Condo Reporter - Timely Commentaries on the Latest Developments in Condominium Law in Ontario

We previously blogged about the Boily case involving a dispute between some owners and the directors of a Condominium complex in Ottawa.  This dispute revolved around the proposed alteration of the condominium’s courtyard.  Last March, a judge found the corporation and the directors in contempt of a prior court order and ordered them, for a second time, to reinstate the courtyard to its prior configuration and appearance at the directors' personal cost.  

This week, the same judge ordered the directors to pay, personally, in excess of $96,000 in legal costs. 

The Court concluded that the board's 

stubborn refusal to accept the Applicants' success set them on a path of deliberate and continual contempt that should attract a costs award on a substantial indemnity basis. The Moving Party should not have to bear the costs of those actions.

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In a previous post,  we reported on the Boily v. CCC 145 case, where a board of directors was ordered to reinstate the prior landscape of the condominium courtyard and to personally pay a substantial portion of the legal costs incurred by the owners involved in this dispute with the board.  Unfortunately, the board of directors did not comply with the court order and the owners were forced to return to court.  In the latest chapter of this saga, the court found the corporation and the board members to be in contempt of a court order and imposed on the directors personally the additional costs to return the courtyard to its prior state. Take a look at the "before and after" photos in this blog post to better understand the issues relating to the landscape reconstruction.

Boards are usually shielded from personal liability but only if they act honestly and in good faith and if they exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.  In this case, unfortunately for everyone involved, the court concluded that the board did not act in such a fashion and held them accountable for their actions. 

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One of our previous posts stressed the importance for condominium corporations to keep a healthy reserve fund. However, sometimes a board of directors has no choice but to levy a special assessment in order to proceed with necessary work, maintenance or repairs. Such a decision is rarely well-received by owners, who will most likely question the rationale of the decision and the board’s management of the condominium’s affairs. Even if owners agree that the contemplated work is necessary, many may believe that there are more affordable options.

Once the decision to levy a special assessment has been made, the next question is often to determine how much time to give owners to pay.

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Keir Wilmut is a featured contributor in the Winter 2012 edition of condo voice magazine. In his article “Delivery Liability”, Keir discusses common condominium corporation rules and declaration provisions regarding responsibility for common element damage and the potential liability that owners may face if the common elements are damaged during a delivery or move.

“These provisions mean that if a mover or delivery company gouges the wall in the hallway when carrying your couch, the Board could hire a contractor to fix the damage and then bill the cost of the repair back to your unit.”

Keir also discusses the precautions that owners can take to prevent damage to common elements when moving household items using a third party and what to do if damage does occur.

“If damage does occur, check your condominium corporation’s Declaration and Rules to see of you can be held liable. Take photos of the damage, contact the company, and ask them to pay for the cost of repair.”

You can read Keir’s commentary beginning on page 21 of the Condo Voice magazine. For more information on obtaining a copy of the Condo Voice, please contact CCI at the link provided.

Does your condo have enough cash stashed in its reserve fund? An inadequate reserve fund could have devastating financial consequences to condo owners.

The Condominium Act, 1998 requires all condos to establish and maintain a reserve fund to cover the cost of major repairs and replacement of common elements. In addition, condos must conduct reserve fund studies, designed to assess whether the reserve fund is sufficient to cover the expected repair and replacement costs. The reserve fund is funded from the monthly maintenance fees paid by owners.

As a prospective purchaser, low maintenance fees mean greater affordability; as an owner, more disposable income; and as a board member, a happier community and greater popularity. All of these seem great, right?

WRONG!

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The Condominium Act (the “Act”) has several provisions (sections 85, 134(5) and 135(3) which place the financial burden of obtaining compliance orders on those responsible for the non-compliance, thus relieving innocent owners of this financial burden. There are numerous reported cases where the costs of legal proceedings were enforced against individual non-compliant owners. In a recent case, Boily v. Carleton Condominium Corp. No. 145, the court was asked to decide whether innocent unit owners should have to bear the legal costs of proceedings in cases where there has been misconduct on the part of the board of directors.

