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

Background

The Ballantrae Golf & Country Club in the Town of Whitchurch-Stouffville is located in a gated condominium community consisting of 736 units in five condominiums surrounding a golf course, together with a sewage plant and Recreation Centre. Schickedanz Bros. Ltd., the developer, continued to hold ownership of a 4.18 acre parcel of land containing the 15,722 sq. ft., one-storey Recreation Centre, pending development of the fifth condominium corporation. MPAC assessed the Recreation Centre in the amount of $1,460,000 for the 2005 taxation year and $1,740,000 for the 2006 and 2007 taxation years.

ARB Decision

The ARB was persuaded by Schickedanz’ lawyers’ arguments that unit owners’ exclusive rights and controls over the Recreation Centre equated to an easement. The ARB noted the various factors surrounding the unit purchases (including the restricted zoning for the Recreation Centre, provisions contained in the disclosure statement, declaration, purchase agreements and the vendor’s sales representations made to potential purchasers). The ARB accepted that those factors demonstrated that owners’ rights with respect to the Recreation Centre constituted an easement appurtenant to each of the residential units.

Sunset Lake

The ARB also adopted its decision in Sunset Lake Owners Association v. MPAC where 141 residential lots shared rights-of-way over park routes, sports areas, docking facilities and parking, which MPAC had assessed separately. The ARB had determined in that case that the intent was to use the common areas for the shared use of the owners of the lots, and had therefore found that the common areas constituted easements in favour of the owners’ units, following a line of U.S. precedent cases. 

Assessment of Servient Tenements

The Sunset case and the Schickedanz case both interpreted s. 9 (1) of the Assessment Act to conclude that where an easement is appurtenant to any land, that land must be assessed as part of the dominant tenement (the property which receives the benefit of the easement) at the added value which the easement gives to the dominant tenement, with the result that assessment of the shared lands (in this case the Recreation Centre freehold lands), as a servient tenement which is subject to the easement, must be reduced accordingly.

“Added Value”

The ARB held that the “added value” added to the dominant tenement units had to be subtracted from the value of the servient tenement Recreation Centre. In order to determine the amount of the “added value”, the ARB took into account the fact that Schickedanz was transferring the Recreation Centre to the five condominium corporations for a zero additional payment. 

No Double Taxation

In the end, the ARB held that “The prevailing principle is that there should be no double taxation, no matter how small.” For each of the taxation years under appeal, the assessment of the Recreation Centre was therefore reduced to a nominal amount of $1.

Implications of the Schikedanz decision

The Schickedanz assessment case will become a powerful precedent affecting many recreation facilities, guest units, superintendent units, gatehouses and other units held by condominium corporations as “common amenity assets” on behalf of the unit owners, which they exclusively control in the nature of an easement. One can only hope that MPAC may adopt the general conceptual easement and “added value” reasoning for all common amenity units.

Section 37 Agreement Settlement

In a separate case, MPAC and TSCC 1649 entered into a Settlement Agreement whereby the assessment of a daycare unit was reduced from $1,928,000 to $5. The City of Toronto had imposed a s. 37 site plan development agreement upon all owners of the property to construct, furnish and equip a daycare facility to accommodate 52 children for 99 years. The declarant, (Waterclub) and the three sister condos who became the successor owners of the daycare centre were obligated to charge only nominal rent to the daycare operator and restrictions prevented sale of the daycare unit for anything other than nominal value. The costs of operating the daycare unit exceed any revenue to be generated by it. The definition of “current value” referred to in s. 1, 19, 19.1 and 19.2 of the Assessment Act refers to the amount of money the fee simple, if unencumbered, would realize if sold at arm’s length by a willing seller to a willing buyer, which in this case, would be less than zero. The parties agreed upon an assessment of $5.

