A Warning to Owners Leasing their Units

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A recent case provides a warning to owners leasing their units. Briefly, the facts are as follows. A unit owner leased her unit to a tenant. The tenant “did not live harmoniously with his neighbours” and was in constant conflict with management. He sued the condominium for over $5,000,000. The condominium’s lawyer wrote to the owner to warn them that the costs incurred by the condominium to defend itself against the tenant’s claim would be sought from them. The owner’s son, who was power of attorney, ignored the warning and provided an affidavit in support of the tenant’s claim against the condominium. The tenant’s claim “failed miserably” and the condominium sought to recover about $86,000 in legal fees from the owner.  The owner refused to pay and the condominium registered a lien against the unit.

The court found no reason to question the validity of the lien. The main argument presented by the defendants was that the owner was not properly served by the condominium. The court found that the owner was in India at the time and it was difficult for her own family to contact her. “It would not be realistic to require the corporation to serve her personally and the law does not require it.”

The court reviewed the new provisions of the Condominium Act, 1998 at paragraph 27:

The Condominium Act establishes what must be done to serve a document for the purposes of the Act:

  • Section 46.1(3)(b) requires the corporation to keep a record of each unit owner’s address for service if that address is in Ontario.
  •  Section 46.1(4) states that a document can be served on an owner in several different ways including delivery by prepaid mail addressed to the owner at the address for service that appears in the records of the corporation.

The court was satisfied that the documents were served on the owner when the condominium sent the document via registered and regular mail to the address for service provided by the owner. “There was nothing more that the corporation could do.”

The owner also disputed the validity of the process because the condominium did not bring an action or have a hearing before registering the lien. The court reviewed section 85(1) of the Act and confirmed the process does not require an action to be commenced prior to the registration of a lien against a unit. The condominium must register the lien within three months of the default and must provide notice of the lien at least ten days before registering it. The condominium satisfied the requirements of the Act.

The owner tried to argue that it was not fair for them to be responsible for their tenant. In response, the court said:

[36]           The simple answer to the questions raised by the Sandhu family is that section 134(5) of the Condominium Act makes the unit owner responsible for the financial consequences of her tenant’s actions. If a corporation is awarded costs in an order which is made against an owner or an occupier of a unit, the costs, including the legal fees of the corporation, are added to the common expenses of the unit. That is simply the law of Ontario.

[37]           There are very good reasons for that law. One must consider the nature of condominiums and the rules that are necessary to regulate them. A condominium draws many strangers to live together in a single building. For many unit owners, the purchase of their condominium unit will be the largest financial investment of their lives. It is essential that the building is managed in a way that preserves the value of the property and maintains a sense of fairness for everyone.

[38]           The sense of fairness is created by imposing strict responsibilities both on unit owners and managing corporations. Unit owners are responsible for paying their share of the common expenses and for the conduct of any one who occupies their unit. The corporation is responsible for collecting the common expenses and notifying the unit owner of any troubling behaviour by a tenant. The purpose of the legislation is to ensure that the actions of a single unit owner do not give rise to additional expenses for all the other unit owners.

The court, while sympathetic to the owner’s situation, granted judgment in favour of the condominium and granted it possession of the unit so it can sell the unit to recover the amounts owing under the lien.

 

 

The CAT’s Meow – New Tribunal Decisions

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Photo by Vadim B on Pexels.com

The CAT has been busy this month releasing three new decisions. Obviously, the issues relate to record requests. All three cases have some interesting commentary on the circumstances when the CAT will award legal costs and penalties.

Lahrkamp v. Metropolitan Toronto Condominium Corporation No.
932, 2019 ONCAT 4

The owner filed a claim with the CAT for records. Previously, the condominium obtained an order from the Superior Court of Justice to declare the owner a vexatious litigant. The CAT member found the owner’s claim vexatious and dismissed it. That was not the end of it. The condominium sought over $12,000 for costs of its involvement in the CAT hearing and $22,000 after further submissions were made! Continue reading

The Condominium Authority Tribunal (CAT)

negotiateThe Condominium Authority Tribunal (CAT) has been up and running for about a month now. The CAO’s website contains a lot of useful information about the CAT, including the mediators selected to facilitate disputes. The CAO’s website also has the CAT rules that were released earlier this month. The rules answer many of the most common questions posed so far, such as “Who can file a claim?”, “How does the process work?”, and “Do condos need lawyers for the CAT?”.

