To kick off the new year, we’re reviewing the Condo Act  in a series we’re calling “Back to Basics”. We’ll cover common topics and issues that often arise in condo living. So, follow along and we hope you’ll gain an appreciation of these foundational concepts.

In Part 1 of this series, we discuss a topic we’re frequently asked about – Section 98 of the Condo Act and owner alterations to common elements. Can owners alter the common elements, such as installing a decorative light outside their unit door or permanent bike rack in their parking space? How? Who pays for it?

For starters, owners aren’t allowed to change the corporation’s common elements without permission. Most condominium declarations include a strict requirement that owners obtain the board’s written approval to modify any common elements. Owners must also comply with Section 98 of the Condo Act.

Section 98 sets out the requirements to allow owners to alter common elements. Section 98 requires that: (1) the alterations be consistent with the declaration and the Condo Act, and (2) the board approves the alteration by resolution before changes are made. If these conditions are met, owners must enter into a written agreement with the corporation, which is commonly referred to as a “section 98 agreement” or “owner’s alteration agreement”. The agreement is registered on title to the unit that outlines the responsibility for repair, maintenance and insurance (among other items), and specifies who owns the alteration.

Boards are under no obligation to approve owner requests and have broad discretion in approving them. However, they must always act reasonably in the circumstances.  Especially in cases where alterations pre-date the Condo Act or were permitted or accepted by prior boards without formalizing approval via an agreement at the time. Larger alterations may require notice to and approval of other owners while alterations to exclusive use common elements are permitted without owner approval but in the discretion of the condo board considering certain statutory factors.

The preparation and registration of the Section 98 agreement is typically paid by the owner requesting and changing the common elements, in addition to any other reasonable costs required by the board (e.g. the cost of an engineer to review proposed structural changes).

A Section 98 agreement can sometimes retroactively approve or regularize historical changes to the common elements approved by the past board(s) but never formalized into a registered agreement. The later registration of a Section 98 agreement would bring unit owners into compliance with the declaration and the Condo Act. In these circumstances, the corporation may require the owner sign the corporation’s form of section 98 agreement or require the removal of the alteration and restoration of the common elements to its prior condition, all at the owner’s expense or take enforcement action against the unit owner for non-compliance.

It’s better to ask permission first than to ask for forgiveness later!

Happy New Year to our readers.

We hope 2024 is a year of peace, balance and prosperity. We present our top ten condo law cases of 2023 in our newest issue of Condo Alert!

Here’s hoping the past decisions help us in navigating noise, nuisance vs. maintenance, repair and chargeback disputes and promote our oft repeated mantra of “reasonableness in condos”.

Toronto often ranks amongst the dog-friendliest cities in the world. Sadly, this sentiment does not necessarily apply to condos in the city. Through its governing docs, condos can impose an outright prohibition on dogs from entering the premises; it can also impose weight, size or breed-related prohibitions. However, these prohibitions do not take precedence over a valid disability-related accommodation request under the Human Rights Code.

The CAT’s recent decision in YCC  435 v. Karnis et. al. (here) highlights common positions many condos take when responding to accommodation requests. The important facts of this case are summarized below:

  • YCC 435 had a strict “no dogs” rule (the “Rule”). Ms. Karnis and YCC 435 agreed that Ms. Karnis had a disability-related need for a service dog and would therefore exempt her from the Rule.
  • A medical note from her doctor confirmed that she “required a service dog is large enough for mobility work, specifically steadying her when she feels dizzy or is experiencing vertigo”.
  • Before exempting Ms. Karnis from the Rule, YCC 435 insisted she enter into an “accommodation agreement” for such. The “accommodation agreement” sought to prohibit German Shepherds and dogs over 25 lbs.
  • While the “accommodation agreement” was being negotiated, Ms. Karnis obtained Sophie, a White German Shepherd. Sophie was obtained from an organization specializing in breeding and training dogs for those with disabilities. She paid over $15,000 to obtain and train Sophie as a service dog.
  • YCC 435 refused to exempt Sophie from the Rule as “it did not accept German Shepherds” and there was “no evidence that a service animal of a different breed couldn’t satisfy [Ms. Karnis’] request for accommodation”.
  • As things usually go with these impasses, Ms. Karnis would not remove Sophie and YCC 435 began a compliance application at the CAT to enforce the Rule.

