Can You Arbitrate Oppression Claims Between Condos?

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Today’s post is about a recent Court of Appeal decision regarding arbitration in condominiums. The facts are straightforward. Two condominiums were parties to a cost-sharing agreement. There was a dispute about the amounts owing under the cost-sharing agreement. The parties participated in a mediation, which was unsuccessful. One of the condominiums sought to arbitrate the dispute. The other disagreed that aribtration was appropriate and commenced an application to the Superior Court of Justice seeking various relief, including an order that the conduct of the first condominium was oppressive, unfairly prejudicial or unfairly disregards the interests of the condominium pursuant to section 135 of the Condominium Act, 1998.

In response to the application, the other condominium brought a motion to stay the application in favour of arbitration. The motion judge found that the entire matter should proceed before the court, despite finding that some matters were within the jurisdiction of an arbitrator under section 132 of the Act. The decision was appealed.

For context, section 135 of the Condominium Act, 1998, permits certain parties to bring an application to the Superior Court of Justice if the conduct of another owner, the condominium, a declarant, or a mortgagee of a unit “is or threatens to be oppressive or unfairly prejudicial to the applicant or unfairly disregards the interests of the applicant”. Previous court decisions have found that disputes involving oppression claims do not require mediation and arbitration under section 132 of the Act and the claim could proceed in the Superior Court according to section 135 of the Act.

The Court of Appeal reviewed a recent decision where the Supreme Court of Canada made it clear that a court did not have discretion to refuse to stay claims that were dealt with in an arbitration agreement. The Court of Appeal found that the dispute between the condominiums was clearly covered by the arbitration clause and the motion judge should have stayed that portion of the application.

With respect to the oppression claim, the Court of Appeal did not agree with the motion judge that the “pith and substance” of the dispute was oppression. The core of the dispute was the interpretation and application of the cost-sharing agreement and these sorts of disputes required mediation and arbitration under section 132 of the Act. The Court of Appeal cautioned courts reviewing these sorts of claims at paragraph 25:

In our view, courts should generally be cautious in their approach to oppression claims of the type asserted here. In particular, courts should be wary of allowing such claims to overtake, and potentially distort, the dispute resolution process that lies at the heart of the Condominium Act, 1998, a central aspect of which is a preference for arbitration over court proceedings. In other words, courts should be alert to the possibility that persons, who are party to an arbitration agreement, are attempting to avoid that process by “piggybacking” onto claims made against others: see e.g. MTCC No. 965 v. MTCC No. 1031 and No. 1056, 2014 ONSC 5362, at para. 18; see also TELUS, at paras. 76, 98.

The Court of Appeal stated that oppression claims may be determined by arbitrators if the claim relates to a dispute that falls within the terms of the arbitration clause (in the cost-sharing agreement) or section 132 of the Act. At paragraph 29:

The language of s.135(1) is permissive, not mandatory. It contemplates that, in certain circumstances, it may be necssary to have resort to the Superior Court of Justice to obtain relief. However, s.135(1) does not oust the jurisdiction of an arbitrator to consider the same relief, if that relief is part of the dispute in question that properly falls within the terms of the arbitration provision or within the terms of s.132. In this case, we have already noted the broad language of the arbitration clause. There is nothing, in our view, that would preclude an arbitrator, acting under the authority of that arbitration clause, from considering the alleged oppressive conduct advanced by the respondent in appeal, at least as it relates to the actions of TSCC1636.

The Court of Appeal allowed the appeal and granted a stay of the application. The two condominiums will need to participate in arbitration.

This is an interesting decision. I have had debates with other lawyers about mediation/arbitration for oppression claims. Many take the position that only the Superior Court of Justice has jurisdiction to hear these sorts of claims. It is nice to have a decision that brings some clarity to the issue.

Spring Break Reading: Courts Edition

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As described in our post on Wednesday, the Condominium Authority Tribunal (CAT) has been busy so far in 2021 releasing at least 30 decisions. Well, the Superior Court of Justice is no slouch either. There have been dozens of decisions in 2021 that are relevant to condominiums in Ontario. The Court of Appeal has also released some interesting decisions. Today, we briefly review a few of the key decisions.