The Process 

The general process for resolving disputes at the CAT is:

  1. Negotiation
  2. Mediation
  3. Decision

Negotiation

The process starts with the aggrieved party filing an online application with the CAT. This person is called the “Applicant”. The Applicant must pay a $25.00 filing fee with the application. The Applicant must be an owner, a mortgagee, a purchaser, or the condominium corporation. The other party, called the “Respondent”, must create an account with the CAO and join the dispute.

The negotiation step allows the parties try to settle the dispute using the CAT’s online system. The parties can communicate and exchange offers to settle through the system. The case will be closed by the CAT if: 1) the parties reach a settlement; or 2) no settlement offer has been made by any of the parties for more than 30 days.

Mediation

The second stage, mediation, is where a neutral third party (the “mediator”) assists the parties in discussing the issues and (hopefully) reaching a settlement. The cost for the mediator is $50.00. The mediator may give directions about the process. If the mediator is also a member of CAT, he or she may make a procedural order that the parties must obey. The mediator, if he or she is a member of CAT, may make a final decision on the dispute if the parties consent.

The mediator decides when the Applicant can move to the final stage. If the applicant has paid the fee for the final stage, the mediator will prepare a brief summary, which will be provided to the member responsible for making a decision. All discussions and documents exchanged during the mediation are private and confidential and may not be made public or used in the final stage unless the parties agree or the CAT allows it.

The CAT will close a case at the mediation stage if: 1) the parties reach a settlement, 2) the parties agree to the CAT making a consent order that ends the case, or 3) the mediator finds that the Applicant has abandoned the application.

Decision

The final step is a decision. If the parties cannot resolve the dispute on their own or with the assistance of a mediator, the Applicant can ask the CAT to make a decision for $125.00. The member hears evidence and arguments and makes a binding decision.

Fortunately, the CAT also has the authority to dismiss an application before a decision is made. Examples include where the application is about a minor issue, the CAT does not have authority to hear the case, the CAT is being used for an improper purpose, the Applicant knew or ought to have known that their documents had false or misleading information, and the Applicant has abandoned the application.

The Rules

The CAT has its own set of rules. Fortunately, the rules are much easier to read than the rules of court or other tribunals. This should make it easier for people without formal legal training to go through the process without a lawyer. Notwithstanding such, the rules permit any party to be represented by an Ontario lawyer or paralegal, or a person who is exempt from the Law Society’s licensing requirements (i.e. a friend helping the person without receiving any fee, licensed condominium manager or a condominium’s director).

The rules describe how the parties are to communicate with each other, share documents, and present evidence. The parties must use the CAT’s online system, unless the CAT allows other methods. The CAT has the authority to order any party to give details, information or documents (called “disclosure”) or summons a witness. The rules also describe how disclosure is to be delivered.

Lastly, the rules indicate that the CAT’s decisions will be available to the public, unless an order has been made to limit access for privacy or public interest reasons. It will be interesting to see how much information is provided to the public.

Costs & Expenses

The rules indicate that the CAT has the authority to order one party to pay to the other party any reasonable expenses or costs related to the CAT, such as the filing fees. However, a party will NOT be ordered to pay another party’s legal fees unless there are exceptional reasons to do so. So, while costs will not be the norm, they will be available where the member believes it is appropriate (i.e. perhaps where one party’s conduct or unreasonable position has caused unnecessary delays or expenses).

Given that the process (at least before the decision stage) is designed to be user-friendly, it is likely that most owners and condominiums will choose not to use a lawyer or paralegal. That seems to be a reasonable course of action; however, given that the CAT’s decision is binding on the parties, the parties might want to use lawyers or paralegals for the decision stage to minimize their risks.

Only time will tell how if the CAT provides what was promised – a quicker, easier, and more cost-effective system for resolving disputes in condominiums. I’m interested in hearing your experiences with CAT. Is it user-friendly? How are you finding the online system?