As discussed below, YCC 435’s positions can be lumped into three main categories, all of which the CAT rejected. Sophie presumably remains with Ms. Karnis and it appears Round 2 of this bout will take place at the Human Rights Tribunal.

A. ACCOMMODATION UNNECESSARY: ALTERNATE DOG BREED WOULD SUFFICE

The draft “accommodation agreement” intended to prohibit German Shepherds (which is technically distinct from a White German Shepherd) and dogs over 25 lbs. As such, YCC 435 questioned why Ms. Karnis required Sophie as opposed to a different breed weighing under 25 lbs. YCC 435 noted that Ms. Karnis’ doctor’s note did not specify that a particular size or breed was required to meet her needs.

I pause to refer to Ontario’s Human Rights Commission’s “Policy on Ableism and Discrimination based on Disability” (the “Policy”, specifically s. 8.7) though it was not considered in this decision. The Policy outlines what can/cannot be requested in responding to an accommodation request. Generally , a person seeking accommodation should be able to provide a medical document that (a) is issued by a qualified health care professional (i.e. a doctor), (b) confirms the person has a disability and (c) confirms the requested accommodation addresses their disability. The OHRC’s guidance on the last point is crucial:

Organizations are not expected to diagnose illness or “second-guess” the health status of a person with a disability. An accommodation provider is not entitled to substitute its own opinion for that of medical documentation provided by a doctor. Similarly, an organization must not ask for more confidential medical information than necessary because it doubts the person’s disclosure of their disability based on its own impressionistic view of what a specific disability should “look like”.

Ms. Karnis’ doctor opined Ms. Karnis “required a service dog that is large enough for mobility work, specifically steadying her when she feels dizzy or experiencing vertigo”. Though the doctor’s note did not comment on specific breeds or sizes, the CAT acknowledged this is beyond a doctor’s expertise.

In any event, Sophie’s breeder and trainer – with over 20 years of experience with service dogs – also testified that Sophie was the right size, dexterity and temperament to address Ms. Karnis’ needs. Conversely, YCC 435 provided no experts who could comment on the appropriateness of an alternate breed.

Tony’s Takeaway – “Agree to Disagree”: I question whether the “accommodation agreement” was necessary, let alone appropriate in this case. If Ms. Karnis is legally entitled to have Sophie, she does not have to sign an agreement to validate this – it is enough that she meets the requirements of the Code.YCC 435 relied on two cases to support its position that a condo can impose reasonable conditions in the accommodation process but it is not clear how these cases support this view.

Tony’s Takeaway – “Doctor knows best”: I’ve seenpeople seeking disability-related accommodations do everything they can to keep their pets with them, short of providing a proper medical note. They’ll usually throw a reflective vest with a SERVICE DOG patch on their dog or buy a “certificate” on the internet “registering” their pet as a service animal with all sorts of meaningless organizations. I completely understand the skepticism a board might have when they receive an accommodation request.

But that is precisely what the accommodation process is for: the person seeking accommodation needs to provide medical evidence supporting their request. Faced with a medical note that says an animal is “required”, “necessary” or “indispensable” to accommodating a person’s disability, it is inappropriate for an accommodation provider to suggest any alternatives. This language is unambiguous: the person must have the requested accommodation – whether there may be suitable alternatives is irrelevant.

For clarity, this is not a bulletproof loophole to obtain any accommodation request under the sun. Even with documentation this clear, a condo would not be obligated to accommodate a resident if the condo would suffer “undue hardship” in process. Which leads us to YCC 435’s next argument…

B. THERE IS UNDUE HARDSHIP: GERMAN SHEPHERDS ARE DANGEROUS

YCC 435 argued that Sophie was a dangerous and menacing dog: the condo would suffer undue hardship if it had to accommodate Sophie in the complex. It claimed Sophie leapt onto other residents and there were complaints about noise Sophie created when playing with a toy. However, this was raised in testimony from YCC 435’s director. YCC 435 submitted no evidence nor investigated these allegations.

Ms. Karnis indicated these were isolated incidents when Sophie was a puppy. Since this time, Ms. Karnis spent hundreds of hours on training. Sophie successfully learned to perform her duties without distraction. Sophie was otherwise living in reasonable harmony with other residents.