 The Boily case involved a dispute as to whether proposed modifications to the condominium courtyard constituted a “substantial change” to the common elements as contemplated by section 97 of the Act. The proposed redesign of the courtyard included the removal of significant vegetation, the addition of parking spaces, changes to the design, shape, size and configuration of the courtyard and the replacement of the podium’s original red-brick with significantly different-looking limestone veneer cladding. 

Rod Escayola of our firm was retained by a group of owners who felt that the proposed work constituted a “substantial change” that required the approval of 66 2/3% of the owners. The board argued that the work constituted “maintenance” not requiring a vote by the owners.

 The board refused to hold a special meeting of owners as requested

The group of owners eventually requisitioned a special meeting of owners pursuant to section 46, requesting (amongst other things) the question of the new courtyard configuration be put to a vote requiring approval of 66 2/3% of the owners. 

The board refused to recognize the validity of the applicants’ requisition for a special meeting, alleging that they had not met the 15% threshold required to requisition such a meeting. In support of their refusal to call a special owners’ meeting, the board took the position that in the case of units that were jointly owned, the requisition needed to be signed by the majority of the joint owners of each unit. Moreover, the board refused to provide the group of owners with the list of registered owners, despite numerous requests. The owners had requested this list, on four occasions, in order to rectify any alleged deficiencies in their requisition.

The board then issued its own requisition for a special meeting of owners, which indicated that the board intended on submitting the question of the courtyard configuration to a simple majority vote at the meeting called by the board – all along refusing to allow the special meeting requisitioned by the other group of owners. The board also advised that the work would start the morning after the special meeting it had called. 

The group of owners sought an emergency injunction to prevent the board’s special meeting to proceed and to prevent the work on the courtyard from starting until they were allowed to hold the special meeting of owners they were requisitioning. The court granted the emergency injunction only hours before the board’s special meeting of the owners. 

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In this series of posts, we are focusing on the level of owner consultation required when boards are contemplating renovations to the condominium or changes to the services provided to the owners.

As indicated in our last post, some decisions by the board require owner consultation while other decisions do not.  This post will focus on decisions by the board that do not require any owner consultation such as: 

• Routine maintenance work and repairs; and
• When the work is required to prevent injury or damage to the property

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In part one and part two of this blog topic, we discussed the circumstances in which a court will appoint an administrator to take over the management of a dysfunctional condominium corporation. This post will deal with how and when a court will end an administrator’s term and return the corporation to self-management.

Although section 131 of the Condominium Act does not contain an express provision addressing the termination of an administration, the courts have established that the test to remove an administrator is the same test as for the appointment of an administrator.

Good reason must be shown why unit owners should not manage their corporation’s affairs through an elected board of directors

When a court is considering either the appointment or termination of an administrator, good reason must be shown why unit owners should not manage their corporation’s affairs through an elected board of directors. The onus lies upon the individuals wishing to maintain the administrator to establish that this test is not met and that the administrator’s appointment should continue.

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The Condominium Act provides that the affairs of the condominium corporation are to be managed by a board of directors elected by the owners. Should the owners become dissatisfied with board members or the way they manage the corporation’s assets, the Act provides a mechanism for owners to requisition a meeting of owners to remove one or more board members.

In addition, the owners (or the corporation itself) can apply to the courts for the appointment of an administrator to take over the administration of the condominium corporation.

Imagine for instance, a situation where a condominium corporation has accumulated extensive debts and becomes unable to meet its payment obligations for utilities and municipal taxes. Rapidly, annual general meetings become “chaotic with blame being heaped on others for the corporation’s problems” and election campaigns become personal and acrimonious. Various factions of owners attempt to have the board removed, while the board accuses former board members of causing “internal strife and in-fighting”. The level of hostilities between residents, owners and board members quickly escalates while the corporation remains on the "brink of financial collapse". In such circumstances, even the most well-intentioned boards can become dysfunctional and unable to effectively manage the corporation.

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A follow up to our posting on "Owners Requests for Records."  Mr. Lahrkampt found himself in court once again when Metropolitan Toronto Condominium Corporation No. 932 brought a motion in Small Claims Court for clarification with respect to the minutes and the proxies that the Corporation was ordered to provide.

