Chargeback or Fine?

I’m often asked by directors if they can fine owners for unruly or disruptive behaviour, like excessive noise or improper parking. The simple answer in Ontario is no. While a condominium cannot fine an owner, it may be able to charge some costs back to the offending unit owner in certain circumstances. This process is typically referred to as a “chargeback”.

The Condominium Act, 1998, is clear that a condominium may only lien an owner for “common expenses”, which according to the Act are “expenses related to the performance of the objects and duties of a corporation and all expenses specified as common expenses in this Act or in a declaration”. It is noteworthy that it says the Act or declaration, not the by-laws or rules. This seems to suggest that an indemnification clause in a by-law or rule is not sufficient, in itself, to support a lien against a unit for a chargeback.

A provision in a by-law or rule may be sufficient to support a lien against a unit for a chargeback if it is authorized by the Act. For example, a condominium may pass a by-law extending the circumstances where a deductible may be charged back to an owner. While the provision is within a by-law, it is enforceable because of section 105 of the Act, which authorizes a condominium to pass such a by-law.

This is a controversial topic. Many lawyers ignore the definition of “common expenses” in the Act and rely upon provisions in rules and by-laws, without further support, to charge costs back to owners. If you have any doubts about the condominium’s ability to charge back an amount to an owner you should discuss it with the condominium’s lawyer or property manager.

For more information, see the Ontario government’s website.