A recent decision of the Ontario Small Claims Court tackles the interesting issue of whether and how condominium boards can reverse earlier decisions in maintenance and repair scenarios.
In 2005, the board of a 40-unit lot-line townhouse complex authorized payment for work to address a recurring plumbing backup problem that was unique to one particular unit. The board of the day had insufficient money in its reserve fund to pay the cost of fixing the problem on a permanent basis but apparently resolved to do the work once the corporation was in a better financial position.
A new board and property manager subsequently took the position that the problem in this unit’s sanitary sewer was not related to the common elements and that the owners of the unit were therefore responsible for solving the problem. The board did not seek to recover its expenditure for the earlier repairs but refused to conduct or pay for any further repairs.
In 2011, the unit owners hired a contractor to repair their sanitary repairs at a cost of $4,500. They asked the condo corporation to reimburse them and, when the request was refused, the unit owners sued the condo in small claims court on the basis that the condo corporation had committed itself with the board’s 2005 resolution to solve the problem one day.
The small claims court analyzed Schedule "C" of the condominium’s declaration which included the following components as part of the unit:
“all pipes … and those portions of the water, storm, sanitary and natural gas services extending from the shut-off valve or main line tee, that provides services that particular Dwelling Unit only."
The court also noted that the owners’ plumber’s report clearly indicated that the sanitary sewer served only the single unit and that the work was performed within the boundaries of the unit. It further appeared that the problem resulted from a design fault between the connection pipes from the unit to the main supply line. In light of these facts, the court agreed with the condo board that the problem did not lie within the common elements that the owners of the unit were consequently responsible for the cost of solving the problem.
To decide the case, the court gave this answer as to whether the board’s 2005 decision to address the problem could be reversed in a later decision.
Of course it can.
Just as a prior Board of Directors can reach a good faith reasonable decision, so can a later Board – armed with the wisdom of better hindsight and research – overrule it in the best interests of all unit owners. In that the July 2011 repair pertained to the owner’s unit exclusively, not the common elements, it would have been contrary to the best interests of the other owners – and jurisdictionally flawed – to commit them to fund such a repair.
Both sides relied upon precedent that upholds the right of a decision-making entity to make its decisions reasonably and in good faith. [Cases omitted.] This principle applies both to the 2005 and 2011 decisions.
The 2011 decision, however, in my view, was better researched, with greater benefit of hindsight. It is not irrelevant that the 2005 Board, having committed itself to funding the Plaintiffs’ repair, realised very quickly that the Corporation’s budget simply could not handle it. Consequently the repairs remained unresolved for years.
It cannot seriously be argued that a decision made reasonably and in good faith is forever – and under all circumstances – binding. The Plaintiffs knew full well when they undertook the repair that the Board was unwilling to reimburse. The Board was entitled to amend its earlier decision prospectively. But it would have been in muddier waters if it attempted retrospectively to assail payments already disbursed to the Plaintiffs, something it has – wisely – never sought to do.
The court dismissed the plaintiffs’ claim for reimbursement of the $4,500 repair cost.
This ruling usefully illustrates that condo boards remain free to reverse earlier decisions when the later decision is made in good faith and is based on credible information showing that the earlier decision is wrong.
Such scenarios often arise when new directors assume office or the board of a previously self-managed condo begins receiving advice from a professional property manager or lawyers with greater experience in condo law. It is not uncommon, for instance, for condo boards to reverse a long-standing practice or policy once advised that the initial decision was legally incorrect. The fact that the practice or policy is time-honoured does not change the fact that it is inconsistent with the Condo Act or the corporation’s documents. Condo corporations should not be handcuffed to an earlier decision if is later found to have been made with erroneous information or poor advice.
Beyond what is legally right or wrong, the next most important factor is how unit owners will react to a sudden about-face on a maintenance or repair issue. A condo board intending to reverse an earlier decision must consider the impact of that change on unit owners and should consider whether the change can be implemented or phased in so as to reduce potential hardship. Additionally, the basis for changing an earlier decision should be clearly explained to owners in order to minimize the potential for hard feelings and conflict. If owners are given a clear explanation for the change, an opportunity to state their views and to be convinced of the correctness of the change, needless dispute can often be avoided.
The case is Apaloo v. Durham Condominium Corporation No. 169,  O.J. No. 2850, as yet unreported publicly.