A recent case demonstrates the possible consequences when owners choose not to pay their monthly common expenses on time and the condominium is forced to take steps to lien the unit and sell it. The unit owner had not paid her common expenses since June of 2018. The Condominium registered a lien against her unit on January 31, 2019. The owner did not pay to discharge the lien, so on May 14, 2019 the Condominium issued a statement of claim seeking to obtain possession of the unit so it could sell it. The owner filed a statement of defence and counterclaim in which she claimed to have paid her common expenses to the manager. She also sought $11,350 in damages for a flood in her unit.
The condominium brought a motion for summary judgment so it could continue its efforts to sell the unit. At the hearing the owner offered to pay the outstanding common expenses. The parties could not agree on the amount of legal costs the owner should pay to the condominium. The condominium sought all of its legal costs ($56,000) from the owner. The owner argued no more than $15,000 would be reasonable.
The judge reviewed the relevant provisions of the Condominium Act, 1998, including section 85(3) which states the lien includes interest and “all reasonable legal costs and reasonable expenses” incurred to collect the outstanding amount. The judge stated that the phrase “all reasonable legal costs” signals that condominiums ought to be entitled to more than partial indemnity costs. Subject to the court’s overriding discretion to determine costs, the condominium is entitled to recover all of its legal costs when enforcing a debt owed by an owner so long as those costs are reasonable.
The judge acknowledged the fees sought by the condominium were high, but found them reasonable in the circumstances of the case. The owner had repeatedly defaulted in her fees in the past, which resulted in liens and power of sale proceedings. The owner was well aware of the consequences of not paying common expenses and the legal steps the condominium would take to recover any unpaid amount. The legal work done by the condominium was necessary to collect from the owner as the owner refused to pay the amount owing to the condominium. The judge also felt the owner’s litigation strategy was to delay the matter to avoid her obligation to pay her share of the common expenses. The judge found that she was not entitled to complain about costs incurred as a result of her own litigation strategy. Lastly, the owner made no efforts to settle the matter and refused reasonable settlement offers from the condominium until just before the hearing.
The case is an interesting one. While I agree that the owner’s own litigation strategy appears to have greatly increased the condominium’s costs, some of the time claimed by the condominium seems unreasonable. For example, spending almost 5 hours to register a lien, seems excessive. A lien usually takes less than an hour to prepare and register. Even including a notice of lien would not bring the time to close to 5 hours. Similarly, 38 hours to review and reply to a responding motion record that, according to the judge, did not contain any evidence to substantiate the claim seems extreme.
2020 has been an eventful year, to say the least. With everything else going on in the world, who has time to stay on top of changes in condominium law? We do! And so to help you out, we’ve prepared a list of 10 changes and decisions in condominium law in 2020 that you won’t want to miss.
The Condominium Authority Tribunal (the “Tribunal”) expanded its authority
Starting on October 1, 2020, the Tribunal’s jurisdiction expanded to include hearing disputes based on provisions in a condominium’s declaration, by-laws, or rules regarding: (a) pets, (b) vehicles, (c) parking/storage, and (d) indemnification/compensation related to the disputes in (a)-(c). This means that disputes in these categories can now be heard using the Tribunal’s streamlined dispute resolution process instead of going to court.
