What happens to prepaid memberships when I sell a fitness studio in Ontario?

Ontario’s Consumer Protection Act, 2002 defines “personal development services” to include services provided for health, fitness, diet or matters of a similar nature. Sections 29 to 36 then set rules for agreements of that kind. The sections read for this page do not say that a sale of the studio business moves, ends or re-papers a member’s agreement. A member’s rights come from the agreement itself and from these sections, so what happens on a sale depends on the agreement’s terms and is a question for a lawyer.

Which memberships the rules reach

Under section 29(1), sections 30 to 36 apply where payment in advance is required and the consumer’s total potential payment obligation, excluding cost of borrowing, exceeds a prescribed amount. Section 27 of O. Reg. 17/05 prescribes that amount. Section 29(2) lists services these sections do not apply to, so check it against your studio. Under section 29(3), an agreement that existed before the section came into force is outside it unless it is extended or renewed afterwards.

Term, renewal and cancellation

Section 31(1) says no agreement may be made for a term longer than one year after the day all the services are made available to the consumer. A renewal clause is not valid unless the supplier complies with the prescribed requirements, which section 30 of O. Reg. 17/05 sets as delivering a written renewal notice, and a copy of the agreement noting all changes, at least 30 days but not more than 90 days before the agreement expires. Under section 31(5) of the Act, that renewal rule does not apply to successive monthly renewals the consumer can end on one month’s notice or less. Under section 35, a consumer may cancel without any reason within 10 days after the later of receiving the written agreement and the day all the services are available, and within one year after entering into the agreement if no copy meeting section 30 was received. Ask whether every member holds a compliant copy.

Payments for services not yet available

Section 36(1) says a supplier may not receive payment for services not available when the payment is made, except through a trust corporation registered under the Loan and Trust Corporations Act that has agreed to act as trustee. Section 36(2) makes an exception where the unavailable service is the use of a facility and the consumer has agreed in writing to use another facility of the supplier’s until it is available. Under section 36(7), the trustee may not release funds to the supplier until the services are available. If a facility is not available on the day the agreement specifies, section 36(3) has the trustee refund all payment unless the consumer agrees in writing to let the trustee retain it, and section 36(4) limits each such permission to 90 days. This matters if the studio is still opening or moving. For the wider sale picture, see buying a fitness studio and gym.