Some interesting points on matters raised by both parties, were made by Justice Godfrey in his decision: 

• Confirmation that the Corporation could redact references to unit owners and unit numbers.
• No charges for labour relating to the redacting of portions of the minutes ie. only the costs relating to the labour for photocopying could be charged.
• Names, unit numbers and signature of the unit owners can be redacted from proxies.
• The addition in handwriting of another candidate's name to a proxy, which addition is not under the handwriting of the unit owner giving the proxy but a third party, does not invalidate the proxy.
• Section 52(4) of the Condominium Act which requires proxies to be "under the hand of the appointer", means that it has to be signed by the unit owner (appointer) and does not mean the rest of the proxy has to be under the handwriting of that unit owner. 

In the U.S. steps have been taken recently by some condominiums and homeowner associations to ban sex offenders from their communities by amending their Declarations. Their motivation in doing so is to protect children but also to ensure that the market value of their homes would not be impacted by the presence of a sex offender. 

In Ontario, many declarations impose prohibitions on dangerous pets but to date, prohibition on persons such as dangerous offenders or other individuals with criminal backgrounds are not part of condominium declarations, bylaws or rules. 

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Denise Lash was interviewed for the feature article “Designing the Rules” in the June / July issue of CondoBusiness Magazine. Denise discusses the importance of communication between condo board members and new condo owners and the differences some people face transitioning into the condominium lifestyle – which is not as seamless as some new buyers might think. She also provides advice on how to improve the communication between new owners and condo board members.

 You can read the article in the digital version (pages 16-20) on their website.

One of the most memorable Seinfeld episodes is the one which takes place at Del Boca Vista, a condo complex in Florida, where Jerry's father and mother, Morty and Helen have retired. Morty, who serves as president of the board, soon finds himself impeached due to allegations that he has been embezzling funds from the condo association.  Residents at Del Boca Vista, started rumours about Morty when they became aware that he had a new Cadillac, a gift from Jerry.  Morty ended up resigning when the vote took place and the tie-breaking voter turned against Morty when he remembered that Jerry had previously stolen a loaf of marble rye bread.

This episode not only introduces humour into some real life issues that condominium corporations often face but also highlights one of the challenges that directors often must deal with; owners' mistrust of board members.  

Although there may be times when it is discovered that a board member has a conflict of interest or may not be acting in the best interests of the owners, in many instances, false rumours are spread about activities of the board simply because the board has failed to communicate with the owners and owners lack information about board activities.

The outcome is usually the creation of dissident groups who gather to overthrow the board and take steps to do so by requisitioning an owners' meeting.

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Drinking and driving.  The dangers are widely known but the problem persists.  Its something we all need to be conscious of when attending events where alcohol may be served.  Accidents caused by impaired drivers can have devastating consequences on all involved.   In 2006, the Supreme Court of Canada weighed in on one such case and the decision has had important implications for condominium residents since that time.

The events giving rise to the case were tragic.  A couple hosted a new year’s eve party at their house.  It was a “BYOB” event– bring your own booze.   One of the guests drank excessively.  The hosts were not aware he was impaired, nor was there evidence that they had served him drinks.   Shortly after midnight, the guest left the party and was in a head-on collision with another vehicle carrying four people.  One of those passengers was killed and the other three were seriously injured.  Of those three passengers, Zoe Childs, was left paralyzed from the waist down.  The guest was convicted of various criminal offences and received a sentence of ten years.  Ms. Childs sued the guest, as well as the two hosts of the party.  The Supreme Court denied Ms. Childs’ claim against the two hosts, deciding that as a general rule, the host of a private party where alcohol is served (referred to as “social host” in legal terms) is not liable to a member of the public for injuries caused by a guest, unless the host was actively involved in creating or contributing to the event that caused the injury (the Court was clear that simply hosting a party where alcohol is served was insufficient in this regard).

