Condo directors in Ontario are expected to exercise a certain degree of attentiveness, caution and prudence while carrying out their duties. This expectation is known as the “standard of care” and is set out in section 37(1) of the Condominium Act, 1998, which provides:

37.  (1)  Every director and every officer of a corporation in exercising the powers and discharging the duties of office shall,

(a) act honestly and in good faith; and

(b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

While the wording of this standard of care seems pretty simple, some directors don’t entirely understand what it means.  A recent Superior Court case illustrates that some directors don’t understand it at all, or don’t care.
Continue Reading A reasonably prudent director

Happy New Year!Happy New Year.

Our picks for the top 10 condo law cases of 2014 is an all-Ontario batch, with half being important Court of Appeal rulings.   Some of them highlight the dire need for significant revision to our condo law.

10.     TSCC 1908 v. Stefco Plumbing & Mechanical Contracting, 2014 ONCA 696

Expired condo lien rights cannot be revived. Unpaid common expenses are not damages that can be recovered with a compliance order (where 100% costs recovery is typically assured).  If you snooze, you lose and must sue the owners for a liquidated debt as any other unsecured creditor and any shortfall should be paid by the person(s) who allowed the debt to age beyond the 90-day lien period.   Condo corporations can minimize the odds of losing their first-place security over unpaid common expenses by working with a professional condo manager and enacting a collections policy.

9.       Boily v. Carleton 145, 2014 ONCA 574

The Court of Appeal upheld a contempt order against board members who breached a court order but significantly reduced the penalty and the costs payable by those directors personally.  While one of the court’s motives in softening the penalty and costs award was presumably to avoid dissuading people from serving on condo boards, the ruling leaves this corporation (and its entire ownership) holding the bag for a lot of costs arising from a board run amok. Similarly, the individual unit owners who spearheaded this litigation to hold the board to account are likely financially devastated from their effort and the hollow result.   No good deed goes unpunished.

8.       Gordon v. YRCC 818, 2014 ONCA 549

The Court of Appeal upheld a condo by-law permitting the board to disqualify directors after an internal “ethics review.”  Some observers hail the approval of such by-law as a victory, but it may cause more problems than it solves.  Allowing the majority of a condo board to unseat directors may periodically be helpful, but it strikes at the heart of condominium democracy and creates a real potential for abuse.  While the ownership may recall and remove directors at a whim, boards holding their own “ethics review” must do so in accordance with procedural fairness, good faith and act reasonably, failing which the process is open to judicial review, thereby giving rise to needless litigation and cost.  If the purpose of the by-law is to provide for swift, painless removal of bad-apple directors, it is defeated by the increased likelihood of a lawsuit and the prospect of a shining knight or whistle-blower being ousted by rogues.   Just because it may be possible to implement such a process to remove directors doesn’t mean it’s a good idea.
Continue Reading Top 10 condo law cases of 2014

MC900300842As the buying frenzy for new condos continues, a growing trend threatens to leave purchasers poorly protected against construction deficiencies.   Purchasers and their lawyers should pay attention.

In recent years, some developers’ agreements of purchase and sale for new units began including limits on the developers’ warranties for those units.   But that wording would usually not prevent the condo corporation from making claims for construction defects in the common elements.  That has changed.

More recently, some developers will make agreements between themselves and the condo corporations under their control in the early days after registration, where the corporation releases the developer from all warranties and claims for construction deficiencies except for the minimal coverage under the Tarion new home warranty.   Those agreements might be authorized and registered on title to all the units using a condo by-law.

The result is that the condo corporation turned over to its purchasers has no legal recourse against its developer for construction deficiencies, other than to make claim under the Tarion warranty, known for its many shortcomings and limitations.   This leaves the condo corporation having to pay the cost to repair most construction deficiencies from its own funds, leading to rapid increases in common expenses and surprise special assessments.

What makes this slick practice legally acceptable is that the release agreements and authorizing by-laws are disclosed to purchasers as part of the disclosure materials and the by-laws are registered on title following the condominium’s registration, thereby giving the world fair notice.   But is fair notice enough?


Continue Reading Watch Out: Developers limiting their liability for building defects

In addition to people, pets and parking issues, this autumn’s harvest of condo-related court and tribunal decisions includes a bumper crop of court of appeal cases dealing with:

  • Expired condo liens;
  • Contempt of court by directors;
  • Bylaws permitting in-house “ethics reviews” for directors; and
  • Bylaws releasing developers from construction warranties.

Plenty of interesting reading.

HRTO

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The recent Ontario Superior Court case of Hogan v. MTCC 595 demonstrates that some condo boards have not yet read the memo about being responsive to unit owners and exercising common sense. Headshaker cases like this one are worth highlighting as examples of how not to run a condominium.