Tony’s Takeaway – “The Proof is in the Puppy”: This is the weakest and most speculative of YCC 435’s positions. Beyond YCC 435’s failure to provide enough evidence of Sophie’s “danger”, the Policy is clear that the hardship must be more than merely speculative:

Anticipated hardships caused by proposed accommodations should not be sustained if based only on speculative or unsubstantiated concern that certain adverse consequences “might” or “could” result if the person is accommodated.

In other words: prove it or lose it.

C. YCC 435 ENTITLED TO DEFERENCE UNDER BUSINESS JUDGMENT RULE

YCC 435 invoked the “business judgment rule” (“BJR”) as a “catch-all position” to defend its decision to demand Sophie’s removal. Condo boards are not held to a standard of perfection and are afforded significant deference for their business decisions asthey are in a better position than a court or tribunal to determine what is best for their condo community. YCC 435 argued its decision to reject Sophie was entitled to deference as it deemed (a) White German Shepherds to be dangerous, (b) Sophie menacing and dangerous, capable of causing serious harm if she attacked someone and (c) a preference and that other less dangerous dogs were suitable alternatives.

But, as YCC 435 argued, the BJR is limited to “protecting decisions that are a product of reasonable conduct of good faith judgment”. The CAT rejected the Board’s reliance on the BJR for this very reason. It did not exercise the care, diligence and skill that a reasonable board in comparable circumstances would have before rejecting Sophie:

The board cannot insulate itself from scrutiny when addressing accommodation requests without providing a cogent rational for its position after using reasonable diligence. I have been presented with insufficient evidence that the board took reasonable steps to fully inform itself and investigate Ms. Karnis’ request and specifically, whether Sophie posed an unreasonable risk.

COSTS REQUIRES MORE CLARITY

For all of my past criticisms of the CAT, this case was overall rather detailed and clear. This decision reflects a thorough analysis of the key legal issues and parties’ submissions. The public can reasonably understand how the CAT came to this decision…for the most part.

Unfortunately, the discussion on costs is a defining example of my previous criticisms. As I read through this decision I expected the CAT to award Ms. Karnis, her costs on a partial basis at the very least. Despite being entirely successful in defending this application, the CAT declined to award costs to either party as neither party behaved unreasonably, improperly or caused delay/expense. This was all in a short three-line paragraph. Where the CAT went into great detail on all the challenges Ms. Karnis was put through – ultimately succeeding in the end – I struggle to see how it came to this decision.

TONY’S FINAL TAKEAWAY – “REASONABLENESS AND GOOD FAITH STILL TOP DOG”

Time and time again, I go back to my #1 Takeaway: be reasonable and act in good faith. Failure and refusal to follow this principle is the root of virtually every condo dispute I have seen. This is profoundly important when dealing with accommodation requests. The CAT sums this up best:

Ms. Karnis’ has requested accommodation in accordance with the Code based on the principles of dignity, individualization, integration and full participation. The extent to which the board is required to exercise its care, diligence and skill needs to reflect the importance of these principles. Accommodation is necessary to ensure that people with disabilities have equal opportunities. Responding to and investigating Ms. Karnis’ request to reside in the condominium complex safely requires a degree of due diligence and skill that reflects the weighty nature of this request. Generally, the more at stake requires a higher level of due diligence and skill by the board.

The nature of Ms. Karnis’ request is individual to her… When balancing the needs of the condominium with that of Ms. Karnis, the board must weigh all relevant factors… The board did not take the opportunity to explore the White German Shepherd breed with Ms. Baker or why Ms. Baker recommended Sophie. Ms. Imer provided testimony that suggests the board took insufficient steps to investigate if Sophie posed a real danger. I find that the board took only negligible steps.

I find the board failed to reasonably investigate and consider Ms. Karnis’s individualized request to house Sophie and whether doing so would cause undue hardship.

John Warren, a long-time Director & Past President of CCI-Toronto, was everyone’s friend in condo world.  He passed away peacefully on September 29, 2023. 

John received his CA designation in 1973 and spent 2 years at a large audit firm in Brussels, enabling his wife, Beatrice and him to tour around Europe. 

