The Battle Rages On…

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A few years ago I wrote about a case that had dragged on for over six years.  It involved a former director and a condominium. The director took various steps without legal authorization from the board, including terminating the manager and commencing a legal action against the property management company and its president. The director also commenced an action against the condominium and accepted service of his own claim so the other directors were not aware of the claim. This was all within 4 months of being elected by the owners. Not surprisingly, the owners requisitioned a meeting to remove him. That didn’t stop him. He started 5 legal actions in 2010, all of which were dismissed with costs. He appealed, which was also dismissed. Continue reading

Looking Back on 10 Decisions of 2018

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Below is a brief look back at some of the most talked about cases in 2018:

Metropolitan Toronto Condominium Corp. No. 932 v. Lahrkamp, [2018] O.J. No. 311

A unit owner had commenced many legal proceedings against the condominium corporation for approximately 10 years relating to the production of documents – many of these proceedings were dismissed.  The condominium corporation successfully applied to the Court to have an order prohibiting the owner from commencing legal proceedings against the condominium corporation and its past, present, and future directors, property managers, and service providers without leave of the Court.  Note that the unit owner was not prohibited from bringing legal proceedings before the Condominium Authority Tribunal (“CAT”) and did so later in 2018…the owners application before the CAT was dismissed.

Jones v. 2341464 Ontario Inc., 2018 ONSC 717

A developer/vendor attempted to unilaterally terminate an agreement of purchase and sale for a pre-construction condominium unit due to delays in construction.  The Court found that the provisions in the agreement of purchase and sale that allowed the developer/vendor to unilaterally terminate the agreement of purchase and sale had been removed by a valid amendment and that the developer/vendor was required to perform its obligations set out in the agreement of purchase and sale.

Simcoe Standard Condominium Corp. No. 431 v. Atkins, [2018] O.J. No. 2986

Two condominium corporations were ordered to call requisitioned meetings of owners because of a special assessment levied by the condominium corporations. The condominium corporations had refused to call the meetings of owners because they alleged the requisitioning owners had obtained the necessary signatures to requisition a meeting of owners by disseminating misleading information.  The Court was not persuaded by the evidence presented to support such an allegation and found no reason for the condominium corporations to refuse to call meetings of owners in accordance with section 46 of the Condominium Act, 1998.  Further, the condominium corporations asked the Court to prohibit the use of proxies during the requisitioned meetings of owners as a result of the dissemination of misleading information. The Court refused to do so finding that the communications were not misleading but rather expressed an opposing view. The Court also questioned if it had authority to “deny owners the statutory right to vote by proxy.”

Janet Cangiano v Metropolitan Toronto Condominium Corporation No. 962, 2018 ONCAT 7

A unit owner had requested to audit the proxies recently used to elect directors to the board of directors without redaction. The CAT refused the request of the unit owner as clause 55(4)(d) of the Condominium Act, 1998 provides that the ability of an owner to examine the records of the condominium corporation does not apply to “any portion of a ballot or proxy form that identifies specific units in a corporation or owners in a corporation unless a by-law of the corporation provides otherwise”.

Peel Standard Condominium Corporation No. 984 v. 8645361 Canada Limited, 2018 ONSC 4339

After obtaining an order prohibiting a commercial unit owner from harassing the condominium corporation’s board members, employees and managers and multiple orders from the Court, the condominium corporation successfully obtained an order requiring the owner to vacate and sell the commercial unit for any reasonable offer.  The Court also granted the condominium corporation the ability to apply for possession of the commercial unit if the owner did not comply with the conditions of the Court’s order.

Toronto Standard Condominium Corporation No. 2256 v. Paluszkiewicz, 2018 ONSC 2329

A condominium corporation asked the Court to set aside the decision of an arbitrator with respect to the validity of improvements made to a unit authorized by a section 98 agreement. The section 98 agreement was authorized by the declarant appointed board and called for the production of detailed drawings and further approval of the board prior to renovations commencing.  The owner argued the required plans were submitted to the declarant appointed board provided and the evidence of the condominium corporation was not sufficient to persuade the Court to set aside the decision of the arbitrator.

