Ontario Condo Law Blog : Toronto Condominium Lawyer & Attorney : Gardiner Miller Arnold Law Firm : Ontario, Ottawa, Hamilton, Kitchener

The decision to reduce or avoid using lawyers in pursuing claims for construction deficiencies is typically made in order to save money. This is often a poor choice and can lead to a host of unfortunate scenarios, including the following:

1. Unsuccessfully pursuing claims clearly not covered by the Tarion warranty;
2. Pursuing claims of a value greater than the new monetary cap;
3. Missing the limitation period for commencing appeals of Tarion decisions;
4. Missing the new deadlines to request conciliation, resulting in unintentional withdrawals of warranty claims;
5. Missing the limitation period within which to commence an action in court;
6. Allowing the developer to divest itself of assets and fade away without making good on its financial obligations;
7. Being “outgunned” by the developer’s legal team;
8. Settling for far too little money or pushing too far for too much;
9. Unknowingly releasing the developer from other viable claims without receiving adequate value;
10. Getting bogged down in procedural quagmires; and (as a bonus reason),
11. Almost any combination of any of the above.

Any of these situations will likely cost the corporation many times more than the possible cost savings of embarking on the construction deficiencies claims process without the help of a suitably qualified lawyer. This is a classic example of condo boards being “penny wise, pound foolish.”

Experienced property managers recommend that their condominium boards obtain legal advice about pursuing construction deficiencies claims at an early stage. In addition to having too little time to properly address the important issues that arise in a construction deficiency claim, property managers are neither trained nor insured to advise boards on the different legal ramifications of proceeding by way of Tarion rather than pursuing a claim in court. As a result, property managers are generally not in a position to give proper advice on these important issues and they typically recognize the limits of their ability when it comes to these complex legal areas. A lawyer with expertise in condominium and construction law can provide the necessary advice and help devise an effective plan to guide boards and their managers through the construction deficiency maze.

In addition, an inherent conflict arises when a property manager appointed by the developer (while in control of the condo corporation before turnover) is asked to advise the post-turnover board as to whether or how to pursue a claim against the developer for construction deficiencies. It is arguable that a manager appointed by a developer-controlled board may be tempted to give advice to the owner-controlled board that favours the developer’s position, to the detriment of the corporation and its owners. For this reason alone, it is essential that the board engage a lawyer to obtain an objective, impartial opinion to consider and act upon. Managers should (and generally do) encourage this approach, as it effectively cleanses any appearance of possible impropriety or undue preference and ensures that the board receives good advice. Good managers focus on “managing” life for a new condo corporation and can readily spot situations that require the involvement of another professional or specialist. Conversely, managers that do not recommend that the board seek the involvement of legal counsel or who provide legal advice might find themselves the subject of a lawsuit for negligence if the warranty claims process unfolds badly and results in a high value claim being lost.

This is not to say that the property manager does not play a pivotal role in the entire process. The manager is key in supporting the entire effort and coordinating between the board, the engineers and counsel and in helping to move the claim forward. Perhaps even more important is the fact that the manager will help the board budget for a legal battle with the developer and rejuggle the financial plan where necessary so that the war chest doesn’t run dry at a critical juncture.

Finding costs savings is important too, and managers play an important part here as well. It is not strictly necessary for lawyers to have complete control over the construction deficiency claims process (especially the Tarion process) or be involved at every small step. In some situations, it is appropriate for the manager to step in to fill the void. Counsel should, however, be consulted early to help devise a workable strategy for the entire process and, subsequently, as and when needed throughout the process to keep the case on the rails. A close and effective working relationship between counsel and the property manager is essential to achieving a good result in any type of legal scenario.

Whether through the Tarion procedure or a lawsuit in court, pursuing claims for construction deficiencies is a process in which the condo directors, managers and owners invest substantial time, effort and money. The outcome of the process will play a large role in the condominium’s finances and its esthetic appearance and practical function for years to come. Embarking on the journey without the help of the corporation’s lawyer can put that investment at risk, cause delay and extra cost, and reduce the likelihood of a successful outcome. This, in turn, reflects poorly on the building and impacts the financial status and standing of the community. It may also demoralize the board, the manager and the owners alike and increase the chance of a dispute or conflict between those players. An unfavourable outcome of a long and hard-fought claim over construction deficiencies often gives rise to additional issues that distract everyone from the other important business that needs to be addressed in the condo’s early years. With so much at stake, responsible condo boards and property managers get their corporation’s lawyer involved before starting any warranty claim process.

Do Away With Community Directory -- Does any condo still publish an owners’ directory? If so, Ohio condo lawyers Kaman & Cusimano suggest that you rethink the wisdom of that decision.

Smoking in Community Associations -- This topic has grown legs in recent months and will continue to gain momentum.   The folks at HindmanSanchez’s HOA Legi-Slate blog feature a meaty NY Times article on the growing movement to ban smoking in multi-unit residential buildings.

“Smoking and condominium associations” -- Another smoking piece, this one from Patrick Brady at the MEEB law firm in Boston, discusses the developing trends in American lawsuits over smoking in close quarters and gives some insight into the state of the law on this growing issue and where it’s going.

