Thinking of Bulking Up (Your Telecommunications)?
By: Joel Berkovitz
No, this is not an article about getting in shape for the summer – it’s now September and the time for that has long passed. This article is about what condominium boards and managers need to consider before entering into bulk telecommunications agreements.
For anyone not familiar with bulk telecommunications agreements, they provide for service to every resident of a building, with the cost of the service added to the common expenses payable for their unit. These are also sometimes referred to as an ‘always on’ agreement since the unit benefits from the service whether the owner wishes it or not.
This has been a hot topic recently, as several of the major telecommunications companies seem to be making a concerted effort to sign more bulk agreements with condominiums.
A bulk agreement can be very appealing for a condominium. Under a typical bulk agreement, residents can receive telecommunications services at a significant discount in comparison to what they would be paying on an individual basis. In some cases, the discounts can be 50% or more.
Before entering into a bulk agreement, there are two major legal issues for a condominium corporation to consider.
First, they must consider how section 97 of the Condominium Act, 1998 applies. Section 97 governs the circumstances where a condominium wishes to make an addition, alteration or improvement to the common elements, or a change in the services provided to its owners. A bulk telecommunications agreement would be considered a change in service.
The application of section 97 depends, in large part, on the cost of the new service. Depending on the cost a corporation may either proceed without notice to owners, with notice (giving owners an opportunity to requisition a meeting to vote on the change) or only with the approval of two-thirds of owners (for a ‘substantial change’). We recommend that condominiums consult with their counsel about the application of section 97, since failing to give notice or obtain approval, when required, can have significant repercussions.
Secondly, a condominium should review all existing telecommunications agreements to determine if any of them might prohibit entering into a bulk agreement. Some telecommunications providers include this provision in their access agreements; the rationale being that if they are going to make a capital investment in your building, they want to know that you will not turn around and enter into a bulk agreement with another provider, effectively killing the market for their services. These prohibitions can sometimes be buried in the fine print of an agreement, or in an easement registered on title, so it is critical to review all applicable documents carefully.
If there is a prohibition on future bulk agreements, then the condominium needs to consider whether the agreement is terminable, or if the telecommunications provider is open to negotiate the removal of this clause. There is a process for terminating some telecommunications agreements set out in section 22(9) of the Condominium Act, 1998, but this has limited application.
Of course there are also non-legal issues to consider. Owners should be informed about the possible change in service, whether it is a legal requirement or not. It may be necessary to hold townhall meetings, conduct surveys, or otherwise engage owners, to gather information and get feedback.
Since all of the matters above can take some time to complete, it’s important to build this timing into your planning. You probably can’t bulk up overnight!
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