2021 ONSC 2616: a condominium brought an application against a unit owner claiming that he “terrorized the community”. Other allegations included harassment of contractors, not permitting his unit to be inspected for fire safety purposes, threatening to send asbestos to others’ homes, and playing audio recordings loud enough for the whole condominium to hear on a repeating loop for hours at a time. The condominium sought various orders, including an order prohibiting the owner from communicating with the directors, agents, and contractors. The owner claimed that the condominium had to accommodate him. The court found the condominium had done all that it could to accommodate him and his communications constituted harassment. At paragraph 43 the court summarized the situation as follows:

[43]         A demand for accommodation is only one side of the community living equation. People are required to recognize [the owner’s] disabilities and aid him accessing their goods and services to the point of undue hardship. But the duty to accommodate does not eliminate altogether the other parties’ rights and the need for [the owner] to obey the law and the rules of the condominium. A right to accommodation to participate in the community is not license to harass, oppress, or unilaterally dictate rules for how the condominium community behaves.

2021 ONSC 2575: an owner brought an application against its condominium to set aside part of an arbitration award. The owner only owned parking units and wanted to access the corridors and other common elements. The arbitrator found this was an “absurd result” and found the board’s interpretation of its documents to be reasonable. As a result, the arbitrator determined the owner was not entitled to access the corridors and other common elements. The court set aside the arbitrator’s award. The judge felt the arbitrator had no authority to make the decision it did with respect to the access issue as the arbitrator “cross the line” and purported to amend the declaration to correct perceived inconsistencies or errors. I do not agree with this decision, but it appears the matter is not over given the judge has referred it back to arbitration on the issue of access. We will see what happens with it.

2021 ONCA 191: an owner brought an application against her condominium claiming it had failed to maintain and repair the property and acted oppressively. The owner complained of noise from fans above her unit, which the condominium removed. She claimed the condominium did not resolve the problem in a timely manner. The application was dismissed. The owner appealed. The court of appeal dismissed the appeal. The judge properly considered the test for oppression under section 135 of the Act: was there a breach of the owner’s reasonable expectations and, if yes, the conduct complained of amounts to oppression, unfair prejudice, or unfair disregard of the owner’s interests. The judge was satisfied that the condominium addressed her complaint in a reasonable manner by meeting with her, communicating with her, visiting her unit multiple times, retaining experts to investigate, and in following the recommendations of the experts. The judge’s decision was entitled to deference on appeal.

2021 ONSC 2071: a condominium brought an application against two owners who refused to wear masks while on the common elements. The owners claimed they were exempt due to medical conditions and they were not required to provide proof of their exemption. The condominium argued the owners refusal was deliberate and in defiance of the legislation, municipal mask by-law and the condominium’s mask by-law. The condominium submitted photographs of the owners wearing anti-mask signs and posting anti-mask posters in the building. The condominium was concerned that the refusal to wear masks put the other residents at greater risk. The court had to balance the competing rights of the owners and the rest of the community. The court summarized the balancing at paragraphs 37 and 38:

[37]                 Condominium corporations indeed constitute a form of micro-community, in which the residents partake in a form of social contract. As with living in any community, condominium owners and their guests must enter a social contract which relinquishes their absolute interests to do as they please with their real property, and instead balance their interests with those of the other owners and tenants.  Condominium corporations are mandated to be self-regulated.  Condominium boards have a duty to control, manage and administer their community.  In doing so, they may make rules and policies that are more restrictive than the general law applicable to all persons and premises in the province or in a particular municipality by operation of provincial statutes or regulations, or municipal by-laws: for example, restricting the sorts of pets that residents may keep, or restricting the access of contractors to do non-essential work during the pandemic, as in TSCC 1704 v. Fraser, supra

[38]                 The efforts of the HCC77 board to develop and promulgate a mask policy were not only reasonable, but necessary in the circumstances.  But, in respect of the interplay between provincial and municipal legislation and condominium policy, a condominium board may not promulgate policies that are contrary to law of general application in the province or municipality.  They may make policies that are more restrictive in areas where the law of general application has not already occupied the field, but they cannot be inconsistent.

The court was not prepared to require the owners to wear a mask given their claim of being exempted and the clear language in the legislation and municipal by-law not requiring proof of the exemption. The court did make an order limiting their use of the common elements to essential purposes only (i.e. ingress and egress to their unit, collecting their mail) to protect the other residents. As a result, the owners can no longer walk around on other floors for exercise or visit other residents without wearing masks.

2021 ONSC 1306: an owner refused to replace Kitec pipes in his unit. The condominium notified him that it would replace the pipes at the owner’s cost. The owner refused to permit access to his unit. The condominium commenced mediation proceedings in an attempt to secure his cooperation. He did not participate in mediation. The condominium commenced arbitration proceedings, but the owner did not participate in any meaningful way (other than to object to the arbitrator’s appointment). The arbitrator made an award ordering the owner to permit the condominium to access his unit to replace the Kitec pipes in his unit and ordered $60,000 in costs. The owner continued to refuse, so the condominium sought a court order enforcing the award. The owner brought an application to set aside the arbitration award. The owner’s application was out of time and dismissed. The condominium’s application was granted, so judgment would be issued enforcing the arbitration award.