The Real Reason for Double Taxation

The writer learned about the Schickedanz decision, rendered November 5, 2010, when I presented a PowerPoint "Condo 101" course at the annual retreat for MPAC’s policy, legal, appraisal managers and senior staff on November 10, 2010. I had the opportunity to present a very detailed analysis confirming the real reasons why the assessment and taxation of “common amenity units” is inappropriate, on a totally separate basis, founded upon provisions contained in the Condominium Act, 1998. Those common amenity assets are owned by the condominium corporation as an agent on behalf of each of the unit owners who share the common amenity units in proportion to the “common interest” appurtenant to each of their units. Double taxation occurs when common amenity assets are assessed and taxed, given the fact that the residential units have already been assessed for “current value”, which includes the value of each of their appurtenant common interests in the common amenity units. Owners are inevitably obligated to pay the common expenses required to cover all of the costs applicable to a condo corporation’s common amenity units or other lands held by the corporation, as well as the municipal realty taxes applicable to those common amenity assets. 

“Common Interests”

Section 18 (2) of the Condominium Act provides that “the owners share the assets of the corporation in the same proportions as the proportions of their common interests in accordance with this Act, the declaration and the by-laws.” Despite the fact that the judge generally failed to rule favourably upon that concept in the case of MTCC 1172 v MPAC, individual unit owners were permitted by that case to appeal for a minor reduction in the current value assessment applicable to their individual units. That case was a CCI-Toronto supported attempt to put an end to double taxation of unit owners. It is Gardiner Miller Arnold LLP’s view that s. 18 (2) is complementary to s. 15 of the Condominium Act which provides that each unit, together with its appurtenant common interest, constitutes a parcel for the purpose of municipal assessment and taxation.  Although normally units constitute a parcel for the purpose of municipal assessment and taxation, in a case where a corporation has acquired one or more assets which constitute units or land, there should be only a nominal assessment of $1 and no municipal taxation of such common amenity unit parcels, because the value of those common amenity units is already included in the current value of the common interests appurtenant to each of the owners’ units. 

The concept of “current value” assessment requires MPAC to take into account many factors (including the value of amenities, rights and benefits attached to each of the units) when MPAC assesses the price which a willing buyer would likely pay to a willing seller in an open marketplace. Common interests account for all of the condominium corporation’s common amenities held by it on behalf of all of its unit owners. The condominium corporation’s common amenity assets (whether units, common elements, freehold lands, concierge services or chattels such as the on-site management office computer) all form part of the common interests appurtenant to each of the condominium corporation’s residential, parking and locker units in accordance with each of their respective proportionate shares of common interests. 

File Before March 31^st Deadline

If MPAC does not recognize the double taxation aspect in the assessment of your condominium corporation’s common amenity units in the next Assessment Notice, consider appealing taxes on behalf of all of the unit owners and on behalf of the condominium corporation. Make sure you file the condominium corporation’s Request for Reconsideration with MPAC before the March 31, 2011 filing deadline. This is also a good time to consider whether your condo has passed an assessment by-law provision allowing the condominium corporation to appeal assessment on behalf of all owners in appropriate circumstances. 

Recommendations

We hope that double taxation appeals will not be necessary hereafter, but if they are, don’t just rely on the “easement” argument, because the “common interest” argument should have a broader scope to cover all types of common amenity units. In this article, I have simplified the various arguments used by MPAC and the condominium corporations in the Schickedanz case, so keep in mind that your condominium corporation’s case must be individually considered and then carefully prepared and argued. We have accumulated some winning techniques in several condo assessment scenarios. Make sure you retain a qualified assessment appraiser as a key witness and a condo litigator experienced in following the appropriate procedures and marshaling all the assessment evidence and arguments necessary to win the case.

#7 -- Jia v. Toronto Standard Condominium Corporation No 1479, 2010 ONSC 3433

A Toronto condo was found liable and ordered to pay $50K for assault and battery when its superintendent physically ejected a “trespasser.”  There is nothing new about the concept of employers being vicariously liable for the acts and omissions of their employees, but the brutal assault in this case is noteworthy. See our case comment and our quotes in the Law Times.