Patterson v. York Condominium Corporation No. 70, 2018 ONSC 3735

The Court dismissed an owner’s effort to force the condominium corporation to raise the common expenses, among other requests.  The Court found that the decision process of the board of directors met the standard of care required under section 37 of the Act and that the Court should not substitute its own reasoning for that of the board of directors.

Noguera v. Muskoka Condominium Corporation No. 22, 2018 ONSC 7278

An owner had commenced construction to remove a demising wall between units with the board or director’s permission.  A subsequent board of directors asked for the owner to enter into a section 98 agreement and wanted to review/alter the decision and decision making process of the previous board of directors.  The owner brought an oppression and was permitted to complete construction but was required to enter into a section 98 agreement.

Terence Arrowsmith v Peel Condominium Corporation No. 94 2018 ONCAT 10

An owner made a request for records relating to the removal of mould from the sauna and mailroom.  The condominium corporation did not provide the requested records despite conceding the owner was entitled to such records on the basis that the owner had not properly completed the mandatory request for records form.  The CAT ordered the documents to be provided and award costs (which included an award for the owner’s time spent participating in the process) to the owner. The CAT also went on to impose a monetary penalty on the condominium corporation as a result of its failure to provide records without reasonable excuse.

Condo Administrators

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A condominium administrator is a person appointed by the court to manage the affairs of a condominium when the board is unable to properly manage the condominium in accordance with the requirements of the Condominium Act, 1998. 

According to section 131 of the Act, a condominium, owner, or mortgagee of a unit can apply to the Superior Court for an order appointing an administrator. The Act states that 120 days must have passed since the turnover meeting, but there is a case where an administrator was appointed before the turnover meeting where the developer refused to call the turnover meeting.

Continue reading

The Rogue One: Directors Gone Bad

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A condo director unilaterally fires the property manager, hires himself in her place, enters into several other contracts without discussing it with the other directors, bullies the other owners, sues the corporation, and causes thousands of dollars in damages. It seems like an unbelievable plot for a movie, but this one is based on a true story! Continue reading

Former Director’s Six Year Battle with Condo Continues…

Durham Condominium Corporation No. 45 and Swan.

As a recap, Swan was elected as a director in June of 2009. He often disagreed with the other directors about the management of the condominium. Two months after he was elected he started a claim against the condominium and another against one of the directors. In the first 4 months of his term as director he took several steps without authorization of the board, including:

  • terminating the property manager;
  • commencing two actions in the name of the condominium against the property management company and its president;
  • commencing an action against the condominium and misleading the other directors by accepting service of the claim on behalf of the condominium;
  • sending harassing and insulting emails to directors and management; and
  • installing a satellite dish on the common elements.

One of the directors requisitioned a meeting to remove him for breaching his duties. The owners voted to remove him in September of 2009. He started another action against the director who requisitioned the meeting claiming defamation. In 2010, all 5 of his actions were dismissed at trial and he was ordered to pay $3,750.00 in costs. He appealed. His appeal was dismissed. The court found that the condominium, directors and manager may have produced material that constituted defamation to him, but they were doing what the Act required them to do and there was evidence to support the comments made.

In 2012 the condominium commenced an application against Swan claiming that he failed to carry out his duties and seeking various orders. Swan brought his own application against the condominium claiming that two directors breached their duties to the condominium and should be removed. He also sought his own reinstatement to the board.

The court reviewed his conduct and found that Swan’s “confrontational inflexibility and misguided assessment of his duties as Director failed to meet” the duties in section 37(1) of the Act. With respect to his application, the court dismissed it in full. There was no evidence that the other directors breached their duties or that the condominium acted in an oppressive manner toward him.

The condominium sought costs of $198,880.92 from Swan. Swan argued that the condominium had to indemnify him under section 38 of the Act. The judge ordered Swan to pay $45,000.00 in costs to the condominium. Swan appealed.

The Court of Appeal released its decision to his appeal on costs. The appeal was allowed and he was awarded $6,000.00 in costs. Unfortunately, the matter has been sent back to the application judge for reassessment of the costs as the Court of Appeal did not have enough information to make a decision regarding the condominium’s obligation to indemnify him. One of the key issues for the application judge will be whether he was acting in bad faith (in which case he would not be entitled to indemnification) or was simply negligent in fulfilling his duties (in which case he would be entitled to indemnification).

