When Amlani v. YCC 473 was released at the start of the year, it was the immediate frontrunner for “2020 Condo Case of the Year”. YCC 473 appealed and even in a year of fascinating cases, the Amlani decision still holds its seat at the top of that mountain.
The initial Amlani decision dealt with a common situation. In a nutshell, the board received complaints about Mr. Amlani’s smoking so they instructed their lawyers to deal with the matter. YCC 473 relied upon the indemnity provision in its declaration to charge back its legal expenses to Mr. Amlani and subsequently register a lien against Mr. Amlani’s unit to collect its legal fees.
The initial judge held that YCC 473 could not rely upon it’s the indemnity provision to charge back its legal costs for two key reasons:
1. Mr. Amlani did not commit “an act or omission to or with respect to the common elements and/or all other units” as required by the indemnity provision; and
2. YCC 473’s interpretation of its indemnity provision contravened section 134 (5) of the Condo Act as the costs it claimed related to compliance and enforcement costs without being embodied in a court order.
Section 134 (5) of the Condo Act allows a corporation to add its enforcement costs to an owner’s common expenses if a court awards the corporation its damages or costs in bringing a compliance application. Section 134(5) does not itself authorize a lien for legal fees incurred prior to the compliance application: to register a valid lien for legal fees, the court must first award these fees. However, many condominiums rely on their indemnity provisions as a “catch-all” provision to permit a corporation to add certain costs to an owner’s ledger resulting from their acts or omissions, often without requiring a court order.
The Amlani decision sparked considerable debate amongst condominium lawyers. Some of our esteemed peers argue that you cannot rely on an indemnity provision to charge back legal compliance and enforcement costs without first obtaining a court order. Others took the position that Amlani was a fact-specific decision that turned on the specific wording of YCC 473’s indemnity provision; they argued the Amlani decision does not stand for the proposition that a court order must be obtained before any pre-litigation legal compliance and enforcement costs can be charged back.
The Divisional Court recently set the record straight: condos cannot rely on their indemnity provisions to enable a lien to be registered against a unit to charge back compliance and enforcement costs without a court order. This does not mean a condo can’t recover its pre-litigation compliance and enforcement costs – condos can seek these costs in an s. 134 (5) order but registering a lien for these costs before the order is obtained is improper.