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Ryan Treleaven, an associate in Heenan Blaikie's Condominium Law Group has written an interesting article in the latest issue of CM (Condominium Manager) Magazine, published by the Association of Condominium Managers of Ontario  (ACMO),  on a case involving a condominium owner who was forced to sell their home. Ryan provides some thought on how other owners can navigate matters surrounding compliance. Here is a snippet:

In MTCC 747, Justice Code held that if an Application ‘substantially concerns’ alleged breaches of the Act, the requirement to pursue mediation is not triggered. This means that in appropriate circumstances, a Condominium may proceed directly to Court while relying on the provisions of the Act, its Declaration, Bylaws and Rules. In these circumstances, even if the Corporation fails to establish a violation of the Act, the Court may grant a compliance order restraining ongoing violations of the Declaration, Bylaws or Rules.

It is only in rare cases that a condominium should consider proceeding directly to court to obtain a compliance order. The vast majority of compliance matters can be efficiently(and cost effectively) resolved through mediation.

You can read the rest of the article here.

Here is an update on our November 21, 2010, blog post about Abuse of Power by the Board of Directors. Former board member, Detective Lakey, is scheduled to appear in court on March 15th. Jeff Green, also a former board member, has been waiting for five years to see this matter finally go before the courts. A reminder for board members to conduct themselves in accordance with their duties imposed under the Condominium Act and the by-laws. This means acting honestly and in good faith, otherwise, more board members may be faced with criminal or civil proceedings.

The headline of a recent article  published in Canadian Legal Newswire reported  "A law school star blocked from joining the profession is now appealing a Law Society of Upper Canada panel decision that found he wasn't of good character".  The Law Society Hearing Panel came to this conclusion on the basis of the applicant's behaviour while a board member of a condominium corporation. 

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Recent news of massage parlours spreading into residential buildings, should be a wake up call to condominium directors and managers who may not be monitoring the activities in their condominium communities.

Massage parlours and brothels are not new to condominium buildings.  I dealt with a brothel in a highrise condominium in Scarborough around 15 years ago. One of the directors saw an ad in the newspaper for certain "services" with the address of the condominium right in the ad!  Management had noticed over the course of many months, the male traffic going in and out of the unit.  We dealt with this one as a contravention of the single-family residence provision in the declaration ie. no work activity can be carried out in the unit.  Fortunately we didn't have to get into proving "illegal activity" which is not always easy to do and once the resident (tenant) and the owner of the unit received the letter, the tenant moved out shortly thereafter.

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Section 112 of  the Condominium Act  (the “Act”) permits the new board elected after the turnover of the Corporation  to terminate certain types of agreements  for the supply of goods, services or facilities entered into by the Corporation  prior to the turnover.  The rationale for this section is that  condominium corporations should not be bound by “sweetheart  deals”  made by the Declarant, that may not be in the best interests of the Corporation.  A recent court decision, Lexington on the Green Inc. v. TSCC No. 1930 considered whether Section 112 would allow a Corporation to terminate its  obligation to purchase  a manager’s residence unit  from the Declarant.

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Many older condominium corporations may have a superintendent suite which is part of the common elements and which may not be used for a superintendent.  I recently was contacted by a condominium corporation which had been leasing the suite pursuant to a bylaw authorizing the leasing but wanted to know if somehow the suite could be sold.

Where superintendent suite's are part of the common elements, in order to sell the suite, the declaration and description would have to be amended to convert the suite from a common element to a separate unit.  The Condominium Act provides for amendments with the written consent of either 80% or 90% of the unit owners.  This is often too high a threshold for most condominium corporations to achieve.

In a recent case decision, however,  a condominium corporation was successful in obtaining a court order under Section 109 of the Condominium Act, getting around the requirement for obtaining the written consent of the owners. In allowing the declaration to be amended, the court considered the following:

• that the corporation was registered in the 80's  and had stopped using the superintendant's suite 6 years after registration.
• that the sale of the suite would allow the corporation to use the funds to increase their reserve fund for much needed repairs due to the age of the building.

Section 109 clearly is intended to correct errors or inconsistency in condominium declarations. The judge however, in this case looked at other factors in arriving at the decision to allow the corporation to amend its declaration without the written consent of the owners.

Note that the requirements under Section 97 of the Condominium Act apply to the sale of any asset and would apply to the superintendant's suite once it is converted from a common element to a unit. Depending on the costs relating to the sale of the unit, the unit owners may or may not have the ability to requisition a meeting to vote against the sale.