Stay tuned. This one isn’t over yet…

Question: I’m a director for a new condo. What do I need to know?

Being a director for a recently registered condominium is hard work, but it can be very rewarding. It reminds me of being the parent or caregiver for a newborn. At first, babies need constant attention and a high level of assistance to satisfy even their most basic needs. As they grow older they become more independent and are capable of satisfying their basic needs without much assistance from adults. A condominium is similar. Those first year or so after registration the directors will be very busy and face many challenges, but as the condominium ages it should get easier.

In addition to their ordinary duties (i.e. to manage the affairs of the condominium and ensure the owners comply with the Act and the condominium’s documents), the directors for a new condominium should pay special attention to the following:

  1. Performance Audit – The performance audit is an inspection performed by an engineer or architect to determine if there are any deficiencies that could give rise to a claim for payment from Tarion. The performance audit is mandatory for all residential condominiums, even if a claim to Tarion is not possible like in the case of conversion condominiums. The performance audit must be completed within the 6 to 10 months following registration and must be submitted to Tarion before the end of the 11th month following registration.
  2. Reserve Fund Study – A reserve fund study is a planning document that helps the board estimate current and future cash requirements for major repairs and replacements of the common elements and assets of the corporation. It must be completed within the first year of registration. The condominium may save some time and money by having the engineer performing the performance audit complete the reserve fund study around the same time.
  3. First Year Budget Deficit – Many budget statements prepared by declarants are grossly inadequate for the proper operation of the condominium. The fees are kept unreasonably low and/or expenses are estimated at unrealistic amounts. Luckily for condominiums and owners, the Act states that the declarant is accountable for the budget statement for one year following registration. This means the condominium can recover a first year deficit, if any, from the declarant. The condominium must notify the declarant of the deficit within 30 days of receiving the audited financial statements. The declarant is obligated to pay the deficit within 30 days of notice from the condominium. If a dispute arises about the deficit, the parties must mediate the dispute, and if necessary, use binding arbitration to resolve it.
  4. Agreements entered into by the Declarant – Some agreements entered into by the declarant on behalf of the condominium may be terminated by the new board:
    1. Management Agreements – with 60 days written notice.
    2. Agreements for goods, services, facilities, or leases of common elements for business purposes – with 60 days written notice if terminated within 12 months of the turnover meeting.
    3. Mutual Use / Shared Facilities Agreements – court may order that the agreement be terminated or amended within 12 months of the turnover meeting.
    4. Insurance Trust Agreements – with 60 days written notice.

This list is not exhaustive. The list above includes the most time-sensitive obligations that could cause significant problems for the condominium, directors and owners if they are not completed on time.

Status Certificate Error Costs Condo, Lawyer, and Others

The Court of Appeal has released its decision in Orr v. Metropolitan Toronto Condominium Corporation No. 1056.  I encourage a full reading of the case, but here is a summary of the important facts and findings.

The condominium was developed in the late 80s and registered in 1993. One of the principals of the developer purchased a unit and built a third floor in the common element attic space above his unit. The third floor held a large family room, bedroom, ensuite, storage area and small furnace room. The condominium documents showed the unit as a two-storey unit. The principal was the president of the condo until 1997 when he sold the unit. The purchaser obtained two estoppel certificates (now called status certificates). Neither certificate mentioned the third floor issue. The purchaser bought the unit. During renovations of the unit the new owner discovered construction defects. She had her lawyer write to the condominium and property manager, who responded by demanding that she stop immediately. The condominium’s engineer investigated the defects and noticed the third floor. The condominium brought an application against the owner for the third floor changes. The owner commenced an action against the former owner of her unit (who was also the former president of the condominium and principal of the developer), the City of Toronto, and the real estate agents. The owner started another action against her former law firm, the condominium, the property manager, and a number of individuals.

At trial, the judge found the condominium, lawyers, and seller/director liable for damages.  The owner was ordered to close up the third floor and pay the condominium rent for her use of the third floor. The owner appealed. The seller/director, lawyer, and condominium all cross-appealed

The Court of Appeal made the following findings and comments:

1) Owner’s Claim against the Condo

The Court of Appeal determined that the condominium was liable for negligent misstatement in regard to the certificate that indicated that there were no breaches of the Act, declaration, by-laws or rules. In doing so, the Court made the following findings:

  • The condominium owed the purchaser a duty of care in the preparation of the status certificate. The condominium could not escape its duty by contracting out or delegating the completion of the certificates to the property manager.
  • The condominium and property manager should have been more vigilant and diligent in preparing the certificate when they knew the records transferred from the previous manager were “in dribs and drabs”.
  • The failure of the property manager to make any inquiries into the issue with the third floor prior to completing the certificate was “not reasonable or prudent in the circumstances.”

