMO continuous belief that they can influence the Condo Manager Licensing Authority with their self-interest.

In addition to the capital costs saving to the tax payers and reducing operating cost saving; the proven experience of RECO would give the entire condo industry huge opportunity to be associated with the 50,000 licensed and regulated real estate sales individuals in Ontario.

Finally, please consider the benefit and impact if Realtors® had to have a Condo Real Estate License to sell resale condos.

(Note: It should be known that ACMO’s Board push for a Regulator was because they arrogantly thought they would be the Regulator or at bare minimum the licensing authority.)

  • ACMO Involvement

ACMO continues to report to its Members that they have partnered with the Government and will continue with their involvement with the future Condo Manager Licensing Authority.

ACMO stated in their presentation “ACMO looks forward to partnering with the newly formed DAA to provide reliable, knowledgeable professionals to fill the growing need of condo communities in Ontario.”

Clarity from the Province should be provided to the Registered Condominium Managers RCM and the public as to ACMO true involvement.

It is my understanding that ACMO may be providing their education material to the

  • ACMO and Trades (ACMO Associate Members)

One of the main concerns of Condo Owners (and rightfully so) is the coziness of the various trades and managers. Conflict or not, ACMO continues to enhance this perception in the manner in which the Board finances ACMO and the ongoing organization of after hour pubs night for managers, and the trades – absolutely no good can come from these socials.

Overall Associate Members contribute much more in mandatory annual dues than RCM voting members, and this does not include any Associate Members revenues from advertizing or sponsorships

Individual RCM annual dues are 50% less of that of an Associate Member o ACMO 2000 companies pay nothing to ACMO operations

Surplus is approaching 1.5 million dollars

  • Lawyers Involvement in the Various Future Tribunals – If there is a way to reduce or better yet eliminate legal representation (hence legal costs) then it is imperative that this must be done. Condominium Corporations and their owners cannot afford the costs of complexities lawyers often create.Providing legal advice is a private and highly profitable business.
  • Toronto’s Influence on the Process – ACMO has stated: “This is not MADE in TORONTO legislation for a made in Toronto problem.” This statement could be true, but I assure all; there are much fewer problems the further you move away from large municipalities. Why?It’s an attitude and can only be understood by those that don’t live within a larger municipality.                                                                                                                                                                                                                                                                                                This attitude could be caused by the smaller size of Corporations, or they are less complicated, or possibly more owners’ residents. I hate to state this, but my theory is that smaller municipalities do not have lawyers that strictly practice condo law for a living. There is an interesting article online interviewing two prominent Toronto lawyers (significantly involved in the Review) in the Lawyers Weekly called “Opportunities seen in booming condo market as reforms emerge.” This article link is http://www.lawyersweekly.ca/articles/2411 and should be read by all.
  • Court Appointed Condominium Administration – I do not believe the proposed legislation has dealt with Court Appointed Condominium Administration which is critical to assist those in desperate need. Our Courts are getting better at understanding condo ownership but unfortunately the current process is flawed. I think it would make sense to have the Courts and the Condo Authority to work hand in hand to provide a better solution for Corporations which are failing.

Transcript & Handout

oct-29-2015