Getting the Scoop on that Poop -- CSI comes to Condoland. The blogosphere and Twitter were abuzz last month with the story of the Baltimore condo considering (then rejecting) DNA testing to help identify the source of dog poop on common elements. Lincoln Hobbs of Utah reveals that the idea is not so crappy after all!

HOAs Going Green with a bit of Kicking and Screaming -- In a guest post on the Construction Law Musings blog, Arizona community association lawyer Roger Wood discusses the difficulties of “going green” from the perspective of boards of existing condos and HOAs. Whereas life is easier for the new developments that are built with green technology, existing associations seem doomed to stumble through the conversion process.

How to Deal With a "Crazy" Board of Directors -- After tackling the issue of dealing with crazy owners earlier this year, Daniel Zimberoff at the Northwest Condo and HOA Law Blog turns the tables and shines the light on the boards. 

Goat Dispute Highlights Best Practices for Covenant Enforcement -- Seattle condo lawyer Kevin Britt reminds boards to think carefully when confronted with a potential rule violation. 

Recognizing the Fraud Triangle -- Increase your vigilance. Florida condo lawyer Donna Berger highlights some telltale signs of fraud and how to spot them. 

CCAL Seminar -- The Case Law Update – Utah condo lawyer Lincoln Hobbs blogged about the presentation of the past years' top condo/HOA cases at the US College of Community Association Lawyers' annual law conference. Other seminars were reported, including CCAL Law Conference -- The Unauthorized Practice of Law.

The 2009 Home Renovation Tax Credit and Condominiums – It’s tax season again, and property manager Tracey McLellan offers some suggestions for reporting and claiming the HRTC.  

Dealing With "the Crazies" Within a Homeowner Association -- Daniel Zimberoff at the Northwest Condo & HOA Law Blog offers some advice for what is probably a remarkably rare situation that is seldom faced by condo boards and mangers. 

The Sword, the Shield, and the Guide - Working with the Association's Attorney -- Kevin Britt of the Seattle Condominium and Homeowners Association Attorney Blog identifies and describes three distinct roles that a lawyer can fill when acting for a condo or community association.

Make indoor air quality test a standard part of real estate purchases -- Bob Aaron notes that people are becoming increasingly aware of the dangers of radon gas but that indoor air quality is not yet dealt with as part of real estate transactions. He also describes a number of ways to test for radon.

Use Prepaid Credit Cards for Online Purchases -- Canadian Capitalist suggests using prepaid credit cards to minimize risk when shopping online. My thought:  Condos that provide their superintendents with a corporate credit card for emergencies or purchasing supplies could use prepaid cards instead to help lessen the chance of a huge unauthorized bill and to protect against theft. These cards might also be a good gift idea.   Compare the costs and features of the most popular pre-paid cards at Million Dollar Journey's entry on Prepaid Mastercard and Visa Credit Card Comparison.

HOA Boards Often Approach Me with a Plan and a Question – The lawyers at northwestern US law firm Vial Fotheringham lament the fact that too many HOA boards enact a plan first, and then ask their lawyer “can we do this?”  Good discussion on the scope of a board's authority.

Before Buying Into a HOA or Condo Association... – What due diligence would “The Donald” conduct before buying a condo? Find out by reading this entry on the Trump University Blog.

Mold and Water Damages Often Expensive to Repair – Lisa Magill at the Florida Condo & HOA Law Blog offers practical suggestions to avoid commonly encountered mould problems when owners leave their units for prolonged periods (or for good).

Directors and Officers Coverage is Not the Same as Fidelity Coverage – Lincoln Hobbs of the Utah Condo Law Blog speaks the truth.

This question typically arises after I make a ruling or statement that one or more owners don’t agree with, or if I try to move the meeting past an overly belaboured point or to skip to the next agenda item or allow another person to ask a question or make a comment.

Because this question is so common, I’ve taken a shot at giving a short answer.

Lawyers chairing a condominium’s AGM have two duties:

First: Any chairperson must ensure that the meeting is conducted in a fair, orderly and efficient manner and in accordance with the Condominium Act and the declaration and by-laws of the corporation.

Second: Lawyers performing any service for any organizational client must, according to the Law Society’s rules of professional conduct, exercise their duties in a manner that serves and protects the interests of the organization (as opposed to the interests of the property manager, board of directors or one or more unit owners, or the unit owner who asked that question in the first place).

This concept of acting "in the interests of the organization" was discussed by the Supreme Court of Canada in the case of BCE Inc. v. 1976 Debentureholders, which we wrote about and quoted relevant portions here. The case dealt with the fiduciary duty of directors of a business corporation but it is to some extent applicable to the duty of a chairperson of a condo's AGM, particularly in treating the various stakeholders fairly.

A condominium corporation, like any other organization, has a large number of interests, many of which may conflict with each other, and a number of different stakeholders, each with their own different (and often conflicting) interests.  Treating all of those interests and stakeholders fairly may seem like a difficult juggling act and it sometimes is. 

When it comes to conducting the corporation's AGM, however, the most important balance to be struck is, in my humble opinion, between facilitating a meaningful and constructive dialogue to help the community bond on the one hand, and completing the required business promptly and sending the owners home to their families on the other.

If you're a condo unit owner, make it a point to attend your AGM this year.   Your condo needs you.