#6 -- East of Bay (2003) Development Corp. v. MPAC, 2010 ONSC 3337

Assessing property for tax purposes is a lot like making sausages – you probably don’t want to see how it’s done.   In this case brought by the condo developer to set aside MPACs assessment for the first two years of the condo’s existence and for a refund of all taxes paid, the court slapped MPAC for its "questionable" two-stage property tax assessment process for new condo units. The fact that MPAC was understaffed and unable to cope with a deluge of new condos on the market was no justification for using a two-stage assessment not expressly permitted by the Assessment Act, s.33(1).

#5 -- Metropolitan Toronto Condominium Corporation No. 675 v. Unit Owners, (unreported)

A condo corporation successfully obtained a court order to amend its declaration to unitize and sell an unused superintendent’s suite despite opposition by at least one unit owner. While it’s good to see a court stepping up to fill the void where needed, it’s troubling that a court might override the requirement in the Condo Act for a large majority of unit owners to democratically approve amendments to the declaration, which could include drastic plans to unitize and sell off common elements, a difficult and controversial decision. It is not clear what percentage of owners supported the amendment in this case as there are few facts set out in the court’s endorsement or the case comment by the condo’s counsel. This type of scenario is arguably addressed more appropriately by a change to the Condo Act rather than judicial intervention.

#4 -- Nipissing Condominium Corporation No. 4 v. Kilfoyl, 2010 ONCA 217

The Ontario Court of Appeal affirmed that single family occupancy restrictions in a condominium declaration do not violate the Ontario Human Rights Code.  While the court’s reasons were sparse, this troubling issue is now definitively answered. We can tell that the Ontario Human Rights Tribunal is listening because they relied on the court’s decision in throwing out a human rights complaint made by that same unit owner on the same issue (see 2010 HRTO 1036).

#3 – TIE: Metropolitan Toronto Condominium Corporation No. 985 v. Vanduzer, 2010 ONSC 900 and Kilfoyl v. Nipissing Condominium Corporation No. 4 (re costs), 2010 ONSC 6023

In cases where unit owners are responsible to fully indemnify their condo corporation for the legal costs of enforcing the declaration, by-laws and rules under Condo Act, s. 134(5), the court can order that the lawyers’ accounts be assessed.  By so doing, the court can ensure that cases are not “overlawyered.” See our case comment on Vanduzer and, for a case applying this principle, see Peel Condominium Corp. No. 452 v. Jaworowski, 2010 ONSC 4567, where the court reduced the recoverable legal costs by a whopping 66% after finding that the corporation’s lawyers had “over-resourced” a condo lien enforcement case.

#2 -- Weinberg v. Metropolitan Toronto Condominium Corporation No. 1019, 2010 HRTO 1527

The Ontario Human Rights Tribunal dismissed a unit owner's complaint about the condo’s enforcement of a “no pets clause” where an arbitrator appointed under the Condo Act had already considered the complainant’s disability and ordered the dog's removal. The case reminds us that every litigant has only one “kick at the can.” An arbitrator’s ruling on an issue cannot be revisited by another tribunal.   Similarly, in Atkinson v. Essex Condominium Corp. No. 5, 2010 HRTO 123, the Human Rights Tribunal ordered a unit owner’s complaint over a “no pets” clause to be deferred pending the outcome of the condominium corporation’s concurrent enforcement application to the Superior Court. Multiplicity of proceedings should be avoided.

#1 -- Metropolitan Toronto Condominium Corporation No. 747 v. Korolekh, 2010 ONSC 4448

This was unquestionably the top newsmaker of the year. After hearing evidence of a condo unit owner's bizarre behaviour including verbal assaults, besetting and menacing others with a dog, the Court found the unit owner to be "incorrigible, unmanageable" and ordered her to sell her unit.   See our case comment, our article in Condo Business and our quotes in the Toronto Star and the Law Times.  This appears to be only the fifth Ontario case where a sale order was given. The rarity of such orders was underlined in another 2010 case called Condominium Corporation No. 8110264 v. Farkas, where the Alberta Court of Appeal ruled that evicting condo unit owners is an extraordinary remedy, to be granted only when other incremental remedies fail. 