In November 2013, MTCC 595 notified its unit owners under section 97 of the Condo Act about the board’s plan to make an addition, alteration or improvement to the common elements at an estimated cost of $72,000. As required by subsection 97(3), the notice also advised owners of their right under section 46 to requisition an owners’ meeting to vote on the board’s proposal. Section 46 requires the board to call a meeting on requisition by the owners of at least 15% of the units. 
Continue Reading Rejecting meeting requisitions on minor technical grounds is a major foul

The first half of 2014 brought a bumper crop of condo-related court and tribunal cases from across Canada.   The race for the top 10 cases of the year is heating up!

ONSC nixes unit owner’s case vs condo & bd over previously-litigated issues. Good discus’n re liability of directors. http://canlii.ca/t/g23p8 

HRTO: For giving condo a binding release, fired super’s sexual orientation complaint dismissed as abuse of process http://canlii.ca/t/g298x 

ONSC imposes terms on condo unit owner for violent, antisocial outbursts, but not sale of unit. http://canlii.ca/t/g2b2r 

ONSC awards condo costs of $37K in hotly contested compliance application where sale order requested but denied. http://canlii.ca/t/g2w8t 

ONSC: Claim vs landscaper made 3 yrs after slip&fall may proceed, but condo’s x-claim vs landscaper statute-barred. http://ow.ly/rNMvI 

ONSC: Condos who snooze, lose. Expired lien rights cannot be revived. http://ow.ly/rSH9j  
Continue Reading Microblog posts to June 20, 2014 – Court and Tribunal Roundup

Owing to a very busy and ice-storm-filled holiday season and an even busier start to 2014 , we have been late in releasing our annual top 10 condo law cases of the year gone by.   Mea culpa!

In response to popular demand, here are our picks, presented in no particular order.  Almost all of them have at least one lesson that can and should be picked up by the ongoing Condo Act Review being undertaken by the Ontario Government.   A new condo act that deals with some of the persistent problems we see in our daily practice and in some of the cases cited below would be welcomed.

10.       Owners of Strata Plan LMS 2768 v. Jordison, 2013 BCCA 484

This is British Columbia’s first court-ordered sale of an owner’s unit for bad behaviour.  While this concept is hardly new in Ontario, the reasons of the BC Court of Appeal are noteworthy for the eloquent and compelling argument shattering the old adage that “a man’s home is his castle” if he lives in a condominium.   Let the word go forth that condos are no longer castles.

9.         PCC 98 v. Pereira, 2013 ONSC 7340

Although our courts have repeatedly ruled that forced sale of units is a remedy of last resort, too many condos still make the attempt too early.  In this compliance application, the court was satisfied that the unit owner’s bad behaviours breached the “dangerous activities” provision in s. 117 of the Condo Act.  But after noting that the owner ultimately complied with many of the complaints and since the behaviour fell short of that in comparable cases, the court found that the extraordinary remedy of a forced sale was not yet warranted, and gave a simple order for compliance with the rules and a warning that more severe remedies might be given for future bad behaviour.  Condo recovered the bulk of its legal costs of over $37K.

8.         GSCC 50 v. GSCC 46, 2013 ONSC 122

In this shared facilities dispute over allocation of utilities costs, one of the two feuding condos skipped mediation and arbitration and started a lawsuit to recover its overpayment of the utilities costs, arguing that the non-paying condo was unjustly enriched.  The court stayed that lawsuit pending completion of mediation and arbitration which is mandatory as per s.132 of the Condo Act and cannot be bypassed even if both sides agreed, per s. 176.  Court also pointed out that an arbitrator has the necessary power under s. 31 of the Arbitration Act, 1991 to decide a case like this and to grant the remedies that the plaintiff condo was requesting in its lawsuit.   Moral:  Don’t skip mediation and arbitration to start your shared facilities litigation.
Continue Reading Top 10 condo law cases of 2013

While mediation and arbitration have been mandatory for most types of condo disputes for over 12 years, it seems that there are still plenty of condo cases finding their way into the courts.  According to the scuttlebutt, the judges are starting to notice this, and they apparently aren’t too happy with the volume of people, pets and parking cases clogging up their dockets.

Though I was at first skeptical that the number of condo cases is increasing to epic proportions, tallying up the reported decisions released since our last batch on August 27 is telling.  While the cases we’ve tweeted in the past three months include cases from tribunals and courts of other provinces, the Ontario court cases shown below are probably just the tip of the iceberg when you consider that most court decisions are not sufficiently substantive or interesting to be reported.  In other words, there are probably a lot more condo cases out there that we haven’t heard about.   No statistics are kept and there’s no simple way of keeping track of them, but it’s probably safe to say that there are a lot and that their number is growing.

Here’s the latest bunch, and a big one at that!   As always, follow me on Twitter to stay ahead of the curve with live feed.


Continue Reading Court and tribunal round-up to December 4, 2013