Thursday, June 28, 2018

New Smoking Rules in Condos can put Investors in Jeopardy with their Condo Corp.

Are you a condo investors? If so, you need to be aware of the consequence of the new Federal and Provincial cannabis legislation and how it may affect your rights as a landlord and investor.

Many condos are passing Rules, amending Declarations or making By-law changes to deal with marijuana which will be legal to grow (up to 4 plants) and smoke in all residences in Ontario once October 17th arrives. Many condominium boards are being proactive and have contacted their solicitors to draft Rules or use other methods to outlaw cannabis before it becomes a problem. But many are taking the opportunity to draft Rules that outlaw ALL types of smoking, including tobacco products. And the ban extends to the units themselves, including exclusive use common elements such as balconies and terraces.

For the tobacco ban, it's generally agreed that a grandfathering provision needs to exist in order that these rules be enforceable, especially if the ban is enacted by way of a Rule change. Under the Condominium Act, in order for a Rule to be enforceable absent similar Declaration provisions, it has to promote the safety, security or welfare of the owners or prevent unreasonable interference with the use and enjoyment of the common elements and units. The rule has to be reasonable and consistent with the Act, with the Declaration and with the By-laws. There is also a right of owners to call a special meeting to contest the Rule change if 15% of the owners request such a meeting in writing.

But the general opinion of the legal community is that this type of Rule will be supported by the Courts, particularly where grandfathering has been made available to existing smokers. My own condo has just published an amended set of Rule for our corporation which includes such a ban of all smoking products, in all areas, and provides existing owners and tenants who smoke tobacco, 30 days to register as smokers. Those persons who register will be allowed to continue smoking of tobacco products in their units. Others will be subject to the new Rule. Cannabis, both smoking and growing, will be banned completely.

So what about you as an investor? Your current tenant "may" be able to get themselves on the grandfathering registry if your Rule allows grandfathering for tenants as well as owners. But when that tenant moves out, and a new one moves in, that new tenant will have to be a non-smoker. If they smoke contrary to the Rule, even on a balcony or terrace, the corporation can and will come after you to enforce compliance since the owner of the unit is responsible for their guests, tenants, invitees etc. with respect to compliance with the Corporation's Rules, Declaration and Bylaws.

So be careful. The new standard government lease (which I wrote about here earlier) must have a decent Appendix attached with clauses covering condominium obligations and smoking rules, including cannabis growing rules. So check out what your condo corporation is planning, and have your tenancy agreement properly drafted to allow enforcement at the Landlord and Tenant Board should the tenant fail to comply. Otherwise you could end up with a compliance application against YOU at the Superior Court costing you tens of thousands of dollars to defend.

For proper lease clauses to protect you under these and other circumstances, our landlord forms package has the best Appendix in the industry, full of clauses dealing with every type of tenancy situation, and you can find it here.

Landlord Forms Package with Lease Appendix

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