He completed his first condo audit in 1984 – but then proceeded to build a thriving condo audit department at Adams & Miles LLP, Professional Chartered Accountants.  He said, “I realized that I liked condo audits.  I liked the people, the sense of community and all the different ways that directors and managers operated the condos they were responsible for.” 

John saw firsthand the difference between CCI and ACMO-educated directors and managers compared to those who had not attended their courses.  He was amazed by the diversity of intricate topics published in Condovoice and CM magazines.

During John’s tenure at CCI-Toronto, he promoted progress in its educational programs, including ACMO’s and CCI’s informative annual Condominium Conference sessions.  John volunteered on various committees of CCI and ACMO and is well-known for his articles and seminars analyzing financial, audit, investment, and reserve fund issues. 

As his audit practice grew, “I was exposed to all the ways that people govern condos, for better and for worse.”  At condos under dire financial stress, John had the unique ability to impress reluctant owners with the need to face up to the financial realities.  His audit presentations at AGMs “were always enjoyable, no matter how contentious the issues, as these meetings showed that people were involved in their condo community.  Condos have come a long way, and most are now financially stable.  I am very pleased to have been a part of that process.”

John proactively participated in producing the Institute of Chartered Accountants’ condo bible, Accounting and Auditing Guidelines for Ontario Condominium Corporations.  From 1995-2001, John suggested improvements to the pre-existing Condominium Act.  As a member of the experts’ panel, he focused on financial statements and reserve fund study issues. 

For three years, John, Beatrice and their RV explored Canada coast to coast to coast.  John and I have often traded weekends at our wilderness cottage hideaways or tilting wind on his beautiful 30’ C&C sailboat, Moxie.  John, Greg Ross, Bill Boyd and I have annually flown far back into the wilderness of Temagami or into Grey Owl territory for week-long fishing drinks (comparing brands of single malt scotch in a canoe seemed as compelling as nature’s enchantment).

We will miss John as a very good friend to us all.

Condo living is unpredictable and there’s always something new…yet I write about chargebacks, indemnity clauses and Amlani all too often. The law is settled: condos cannot charge back enforcement-related costs – specifically legal letters – without a court order, despite how any indemnification provisions are drafted. As the CAT and Courts have reaffirmed:

It is one thing to allow the corporation to enforce, by way of lien, common expenses that are applicable to all unit holders and that a majority of unitholders have approved. It is entirely another to allow a condominium corporation the unfettered, unilateral right to impose whatever costs it wants on a unitholder, refer to them as common expenses and thereby acquire the right to sell the unitholder’s apartment.

YCC 50 v. Overholt is the most recent decision to address this point. This case has the classic hallmarks of a simple rule enforcement matter escalating wildly out of proportion:

  • YCC 50 received a smoking complaint against Overholt but did not investigate the complaints, let alone verify them;
  • YCC 50’s property manager sent a warning notice to Overholt, but the complaints continued. Still, YCC 50 did not investigate nor verify the complaints;
  • So YCC 50 sics its lawyers on Overholt. The lawyers sent a threatening letter (in the CAT’s words) to Overholt claiming she violated the no-smoking provisions and there was no exemption for her unit;
  • Turns out that Overholt’s unit was exempt from the no-smoking provisions as a legacy unit before the no-smoking provisions took effect; and
  • $611 was charged back to Overholt’s unit to cover the legal letter. When Overholt did not pay, a lien was registered. Another $1,330 was added to her unit for lien-related costs – more than double what was originally demanded – for a total of $2,926.

But YCC 50’s campaign doesn’t end there. It brought a CAT application to obtain Overholt’s compliance and confirm its entitlement to its costs, only to resoundingly lose on both issues. The CAT recognized that Overholt was properly grandfathered and not in breach of the no-smoking provisions. As for the lien, the CAT cited the wonderful passage from above and ordered YCC 50 reverse its legal/lien-related charges. For the final nail in the coffin, the CAT ordered YCC 50 pay Overholt $2,000 in costs. Time and time again, we stress the importance of acting reasonably.