BONUS:   Lahrkamp v. Metropolitan Toronto Condominium Corporation No. 932, (unreported)

As another instalment of a long-running dispute between a unit owner and his condo corporation, an October 2010 decision of the Ontario Small Claims Court explores the issue of owners’ right to inspect records under Condo Act, s.55. The court rejected the argument that every request for records must be accompanied by a reason for the requested records, but held that the right of a corporation to refuse records may be appropriate where the actual motivation behind the request is being challenged, or the burden and expense to the corporation is a serious issue. Each request must be considered on its own merits. A number of requests for different sorts of records are then raised and decided. 

Thanks for reading our blog this year. Have a happy and healthy 2011.

Fair Taxation for Condominiums

Condominium units, by their density, use proportionately less City services — lighting, sewers, etc. — than do a comparable number of single-family homes, and their ecological footprint is also smaller. In addition, some condominiums pay to maintain their own sewers, streetlights, etc., and provide such services as garbage pick-up. Yet, they are taxed at the same rate as single-family homes. This is a significant inequity. Much is being done across the Province to urge the Government to deal with this inequity. Come out to hear from condo leaders from various municipalities and learn what you can do to assist in the effort to  eliminate this tax inequity!

CCI presents this evening session with featured guest speakers, Armand Conant, CCI Toronto Chapter President, Al Siaroff, CCI Golden Horseshoe Chapter Board Member, Ed Schollen, Markham Association of Townhome Condominium Owners, and moderated by Bob Girard, Chair, CCI Toronto Special Projects Committee.

A not-to-be-missed session, which will take place immediately prior to CCI Toronto’s Annual General Meeting. Attendance is complimentary, however, pre-registration is required. This session is open to CCI Toronto members only.

Fortunately, condominium unit owners have the ability to band together through their condo corporation and bring a single appeal for all of their units. All that is required is for the condo corporation to pass a by-law under clause 56(1)(f) of the Condominium Act, 1998,  authorizing it to object to assessments under the Assessment Act on behalf of its unit owners and to defray the related costs out of the common expenses. 

Subsection 56(4) of the Condo Act provides that a condo corporation with a clause 56(1)(f) by-law also has the capacity and authority to bring appeals under section 40 of the Assessment Act on behalf of owners, and to be responsible for the costs of the appeal (but not for any other results).

The advantage of the owners acting collectively through their condo corporation is that expert counsel can be retained, high quality evidence can be gathered and the case can be brought as a single objection or appeal for the benefit of all of the owners in their corporation. This is a highly cost-effective and sensible way to proceed which maximizes the likelihood of success while minimizing the potential negative impact that can arise from ill-conceived or poorly-presented appeals brought by individual owners. 

Not a team player? No problem. Owners who do not wish to participate in the appeal process may, under subsection 56(5) of the Condo Act, withdraw the appeal in respect of their unit by giving notice to the condo board and the Assessment Review Board prior to the hearing.

If your condo corporation's by-laws do not already authorize the corporation to make objections and appeals on the owners' behalf, the Board must start the process to pass the necessary by-law and then present it to the owners for approval.   As with all by-laws, a favourable vote by a majority of the owners of all of the units is required for approval.

The deadline for requesting a reconsideration of 2008 assessments is March 31, 2009.   Requesting reconsideration is the equivalent of making an objection and is a mandatory pre-requisite to making an appeal.  Appeals must then be made within 90 days after MPAC mails its decision on the reconsideration request.   Get moving!

Click the MPAC picture to the left to view general information on the objections and appeals process.