Condo Declarations Are Not Carved In Stone

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One of our first posts of the year was on the requirements for making, amending, or repealing by-laws. In response to that post we were asked about the requirements for making, amending, or repealing rules. This lead to our third post of the year. If you haven’t read both posts make sure you go back and read them. Today, we will briefly describe the options for changing a condominium’s declaration or description (sometimes called the “survey” or “plans”).

The Condominium Act, 1998 (the “Act”) describes three methods for amending a declaration and/or description: 1) with consent; 2) with an order of the Director of Titles; and 3) with a court order. It is important to note that the Act allows a condominium to update its address for service or mailing address without amending the declaration. For more information, see section 108 of the Act.

With Consent

The most popular method of amending the declaration and/or description is to do so with the consent of the owners. If the amendment includes a change to the proportions of ownership or contributions to the common expenses, the exclusive use common elements, or maintenance and repair obligations, it requires the consent of the owners of 90% of the units. All other changes require 80% of the units. Ask your lawyer for a definition of “units” for the purposes of a declaration or description amendment.

I should note that this method may also require the consent of the declarant if the declarant has not transferred all of the units (except telecommunications units) and less than three years has elapsed from the later of the registration of the condominium and the date the declarant first entered into an agreement of purchase and sale for a unit.

Once the board of directors are satisfied with the proposed amendment they must call a meeting of owners to present the proposed amendment to the owners. The normal process for calling a meeting is used, including the use of the prescribed forms and the normal timeline. The notice of meeting must include a copy of the proposed amendment. The board must collect the written consent of the owners, but the consent does not need to be collected at the meeting. The amendment must be registered in the land registry office before it becomes effective.

With an Order from the Director of Titles

The Act also permits condominiums to amend the declaration or description without the approval of the owners in certain circumstances. Section 110 of the Act states that a condominium (or another interested person) may apply to the Director of Titles appointed under the Land Titles Act for an order amending the declaration or description to “correct an error or inconsistency that is apparent on the face of the declaration or descriptions, as the case may be.” The amendment is not effective until a certified copy of the order is registered on title to the units.

Our office has seen this process used where there was a minor typo found in the declaration, such as where it referred to the wrong instrument number for a document or it referred to levels that did not exist. The Director of Titles has refused requests where the error or inconsistency appeared to be obvious to us, such as where there was an inconsistency between the unit boundaries in the declaration and those in the description.

With a Court Order

The Act also permits condominiums (or an owner) to seek an order from the Superior Court of Justice to amend the declaration or description without the approval of the owners. Notice of the application must be given to the condominium and every owner and mortgagee whose name appears in the condominium’s records. The judge must be satisfied that the “amendment is necessary or desirable to correct an error or inconsistency that appears in the declaration or description or that arises out of the carrying out of the intent and purpose of the declaration or description.” The amendment is not effective until a certified copy of the order is registered on title to the units.

The courts have also ordered declarations and descriptions (and other documents) to be amended in other circumstances. For instance, if the declaration is oppressive, unfairly disregards an owner’s interests, or unfairly prejudices them, it is possible that a court would order the condominium to amend the declaration if an application is brought by the owner under section 135 of the Act (oppression remedy). This is very rare. See an old post for further information: https://ontcondolaw.com/2014/06/06/owner-successfully-applies-to-court-for-amendment-to-declaration/

We previously wrote a single post summarizing the requirements for changing declarations, by-laws and rules. I encourage you to review it if you want a more succinct version of our last three posts. You can find it here: https://ontcondolaw.com/2018/08/29/amending-the-condo-documents/

Can a Condo Prohibit Talking on a Balcony after 11 pm?

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An owner complains about noise from her neighbour’s balcony late at night and asks the condominium to prohibit the neighbour from talking on the balcony after 11 p.m. The condominium does not have a rule prohibiting residents from talking on their balconies at night, but has a rule prohibiting noise that disturbs the other residents.

With more of us staying at home these days this is bound to be a common problem, especially once the warmer weather comes. What should the condominium do when faced with these sorts of complaints? Should the condominium send demand letters to the neighbour? Start a court application? Should the condominium pass a rule prohibiting these late night discussions on the balconies? Fortunately, a recently reported case gives us some guidance.