For all my criticisms of this legal letter-to-lien practice I call the “Chargeback Card”, I see the obvious appeal in the approach. Why go through the expensive and time-consuming legal route to get a compliance order when a condo can smack unruly owners with chargebacks which, if unpaid, a lien and could cause the owner losing their unit via power of sale? Usually owners begrudgingly comply, pay the chargeback and move on with their life. And while these owners could sue to recover the chargeback, most are unwilling to spend more time, money and stress to stroke this flame – notably, a condo can rely on collective common expenses to finance the litigation while the aggrieved owner is fighting their battle out-of-pocket. The Chargeback Card accomplishes its objectives, albeit improperly: the Superior Court recently affirmed that where condominiums improperly issue chargebacks, the onus does not shift to owners to “prove illegality of the chargeback” since the error with the chargeback rests with the condo.

As a pragmatist at heart, I recognize that the Condo Act can be unclear or overly rigid in many situations such that creative but fair approaches are required. However, a pragmatic approach under the Condo Act is only achieved if does not offend the spirit of the Condo Act. Here lies my fundamental problem with the Chargeback Card: it violates the basic consumer-protection intention of the Condo Act. It deprives owners of their legitimate right to due process and is used to improperly force owners into submission. The Divisional Court seems to agree:

[Amlani] does not stand for the proposition that, through deft wording of an indemnification clause, a condominium corporation can deprive an owner of his or her day in court as provided for in subsection 134(5) of the Act.

[…]

…the interpretation the Corporation advances contravenes section 134(5) of the Act because the costs it claims related to compliance and enforcement costs without being embodied in a court order. An interpretation that contravenes a statutory provision is, by definition, unreasonable…

We continue to see the Chargeback Card inappropriately played. The Chargeback Card is a relic from a time where the Condo Act was in its infancy and owners were not as aware of their rights and how a condo functions as they are today. The exploding increase in condominium developments in Ontario will result in more condo owners/residents and ergo, more condo problems. This calls for a modern approach: with all the information, case law and commentary on condo issues nowadays, heavy-handed lawyering, false threats and financial punishment must be replaced with reasonable responses and without depriving owners of their legal rights. Until it is widely understood and accepted that the Chargeback Card is not a winning hand, we will keep seeing cases like Amlani and YCC 50 v. Overholt.

An owner brought a CAT application alleging she was experiencing unreasonable noise from a common element garage grate and unreasonable noise, odour, smoke and  vapour from a common element industrial vent.  At Stage 3, the condo made a preliminary submission that the CAT did not have jurisdiction to hear the dispute because it was a maintenance and repair dispute under ss. 89 and 90 of the Condo Act. 

The CAT partially accepted this:  while the grate issue was dismissed because it related to maintenance and repair, the exhaust from the industrial vent complaint could proceed to a hearing before the Tribunal.

The owner relied on s. 117(2) of the Act, which prohibits a person from creating or continuing unreasonable noise or any other prescribed nuisance to an individual in a unit or the common elements. Prescribed nuisances include odour and smoke; therefore the exhaust complaint fell within s. 117(2).  

The CAT accepted that s. 117(2) can apply to actions of the condo. In doing so, it acknowledged that a condo corporation can be held responsible for causing unreasonable noise or nuisance. Recently, the CAT has held that condos can be liable to owners for nuisances caused by common element security lights and fountain lights. 

This conclusion recalls two recently dismissed owner applications where the allegation was that infestations from other units or the common elements caused a nuisance and the condo was liable for not remedying the situation.  Afterall, if the CAT will deal with nuisances relating to lights or odours from the common elements why can’t it adjudicate nuisances from creepy-crawlies?  Two reasons: 

1.  Light and odour are a prescribed nuisance under s. 117(2) of the Condo Act, which “no person” shall create or continue.  Infestation is not.

2. The infestation applications were brought against condos under s. 117(1) of the Condo Act, which addresses damage to or injury to a person or property.  Those owners did complain of bites, nuisance and annoyance from the infestations they experienced in their units.  However, to advance infestation as a CAT arbitrable nuisance against the condo, there would have to be a rule or other governing provision (even a nuisance one) which prohibited “any person”, not just an “owner” or “resident”, from causing a general nuisance or infestation.  Without a tie-in via a governing document which might apply to the condo, infestation complaints against a condo will be dismissed.

Takeaway:  Owners advancing nuisance claims should examine whether their claims fall within the prescribed nuisances the CAT can hear if they wish to bring an application against their condo.  A nuisance rule may not be enough if it applies to “owners” or “residents” only (and not “a person”).  Otherwise, owners may have recourse in Superior Court for compliance, oppression or under s. 117(1) for extreme infestation nuisance or damage originating from the common elements.

