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Anarchy in the sky: The condo dream becomes a nightmare

If you're a baby boomer and/or empty-nester living in suburban Toronto, you've no doubt considered ditching the house and moving into a sleek downtown condo. You may already have made the leap to take advantage of the rich cultural menu that city life offers. The burbs were great for raising a family and holding backyard barbecues. But they're deathly boring and dining out often means choosing between Swiss Chalet and East Side Mario's.

If you're a first-time buyer, a condo is probably your only option. Prices of a detached home in the Toronto and Vancouver regions are so off the charts that the most millennials in those cities can aspire to rent or own is a 500-square-foot glass box in the sky. Which is fine, for now anyway. Who needs a yard or basement when you spend your days and nights out on the town?

For condo builders, empty-nesters and millennials are the gifts that keep on giving. Coupled with provincial and municipal densification policies, they are responsible for a tripling of the number of condo units in Ontario since 2001. There are now more than 750,000 of them – and counting, since more than half of all new homes under construction in the province are condos.

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What policy makers failed to realize in devising their "smart growth" policies is that, in engineering the condo boom, they were effectively creating a fourth level of government with few of the checks and balances that prevent (most of the time) federal, provincial and municipal administrations from running amok. Bad or unethical governance means that, instead of the dream of hassle-free home ownership, condos often end up becoming a living hell.

Condo towers are essentially city-states unto themselves, and they're often engulfed in civil warfare. Board elections are subject to all kinds of abuses. Cases of collusion among cliques of owners to gain control of the board are common. A Globe and Mail report on one apparent instance of undisclosed co-ordination among three investors vying for board seats at several different condo corporations in Toronto comes as no surprise to anyone who has witnessed condo politics up close.

Condo boards can oversee multimillion-dollar budgets, the hiring of managers and the awarding of repair and maintenance contracts, with little transparency. They determine monthly condo fees paid by owners. They are supposed to act in the best interests of all owners; they often put themselves first.

For investors who rent out their units – roughly half of Toronto condo owners do so – that usually means making money rather than worrying about quality-of-life issues. Investor-owners typically love sharing services such as Airbnb, since renting out their units nightly is more lucrative than a long-term lease. But the endless parade of party-hardy strangers next door can be a nightmare for owner-occupiers. Instead of home sweet home, condo buildings can turn into war zones.

In cases of suspected electoral fraud, the condo corporation can go to court to set aside an election. But that is a long and costly process. Besides, the penalties for rigging a condo board election, other than being kicked off the board, are often limited to simply covering the condo corporation's legal costs.

The Ontario government recently updated legislation governing condos, but the new law has yet to take effect. The updating process began in 2012 in the wake of an alleged $20-million fraud at several Toronto buildings by one condo-management company, whose president reportedly fled to Bangladesh. The new law and regulations will require mandatory training for condo managers and directors, to be overseen by two new regulatory bodies. But while that may or may not improve governance, condo lawyer Shawn Pulver warns it also will mean more bureaucracy and higher condo fees for owners.

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"While the intention is good, I think the implementation is going to be a massive problem," says Mr. Pulver, a partner in the Toronto firm Macdonald Sager Manis. "What really needs to be done is educating owners and prospective owners about what they're getting into."

That, and maybe tougher penalties for breaking the law. Florida, which is to condos what Muskoka is to cottages, just passed legislation that explicitly provides for prison sentences for anyone convicted of committing condo fraud – electoral or financial. The state senator who co-sponsored the new bill, which unanimously passed both houses of the state legislature, said it would help rein in "out of control" condo boards that acted like "totalitarian regimes."

Condo dwellers in Ontario should be so lucky.

Video: Toronto couple on why they downsized from house to condo (The Canadian Press)
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About the Author

Columnist Konrad Yakabuski writes on politics, policy and business for The Globe and Mail’s Comment section and Report on Business. More

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