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Quiet condo for retirement? Maybe not…

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A recent case discusses an interesting (and becoming more common) situation where a building is registered as a condominium, but also operated as a retirement home under the Retirement Homes Act, 2010. An action was commenced by certain unit owners against the condominium and various corporations involved in the operation of the retirement home. The owners claimed that the defendants breached the declaration, by-laws, and Retirement Homes Act, 2010, by acting in a discriminatory manner against some of the owners. The owners sought an order that: 1) required the defendants to ensure that at least 2 directors are independent of the defendants; 2) required the defendants to use an agreement that sets out the services program with mandatory fees in accordance with the by-laws; and 3) damages in the amount of $50,000. Continue reading

Court rules (again) that condo can’t avoid mandatory arbitration

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There have been several cases in the last year or two that have been stayed (halted) because one of the parties ignored an obligation to arbitrate a dispute. Another decision was released this week. Given the number of cases as of late, it seems that a review of the basic principles might be useful. The most recent case includes a great review so we will summarize it here. Continue reading

My Favourite Condo Lessons of 2017

2017

Just as I did last year, I’ve put together a list of my favourite condo lessons for 2017. Every condo director, owner, manager, and other person living in or working for condominiums should know these lessons:

10. An owner cannot bring apply for a minor variance from a zoning by-law for common element parking spaces. The board of directors is obligated to manage the common elements, which includes applying for any minor variances that may be required for the common elements. A different result may have occurred if the owner had the exclusive use of all of the common elements the minor variance would apply to, but in this case the owner only had exclusive use of 6 of the 82 parking spaces. Read our post on the case here: https://ontcondolaw.com/2017/10/03/who-can-apply-for-a-minor-variance-for-the-common-elements-condo-or-owner/

9. Only lawyers should register liens. Most lawyers jumped for joy when a decision about a lien was released in May of this year. During the trial a report from the Law Society was produced to show that, in the eyes of the Law Society, a paralegal is not authorized to register liens; only lawyers should register liens. The interesting part is that in most firms the law clerks, not lawyers, register liens. And don’t get me started on lawyers who give their clerks access to their registration keys…yikes. Here is our previous post on the topic: https://ontcondolaw.com/2017/05/29/is-lien-work-really-for-lawyers-only/

8. Condos can charge interest at almost criminal rates. A case this summer confirmed that a condo can charge interest at 30% above the prime rate if a by-law authorizes it. For  more information, read the MTCC 1067 v. 1388020 Ontario Corp. case available here: https://www.canlii.org/en/on/onsc/doc/2017/2017onsc4793/2017onsc4793.pdf

7. Green energy initiatives are becoming increasingly popular as hydro costs soar and the government is making it easier for condos to implement some of them. For instance, submetering of the units for electricity consumption does not require the approval of the owners; the board can implement it by resolution of the board alone. Condos cannot prohibit clotheslines, but may have restrictions or conditions for their use. For more information, see our previous post on green energy initiatives: https://ontcondolaw.com/2017/05/10/green-initiatives-in-condos/

6. Similarly, electric vehicles and charging stations are likely to be a hot topic in future years as demand for electric vehicles increases.  For more information on some of the legal issues associated with electric vehicles and charging stations see our previous post: https://ontcondolaw.com/2017/04/27/electric-vehicles-in-condos/ 

5. Degrading and harassing behaviour may be prohibited by section 117 as it may be likely to cause psychological harm.  Some owners abuse managers and directors with vulgar language, yelling, and threats. The court has indicated that extreme cases would violate section 117, which prohibits conduct that is likely to cause injury to persons or damage to the property. It would also constitute workplace harassment, which condominiums have a duty to protect their workers from. See our previous post on: https://ontcondolaw.com/2017/04/23/if-you-cant-say-something-nice/

4. Owners need to be careful about sending defamatory emails to other owners and residents. Where an owner sends defamatory emails about directors or the manager, the condominium may obtain an order directing an internet service provider to disclose info to the condo to enable it to identify the person. Defamation is a communication that tends to lower the esteem of the subject in the minds of ordinary members of the public. For more information or to read the case in its entirety, see our previous post: https://ontcondolaw.com/2017/07/26/defamation-in-condos-an-update/

3. The courts will not amend a declaration because an owner feels it is inconsistent with the Act or unfair. The courts have confirmed that their involvement in such matters is limited by the Act to situations where there is an error or inconsistency in documents or where the documents are oppressive. The court will not interfere with validly passed by-laws either. For more information, read our previous post: https://ontcondolaw.com/2017/08/22/summer-case-law-reading/. For a more recent decision by the courts, see the following case: https://www.canlii.org/en/on/onsc/doc/2017/2017onsc6542/2017onsc6542.html