Owners are not allowed to modify the common elements  as they please. Though owners have broader rights regarding their individual “units”, the line between “units” and “common elements” can often blur, leading to escalated disputes.

In Carleton Condominium Corporation No. 132 v Newton , an owner installed a new garage door and front slab door with glass panels – though the owner had exclusive use of  their garage door and front door, the doors were nonetheless common elements. Section 98 of the Condo Act and the condo’s by-laws required owners obtain the Corporation’s written approval and enter into an alteration agreement with the corporation before altering  any common elements. The owner had done neither before they changed the doors.

After the board discovered the installation, it still tried to work out an alteration agreement to provide its approval after-the-fact. However, the parties could not come to an agreement and the corporation brought a compliance application to restore the original doors; the owner countered with an oppression application.

The Court granted the corporation’s application and dismissed the oppression application. This it not a novel outcome and was a predictable result. However, the Court interestingly commented on the Section 98 process and a board’s discretion in considering alteration agreements:

..it is not the function of the court to stand in the shoes of the condominium Board and make decisions about property management issues (such as what modifications to the common elements should be allowed referable to a particular unit). A unit owner must accept the jurisdiction of a condominium board to make decisions about exclusive use common areas and to enforce rules about maintaining a uniformity of appearance of unit exteriors. This is a core function of a condominium Board.

Notwithstanding the Respondent failed to obtain the approval of the Board at any time for the doors he installed in 2020, he was invited subsequently to apply for the Boards approval, which he did, and there followed lengthy negotiations about the modification to his doors. The Board has offered to pay for the new front door and the installation costs. The Respondent has not been treated in a differential or discriminatory manner from other unit owners with similar compliance issues. The Boards uniformity in appearance concerns are objectively reasonable and in the economic interests of unit owners including the Respondent.

This case emphasizes the importance of following proper procedures when seeking to alter common elements. It also highlights the broad discretion of the condo board in considering alteration agreements, uniformity of appearance of the exterior of a property and reminds us that good communication and negotiation can go a long way in resolving conflicts.

The Condo Act requires condominium corporations to insure against damage to the common elements and (standard) units that is caused by major perils such as fire or water escape. Picture this: you come home from a long day at work, only to find your unit flooded because of a broken dishwasher tube. Fortunately, your condo files a claim with its insurance company and the remediation team is already on-site. You happily assume the condo’s insurer is handling the repairs through their policy.  

A few weeks later, the repairs are complete but you receive a letter from the condo demanding you pay for the deductible on the insurance policy. In this case, the condo asks you to pay $100,000 or else this amount will be added to your common expenses. How could this happen?

Even though the condo has to maintain insurance coverage for this damage and indeed activates its policy, you are not necessarily off the hook. If the insurance coverage is triggered, the condo may have the right to chargeback the lesser of (a) the cost to repair the damages and (b) the deductible limit of the insurance policy in two scenarios:

  • The owner, through an act or omission, caused the damage to the owner’s unit; and
  • The condo has passed a by-law that allows it to chargeback the lesser amount for damage to common elements and other units so long as the condo did not cause the damage.

In this scenario, damage originated from the owner’s unit and the condo did not cause the damage, so the owner is still liable if the condo has passed the appropriate by-law.

To avoid a similar situation, it’s important for unit owners to obtain comprehensive insurance coverage for their units. We commonly see owners with coverage up to approximately $25,000 towards insurance deductible chargebacks despite skyrocketing insurance deductibles in recent years. To use the example above, an owner would still be liable for $75,000 out-of-pocket. We recommend owners periodically check their insurance policy against the condo’s policy to ensure “gapless” coverage. Don’t be caught off guard by unexpected charges – take the time to review the condo’s insurance certificate or latest periodic information certificate which will set out the deductibles in various scenarios.

Parties seeking costs awards from the CAT must understand that the Tribunal has the discretion to award costs: even if a party is entirely successful on their claim, there is no guarantee it will receive its full costs, if any. In January 2022, the CAT published a practice direction which informs the public how the CAT will exercise its discretion based on the common principles of proportionality, reasonableness and nature of the parties’ conduct.

