Key CPA Provisions on Penalties for Non-Compliance
The Condominium Property Act (CPA) and Condominium Property Regulation establish legal requirements for condominium corporations. Non-compliance with these provisions can result in fines, legal actions, and financial penalties.
Key Non-Compliance Areas & Associated Penalties
Non-Compliance Issue | Relevant CPA Section |
Failure to maintain and repair common property | CPA, Section 37 |
Failure to conduct reserve fund study every 5 years | CPA, Section 38 |
Improper use of reserve fund | Condominium Property Regulation, Section 23 |
Failure to provide financial statements to owners | CPA, Section 44 |
Non-compliance with bylaws and improper governance | CPA, Section 32 |
Non-Compliance Issue | Penalty or Consequence |
Failure to maintain and repair common property | Board may be subject to legal claims from owners. |
Failure to conduct reserve fund study every 5 years | Fines or enforcement actions. |
Improper use of reserve fund | Potential legal liability and penalties. |
Failure to provide financial statements to owners | Board may face legal action. |
Non-compliance with bylaws and improper governance | Disputes, lawsuits, and potential intervention by the courts. |
Failure to comply with these legal provisions can jeopardize the financial stability of the condominium corporation and lead to legal action from owners or regulatory authorities.
Legal and Financial Risks of Non-Compliance to a Condominium Board
A condominium board is responsible for ensuring the corporation meets all legal and financial obligations under the CPA. Non-compliance exposes the board and the corporation to severe risks, including:
Legal Risks
Fines and Penalties: The corporation may be fined up to $15,000 per offence for CPA violations.
Legal Claims from Owners: Unit owners can file lawsuits if the board fails to meet its obligations (e.g., delayed repairs, improper fund management).
Government Enforcement: The Real Estate Council of Alberta (RECA) may investigate and take disciplinary action against licensed condominium managers.
Financial Risks
Loss of Reserve Funds: Mismanagement or improper use of reserve funds may leave the corporation without sufficient funds for major repairs.
Increased Costs Due to Poor Maintenance: Delayed repairs often lead to higher long-term expenses and increased condo fees.
Special Assessments for Owners: When financial mismanagement occurs, owners may face unexpected special assessments to cover deficits.
Reputational & Operational Risks
Loss of Trust from Owners: Owners may demand the board’s removal or refuse to approve budgets if financial mismanagement occurs.
Legal Challenges and Lawsuits: Multiple lawsuits may arise if owners believe their rights are being ignored.
Key Takeaway:
Non-compliance doesn’t just result in legal fines—it can lead to financial instability, operational inefficiencies, and legal action against the board.
Drafting a Formal Written Notice for a Non-Compliance Issue
A condominium manager must formally document and report non-compliance to the board. Below is a sample formal notice template for a condominium board.
[Sample Notice to the Board]
Subject: Urgent Compliance Issue – Failure to Conduct Reserve Fund Study
Date: [Insert Date]
To: [Condominium Board Name]
From: [Condominium Manager Name]
Dear [Board Members],
I am writing to formally notify you of a compliance issue regarding the reserve fund study, which has not been conducted within the legally required five-year period, as outlined in Section 38 of the Condominium Property Act (CPA).
Details of the Non-Compliance:
Issue: The last reserve fund study was conducted in [Year], exceeding the five-year requirement.
Legislative Reference: CPA, Section 38 requires that all condominium corporations conduct a reserve fund study at least once every five years.
Potential Consequences: Failure to complete the study may lead to regulatory fines, legal action from unit owners, and inadequate financial planning for future repairs.
Recommended Corrective Action:
Engage a qualified reserve fund study provider immediately.
Ensure compliance with the CPA by finalizing and implementing a new reserve fund plan.
Notify owners about the study to maintain transparency and address potential concerns.
I strongly recommend that the board take immediate action to address this issue to avoid legal and financial consequences. Please let me know if you require assistance in scheduling a reserve fund study provider.
Sincerely,
[Your Name]
[Your Contact Information]
Developing a Compliance Reporting Policy for Condominium Managers
A clear reporting policy helps condominium managers handle compliance issues efficiently and ensures accountability. Below is a policy document template that outlines best practices.
[Sample Compliance Reporting Policy]
Purpose:
This policy outlines the steps condominium managers must take to identify, document, and report non-compliance issues to the board in accordance with the Condominium Property Act (CPA) and the Real Estate Act Rules.
Scope:
This policy applies to all licensed condominium managers responsible for overseeing CPA compliance.
Best Practices for Reporting Compliance Issues:
Identify the Compliance Issue:
Review relevant CPA sections to determine if there is a legal violation.
Gather supporting evidence (e.g., financial records, maintenance logs).
Assess the Risk Level:
Low Risk: Minor record-keeping discrepancies, late financial reports.
Medium Risk: Delayed reserve fund studies, neglected bylaw enforcement.
High Risk: Misuse of funds, major maintenance failures, legal disputes.
Document the Issue:
Use a formal written notice (see sample in Section 3).
Maintain a compliance tracking log for ongoing issues.
Report to the Condominium Board:
Notify the board in writing with recommended corrective actions.
Provide legislative references to ensure clarity.
Follow Up on Board Action:
Set a follow-up deadline for board response.
If the issue remains unresolved, escalate to the condominium management broker.
Communicate with Owners (if necessary):
If compliance issues affect owners directly, provide updates to maintain transparency.
Policy Enforcement:
Failure to report serious non-compliance issues may result in disciplinary action from the condominium corporation or Regulatory penalties from RECA.
Review & Approval:
This policy should be reviewed annually to ensure compliance with the latest CPA regulations.