The new Condo Guide for pre-construction and newly-built residential condo purchasers
The Condominium Authority of Ontario released a new Condominium Guide which, starting January 1, 2021, must be delivered to all potential purchasers of pre-construction and newly-built residential condominium units. The Guide will give these purchasers more information on condominium construction and condominium living. For more information on the Condominium Guide, see our previous post here: https://rcllp.ca/condo/?p=499
“Adequate” condo records need not be perfect
Condominiums are required to keep adequate records. The Tribunal confirmed that “adequate” means the records must allow the condominium to fulfill its duties under the Condominium Act, 1998 (the “Act”). To do so, “adequate” records must be accurate but need not be perfect. The level of accuracy required for a record to be “adequate” may vary depending on the record in question. For example, minutes of board meetings are held to a high standard because they look back on facts which should be certain and known, and they serve the important purpose of making the board’s affairs open to the owners. Read the full case here: https://www.canlii.org/en/on/oncat/doc/2020/2020oncat33/2020oncat33.html?resultIndex=1
A condominium cannot impose conditions before releasing records to owners
The Tribunal determined that a condominium cannot impose conditions before providing requested records to an owner. If the records are properly requested by the owner, the condominium must either provide them or refuse to provide them (with a reasonable excuse for the refusal). By imposing conditions, the condominium effectively refused to provide the records. Read the full case here: https://www.canlii.org/en/on/oncat/doc/2020/2020oncat2/2020oncat2.html?resultIndex=1
Comply with Tribunal orders or face cost consequences in court
The Tribunal ordered the condominium to provide records to the owner within 30 days. The condominium did not comply, so the owner took the matter to court. The condominium provided the records to the owner before the court hearing date, yet because the condo had still breached the Tribunal’s order, the court ordered the condominium to pay the owner’s legal fees and disbursements totalling $14,716.91. This serves as a reminder that timelines in Tribunal orders must be complied with, and that Tribunal orders may be enforced in court. Read the full case here: https://www.canlii.org/en/on/onsc/doc/2020/2020onsc189/2020onsc189.html?resultIndex=1
Condominium directors not held personally liable for board decisions
A declarant claimed that the condominium’s directors acted oppressively toward the declarant. The court determined that the claims could not succeed against the directors personally. The directors’ decisions in question were decisions relating to day-to-day activities of the condominium without personal gain, and therefore even if the directors made the wrong decisions, this did not justify a personal order against them. Read the full case here: https://www.canlii.org/en/on/onsc/doc/2020/2020onsc6445/2020onsc6445.html?resultIndex=1
Significant cost consequences of acting unreasonably
After succeeding in a case against his condominium, an owner sought a court order for the condominium to cover the costs he had incurred. The court ordered the condominium to pay $83,340 in costs to the owner. The court granted this unusually high costs award because the owner had acted reasonably throughout the matter whereas the condominium was unreasonable and aggressive. Let this serve as a reminder and a warning that unreasonable, aggressive behaviour from a condominium may have significant cost implications. [Note: the decision was unsuccessfully appealed by the condominium, resulting in another $30,000 costs order payable to the owner]. Read the full case here: https://www.canlii.org/en/on/onsc/doc/2020/2020onsc1190/2020onsc1190.html?resultIndex=1
A recent decision of the Superior Court of Justice illustrates how the conduct of the parties can sway a judge when it comes to the issue of costs. The case is York Condominium Corporation No. 922 v. Frank Lu et al (2016). The facts are straightforward. The owner refused to permit the condominium’s contractors to enter the unit to investigate it after a flood in the unit, which was caused by the owner’s tenants. The condominium made repeated attempts to gain access to the unit and offered to meet with the owner to discuss the issue, but the owner refused. The condominium engaged a lawyer, who wrote several letters, but the owner still refused to grant the condominium access to the unit.
The condominium started a court application under sections 92, 117, and 134 of the Condominium Act, 1998. The condominium asked the court for an order requiring the owner to allow it to access the unit to investigate the damage, and if necessary, repair the damage to the common elements.
The condominium was successful in its application and sought $15,416.00 in costs from the owner. Continue reading →
I am sure that we have all been to meetings where the issue of unruly tenants is raised by a director or owner. The complaints are often about noise, overcrowding, damage to the property, or parking. Sometimes the complaints are about risky behaviour, or even criminal activity. The other residents may try to address the problems with the tenants, but many file complaints with the property manager or board instead. The owner is often unaware of the problems with their tenants until he receives a letter from the manager or board.
Once the owner receives the demand letter he is in the difficult position of trying to get his tenants to comply. Most owners know that if their tenants don’t comply with the condominium’s demands a lawyer will be hired by the condominium to write a letter and the cost may be charged back to the owner. If the owner cannot get his tenants to comply with the rules he is left with the nearly impossible task of trying to get an order for eviction from the Landlord and Tenant Board.
While the board of directors is in the difficult position of trying to elicit compliance from the tenants by enforcing against the owner, there are many provisions in the Act that it can rely upon. Section 119(2) requires the owner to take “all reasonable steps” to ensure that his tenants comply with the Act, the declaration, by-laws and rules. This section is similar to section 17(3) of the Act, which requires the condominium to take “all reasonable steps” to ensure that the owners comply.
A condominium corporation commenced an application against unit owners seeking orders that they obey the rules, be quiet and leave others alone. The owner commenced a counter-application for the same relief against the condominium. Most of the dispute related to the costs of the proceedings. The condominium insisted upon full recovery, or near full recovery, of all of its costs (about $150,000.00) prior to a ruling by the judge. Neither the condominium or owners were successful in their applications. The condominium sought $30,000.00 in costs.
The ruling on costs is one of many made in the past few years where concerns were raised about a condominium’s aggressive stance toward an owner during a legal proceeding. This aggression seems to stem from the condominium’s confidence that it will be entitled to rely upon subsection 134(5) of the Act to recover all or almost all of its legal costs. Subsection 134(5) states: Continue reading →
The Court of Appeal has released a further decision on the implementation of its December 2014 decision and the costs. For those unfamiliar with the Orr v. MTCC 1056 case, you can read more in my previous post.