Though the practice direction aims to provide clarity on the Tribunal’s discretion to award costs, a recent CAT decision leaves us with less certainty than we hoped.

Metropolitan Toronto Condominium Corporation No. 1240 v. Debnath, 2023 ONCAT 56

A condo started a CAT application against a unit owner for repeatedly violating its noise and nuisance provisions by playing loud music at all hours. The owner told the property manager that the loud music was intended to drown out violent sounds from an adjoining unit, but that owner otherwise did not participate in the CAT hearing. In their absence – and on the basis of the condo’s evidence – the CAT held the owner was in violation of the condo’s Declaration and Rules.

In seeking full indemnity costs from the owner, the condo relied on three different – albeit overlapping and similar – indemnity provisions in its Declaration and Rules. The CAT recognized that:

  • Despite receiving multiple warnings before the condo brought its application, the owner “has persistently shown a lack of response to overtures to comply”;
  • It would be unfair for other owners to be called upon to subsidize the costs of enforcing compliance against another owner; and
  • The condo’s legal fees were overall reasonable.

Despite these findings, the CAT only awarded the condo 50% of its legal fees.

A positive highlight of this decision – Reasonableness is the prevailing principle

Although the condo’s noise/nuisance prohibitions in its governing documents were worded such that the noise/nuisance could be “in the opinion of the board or the manager”, the CAT held that the exercise of this discretion must still be reasonable. We commonly see unfettered language like this but the CAT held that “bald assertions by a manager would not suffice in the absence of valid objective evidence assessed in good faith”.

This is critically important and it reinforces the spirit of fairness embedded in the Condo Act.

Lingering confusion – Making sense of indemnification provisions, Amlani and the CAT

Returning to costs and indemnification, the CAT missed the mark. In awarding only 50% of the condo’s legal fees, it noted that the documents submitted by the condo “suggest some challenges in the owner’s life situation”.

We are sensitive to the host of potential issues that could affect how or why an owner might behave the way they do. Even in the face of crystal-clear breaches, issues such as mental illness, disability or other personal matters often call for sensitivity, discretion and accommodation from the condo. But on this point, the Tribunal’s decision does not elaborate on what these challenges were or how the CAT weighed them. For the CAT to make a discretionary decision to reduce the condo’s entitlement, its decision needs to be better articulated to allow the public to appreciate the Tribunal’s reasoning.

The CAT also suggested that the indemnity provisions “did not expressly refer to compliance costs” and that “one provision of the Declaration only spoke to costs relating to damage to property”. It isn’t clear how much weight the CAT gave this in coming to its decision, but one of the Declaration provisions and the Rule the condo relied on was sufficiently broad to capture “any losses, costs or damages incurred by the Corporation by reason of a breach of any rules and regulations”.

In my view, the CAT overlooked the broad reach of the condo’s indemnity provision. It overemphasized whatthe costs relate to(i.e. compliance or common element damage) rather than why the costs were incurred(i.e. by reason of an owner’s breach).

The CAT’s discussion on the drafting forces us to revisit the Amlani saga. I am a vocal supporter of the Amlani decisions (see here and here) and I will always emphasize that the case law is clear that condos can only seek compliance-related costs pursuant to a court order (or an order from an arbitrator or Tribunal such as the CAT) and this cannot be circumvented through deft drafting of an indemnity provision. The problem I anticipate is that by distinguishing “costs related to the common elements” and “costs generally” in an indemnification clause, the CAT invites crafty lawyers and condo boards to continue overstating the drafting of an indemnification provision. How an indemnity provision is drafted is important with respect to what costs can be recovered (i.e. compliance costs, costs relating to physical damage, any costs, etc.) but it cannot change how those cost are recovered: compliance costs are only recoverable once a breach has been proven in court, CAT or arbitration and costs are awarded accordingly.

Conclusion

There’s no denying the work the CAT has done – and continues to do – in providing justice and fairness in the condo community.  Since expanding its jurisdiction to capture nuisance issues, the CAT has done a great job at issuing decisions that are legally-principled and balance corporation and owner interests. But of course, there’s always room for improvement, especially as it relates to costs.

With clearer decisions and less hesitation to award costs against owners who breach the governing documents, the CAT has the potential to move from the final arbiter of justice to the preeminent deterrent for non-compliance.