As a result, the condominium was not entitled to demand the owner close up the third floor and restore the unit to a two-storey configuration at her own expense.

2) Owner’s Claim against the Property Management Company

The property manager was not liable as it was acting as agent for the condominium in preparing the certificates. The property manager did not owe the purchaser an independent duty of care.

3) Owner’s Claim against her Real Estate Lawyer

The Court of Appeal upheld the finding that the law firm was negligent in failing to show all of the plans of the unit to the owner prior to her purchase. The lawyer was not entitled to rely upon the estoppel certificate that indicated there was no breach of the Act, declaration, by-laws or rules; the certificate was “never intended to provide evidence of proper title to a property.”

4) Condo’s Claim against Manager/ Manager’s Claim against Condo

The condominium and property management company claim against each other. The property manager relied upon its management agreement, which included an exception for liability arising from facts that were known by the board and not disclosed to the manager. The Court of Appeal said that it would not impute the knowledge of one director (the seller/president) to the board as a whole since it would “have the potential to vastly increase the liability of condominium corporations and would certainly make risk management on their part all but impossible.”  As a result, the property management company was ordered to indemnify the condominium for the damages it owed the owner as a result of her reliance on the certificate.

5) Condominium’s Award of Punitive Damages from Seller/Director

The trial judge ordered the seller/director to pay $50,000.00 in punitive damages to the condominium. The condominium appealed, asking for $140,000.00. The Court of Appeal upheld the award of $50,000.00.

6) Damages

The owner was awarded:

  • from the condominium – $41,681.00 for repairs to the common elements she made;
  • from the real estate law firm – $28,379.02 for the amount she paid them;
  • from the condominium and law firm (jointly and severally) – the difference between the value of the townhouse as a renovated three-storey unit and a two-storey unit.

The condominium was awarded:

  • from the seller/director – $50,000.00 for punitive damages;
  • from the management company – the amount it owes to the owner for negligent misrepresentation (in the certificate).

The issue of costs (which exceed $1,000,000.00 between the parties) will be determined next year.

 

 

 

Condo Dispute Wastes a Million Dollars?

The Court of Appeal released its decision in the Boily saga 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

Directors may disqualify another director without a vote of the owners

You may recall a case from last summer where a board of directors disqualified one of the directors for violating the condominium’s by-law, which included a Code of Ethics. The lower Court found that the condominium’s by-law permitted the board to disqualify the director. Although the Judge found that the disqualified director had not been given proper notice of the review by the board prior to his disqualification, the Judge was not prepared to order the board to re-instate him since the vacancy created by his disqualification had been filled. Instead, the Judge ordered that the board was at liberty to conduct a fresh ethics review within 90 days, failing which the disqualified director could move for re-instatement to the board.

The board conducted a fresh review and concluded that the disqualified director had violated the Code of Ethics and was still disqualified. The disqualified director appealed to the Court of Appeal. He argued that the by-law permitting the board to determine if he had violated the Code of Ethics was inconsistent with the Condominium Act, 1998, and unreasonable. He also argued that the Judge erred by not re-instating him.

Continue reading

Update – Costs against condo directors (Middlesex C.C. No. 232)

For those of you familiar with the case, you should know that the motion brought by the former directors for leave to appeal the costs awards made against them was successful. As a result, an appeal will be heard by the divisional court in the coming months. 

For those of you unfamiliar with the case, I’ll provide a brief synopsis. It involved an application by a condominium to appoint an administrator. There was also a motion to prevent the owners from calling an owners’ meeting to remove the board until the court made a decision on the application. The condominium was unsuccessful on both the application and the motion. The two unit owners that opposed the condominium sought costs from the directors personally. The court awarded costs against the former directors personally in the range of $35,000.00. The former directors sought leave to appeal the decisions to the divisional court.