MTCC 1056 was registered as a condominium in 1993. From 1994 to 1997 one of the declarant’s directors owned a unit within the condominium. The director was also a director for the condominium. He added a third storey in the common element attic space of the unit. In 1997 a new owner purchased the unit. She understood it was a three-storey townhouse unit. Unfortunately, the status certificate did not notify her that the third-storey was improper, despite the director’s knowledge of the changes he made to the unit. Shortly after she moved into the unit the condominium demanded that she close up the attic space and return it to its original condition. The owner brought a claim against the condominium, the property manager, her own lawyer, and several other individuals. The condominium added the seller/director to the action.
At trial, the judge dismissed the claim against the property manager and individuals, but found that the condominium, director and lawyer were liable for damages. The owner was ordered to close up the third floor space and pay the condominium rent for the third floor.
On appeal, the Court of Appeal determined that the condominium was not entitled to demand the owner close up the third floor and restore the unit to a two-storey configuration. The Court also found that the property management company was not liable to the owner as it was acting as agent for the condominium and did not owe a duty to the owner. However, the property management company was ordered to indemnify the condominium for the damages it owed to the owner because of her reliance on the status certificate it prepared. The property manager was not entitled to rely upon a clause in its management agreement that limited its liability. The Court upheld the finding that the law firm was negligent in failing to show all of the plans to the owner prior to her purchase. The Court upheld the award of $50,000.00 owed to the condominium from the seller/director.
This most recent decision awarded the legal costs of the appeal as follows:
$44,170.81 to the owner by the condominium
$44,170.81 to the owner by the owner’s lawyer
$42,490.60 to the condominium by the owner’s lawyer
$22,651.25 to the property manager by the owner
$11,325.62 to the property manager by the condominium
$11,325.62 to the property manager by the owner’s lawyer
The legal costs of the trial were awarded as follows:
$150,000.00 to the owner by the condominium
$150,000.00 to the owner by the owner’s lawyer
$100,000.00 to the property manager by the owner
$50,000.00 to the property manager by the condominium
$50,000.00 to the property manager by the owner’s lawyer.
For those keeping track, the legal costs awarded have exceed $675,000.00 so far and this matter isn’t over yet. There are also the damages awarded, which could exceed another $500,000.00 between the various parties.
The Court of Appeal released its decision in the Boilysaga in late October. For those of you that are unfamiliar with Boily, it is the case where the board and a group of owners disagreed on various changes to the common elements. The owners commenced an application against the condominium and directors. The court ordered the condominium to restore the common elements. The directors disregarded the court order. The owners brought a motion for contempt of court. The owners were successful. The were further appeals and motions as the parties dug their heels in.
This matter never should have required a court application, or at least not one with multiple hearing dates, motions, and appeals. This type of dispute seems to be the perfect subject-matter for mediation, which would have been a fraction of the cost. The costs wasted on this matter have been astronomical. By my calculation (based on the reported cases), the legal costs of all the parties likely exceeded $500,000.00. Add in the restoration costs of $400,000.00 and you are close to 1 million all because they couldn’t agree on the landscaping for the condominium. Does that seem reasonable to anyone? Continue reading →
Section 134(5) of the Condominium Act, 1998, permits the condominium to add “additional actual costs” to the common expenses payable for a unit where it is successful in obtaining an order for damages or costs from the owner or occupant of the unit. Many condominiums rely upon section 134(5) of the Act when seeking costs from owners and occupants after a successful application. The courts have recently begun to resist such claims where the amount sought for legal costs is excessive or unreasonable.
In one of the more recent decisions (York Condominium Corporation No. 301 v. James (2014) SCJ) the condominium sought over $125,000.00 in costs from the owner. The condominium also sought over $27,000.00 for security, plumbing, inspection, and locksmith charges. The court refused to allow the condominium to recover all of its legal costs. The court refused to award any of the other charges.
In the past few years there has been a trend toward full or substantial indemnity costs for condominiums enforcing against unit owners. However, in York Condominium Corporation No. 345 v. Qi,  O.J. No. 3214 the courts have again awarded only partial indemnity to a successful condominium. Although the court acknowledged the previous case law supporting full indemnity costs for condominiums that are successful in enforcing against unit owners, it also reiterated that judges have retained their general discretion to award costs. In making its decision, the court had the following concerns in awarding costs in favour of the condominium: Continue reading →