2. Many more condos may make the switch from self-managed to professional managers in 2018 and beyond because of the next lesson on this list. For more information, see our post for self-managed condos: https://ontcondolaw.com/2017/12/18/self-managed-condominiums/

And the top lesson of 2017 (it was also the top for 2015 and 2016) is…

1. The Protecting Condominium Owners Act, 2015. Unless you have been living under a rock for the past year, you know the Condominium Act, 1998, (and a number of other statutes) were amended this year. Some of the key changes in force now include:

  • The creation of the Condominium Management Regulatory Authority of Ontario (CMRAO) to oversee condo managers. [www.cmrao.ca].
  • The mandatory licensing of condo managers by February 1st, 2018.
  • The creation of the Condominium Authority of Ontario (CAO) to oversee condos. [www.condoauthorityontario.ca].
  • The creation of the Condominium Authority Tribunal (CAT) to hear condo disputes. The CAT’s jurisdiction is currently limited to record disputes, but the intention is to extend it to other areas in the future.
  • Mandatory training for directors and disclosure obligations for candidates for the board of directors.
  • A new process for calling owners’ meetings, including new forms for the preliminary notice, notice, and proxies.
  • Allowing teleconferencing for board meetings without a by-law.
  • Reducing quorum for owners meetings after two unsuccessful attempts to achieve quorum.
  • Reducing the approval level required for certain by-laws, like adding disclosure obligations for candidates.
  • More communications with owners in the form of three new certificates: periodic information certificate, information certificate update, and new owner information certificate.
  • A new record request process where owners, mortgagees or purchasers want to obtain records of the condominium.

There are new forms associated with many of the changes described above. The forms are available here: https://www.ontario.ca/search/land-registration?openNav=forms&sort=desc&field_forms_act_tid=condominium

The deadline for registering condos was recently extended to February 28, 2018. For more information, visit the CAO’s website.

More changes are coming on January 1st, 2018. You can read about those here: https://ontcondolaw.com/2017/12/12/amendments-coming-january-1-2018/

More changes will come into force on February 1st, 2018 and later in 2018 (and maybe early in 2019). Changes still to come include:

  • The regulatory part of the licensing of managers, such as a complaints and discipline process.
  • Extending warranty coverage through Tarion to residential conversion condominiums in some instances.
  • A process for preparing a budget and notifying owners of changes to it.
  • A process for charging costs back to owners (i.e. infractions, damage).

Stay tuned! Next year should be full of lessons as more of the amendments are released and we have an opportunity to interpret them.

Owner not oppressed by by-law restricting use of parking spaces

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I recently read an interesting case about parking rights in a commercial condominium. The applicant was the owner of three units, which were leased for use as a restaurant. The owner commenced an application against her condominium after it passed a by-law restricting parking in common element spaces.

Historically parking was allocated on a first-come, first-served basis. This led to problems with insufficient parking for customers and employees of many of the units. In 2009 the Board passed a by-law to change the allocation of parking spaces. The by-law allocated two parking spots to each unit. In 2014 the Board discovered that the by-law was never registered so it was not valid. The Board passed another by-law in 2015 to fix the problem. The 2015 by-law increased the number of parking spaces per unit to four. The result was that the restaurant had significantly less available parking for its customers.

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Parking Dispute Draws Criticism from Judge

Yet another case has been released where the judge hearing the case has been very critical of the parties, especially their failure to consider mediation or act reasonably. In Couture v. Toronto Standard Condominium Corporation No 2187 (2015) a dispute arose about a parking space.

Here are the brief facts: the condominium has 44 units, but only 32 parking spaces. The declaration indicated that parking would be assigned at the “sole discretion of the Corporation.” It also required vehicles to be licensed, insured, and in good repair. The owner was fortunate enough to have been assigned a parking space when she initially purchased her unit. In 2012, the condominium revoked her rights to use the parking space as it claimed that she was not complying with the declaration because the vehicle was not in good repair or licensed. She removed the vehicle and claimed that as long as she paid the rental fee of $50.00 per month she was entitled to keep the space whether there was a vehicle using it or not. Continue reading

Top Condo Cases of 2014

The courts have been busy this year! While that is good news for law bloggers, it means far too many condominiums are spending money on lawyers when they could be spending it on solutions. Here are the highlights from cases in Ontario:

10. Declarants may use s.152(6) of the Condominium Act, 1998 to regain control of phased condominiums years after they became entitled to request a meeting of owners to elect a new board. Such conduct may not be oppressive, even when the reason for the request was to end litigation started by the condominium against the declarant: Middlesex 643 v. Prosperity Homes LimitedContinue reading