Survey for ACMO CCI-EO Conference

The ACMO/CCI-EO organizing committee is already hard at work putting together the  ACMO/CCI-EO 6th Annual Spring Conference.

In preparation for this event, the organizing committee would be grateful if our readers could please take 1 minute to complete this survey.  The survey will help the committee tailor the event to best meet your needs.

As many of our readers know, the Annual Spring Conference brings together industry experts, managers, and directors around condo-centric topics. It is an amazing opportunity to learn but also to network with one another.  With all of the changes to the Condominium Act and with the new mandatory licensing of managers, this year’s conference is going to be a big one!

If you feel inclined,  please forward this survey to your colleagues, managers, directors, or condominium owners. We hope to see them all at the conference.

You can email any questions you may have to info@cci-easternontario.ca.

Helpful Recent Decision About Condominium “Changes”

When a condominium corporation makes a “change” – which essentially is something that goes beyond maintenance and/or repair – involvement of the owners may be required under Section 97 of the Condominium Act.

But the required involvement of the owners (in relation to a change) also depends upon the estimated cost of the change.

For instance, under Section 97 (2) (c) of the Act, if the estimated cost of a change, in any given month, is below a certain threshold, the Board has the mandate to proceed (without owner involvement).

On the other hand, under Section 97 (6) of the Act, if the estimated cost of a change is greater than 10% of the corporation’s annual budget, the change must be treated as “substantial” requiring a 2/3 vote of the owners.  If the estimated cost lies somewhere between the threshold in Section 97 (2) (c) and 10% of the annual budget, the Board can decide to treat the change as non-substantial (requiring notice to the owners, with an opportunity for owners to requisition a meeting to consider the proposed change by ordinary vote).

Here’s the point:  The estimated cost of a proposed change is a critical ingredient in determining if, and how, all owners must be involved in the decision to proceed with the change.

 That leaves the following question:  How does one calculate the estimated cost of a change?

In the Zordel case, the corporation had an existing agreement for bulk cable television service (for all units) – with the related cost added to the common expenses.   The Board decided to enter into a new agreement that provided BOTH bulk cable AND internet services.  The Board did not involve the ownership in this decision.

Certain owners objected.  They said that the new Agreement required owner involvement – that the Board couldn’t go ahead on its own.  And they said that – based on the cost of the new Agreement – there was a “substantial change” (requiring a 2/3 vote).

The Court said:

• Even though new technology was being introduced for the cable television service, there was no change to that service. The only change related to the new internet service.

• The cost (of the change) was therefore the cost for the new internet service. The cost of the cable television service did not figure into this calculation, because it was not part of the change.

• The cost was therefore below the threshold in Section 97 (2) (c). As such, there was no need for the Board to involve owners in the decision.

Further notes:  The threshold in Section 97 (2) (c) will change (increase) when amendments to that section come into force (expected sometime over the next two years).   But the amendments to that section will also introduce some additional criteria for the Board to consider (for that section to apply).  So, the law will change somewhat in these areas.  But that shouldn’t change the basic principle expressed in the Zordel case (namely, that the cost of a change is not the cost of the entire transaction…..but only the cost of that part of the transaction that constitutes a change).

We’re also expecting that the “cost” will be further defined in a future phase of new Regulations….but I would similarly expect that the principles in the Zordel case will be confirmed in those new Regulations. We’ll have to see.

Catch Our Lawyers at the ACMO/CCI-T Condominium Conference in Toronto!

November 10 marks the start of the two day ACMO/CCI-T Condominium Conference, happening at the Toronto Congress Centre.

If you are at the conference, be sure to catch Jim Davidson and Nancy Houle, who will both be speaking at the Conference:

  • Nancy Houle will be a panel member during session 3C, “A Professional Too Expensive?  Try an Amateur!” at 4:00 pm on Friday afternoon
  • Jim Davidson will be a panel member during the Closing Session “Case Law Update” at 1:30 pm on Saturday afternoon

The New Condominium Authority Tribunal Rules Are Out!

Here are some of the highlights of the new CAT Rules:

For every dispute, a five-step process is contemplated:

I. The Process

Step 1:  Filing [CAT Fee:  $25.00]

Step 2:  Joining (ie. where the Respondent joins the case) [No CAT Fee]

Step 3:  Negotiation (an on-line dialogue between the parties, all within CAT’s on-line system) [No CAT Fee]

Step 4:  Mediation (where a mediator joins the dialogue, to try to help the parties settle) [CAT Fee:  $50.00]

Step 5:  Tribunal Decision [CAT Fee:  $125.00]

II. Representation

The CAT Rules say that parties can be represented in the process (if they wish) by:

(a) a lawyer or paralegal licensed by the Law Society of Upper Canada; or

(b) a person who is exempt from the Law Society’s licensing requirements. This includes a friend or family member who is helping the User without receiving any fee, or a licensed condominium manager.

III. Costs

In terms of costs, the CAT Rules state as follows:

Recovery of fees and expenses

The Tribunal may order a User to pay to another User any reasonable expenses or other costs related to the use of the Tribunal, including:

(a) the Tribunal’s fees paid by the other User;

(b) the other User’s expenses or other costs that were directly related to that User’s participation in the Tribunal’s process; and

(c) the other User’s expenses or other costs that were directly related to a User’s behaviour during the Tribunal process that was unreasonable or for an improper purpose, or that caused an unreasonable delay.

 Legal fees generally not recoverable

The Tribunal will not order one User to pay to another User any fees charged by that User’s lawyer or paralegal, unless there are exceptional reasons to do this.

In summary, the “losing party” generally won’t be ordered to pay the “winning party’s” legal or paralegal costs (if any).  And this will of course be a growing issue as CAT is given increased jurisdiction (over more and more types of condominium disputes) in the years ahead.

Some parties may understandably decide, as a result, not to involve lawyers or paralegals in many CAT disputes.  For condominium corporations, one or more Directors or Officers may sometimes be comfortable handling the process.  In other cases, the property manager may be an excellent representative. [NOTE: This may however be an “extra service” for the manager – perhaps entitling the manager to a reasonable, extra fee (which would likely not be recoverable in the dispute).]

But some condominium corporations may still be most comfortable having legal representation in these disputes – despite the fact that the costs will generally not be recoverable.  [Also:  In some instances, the case precedent may be an important factor for the condominium corporation.]

With this in mind, we are planning to train one of the members of our team (whether a condominium law paralegal or junior lawyer) to assist our clients with CAT disputes…in order to make this service as economical as possible for our clients.  That way, we’ll be ready to assist, at reasonable cost, if we are ever asked to do so.

One final comment:  In our view, the condominium corporation’s liability or D & O liability insurance likely would not respond (or provide coverage) in most CAT disputes.  But this might depend upon any specific allegations in a given case.  So, insurance coverage is always something to keep in mind.

IV. The CAT Rules also cover various other matters relating to the CAT process, including:

(a) Methods of Communication, primarily involving use of CAT’s on-line system (or alternative methods of communication approved by CAT);

(b) Presentation of evidence;

(c) Delivery of relevant documents;

(d) Witnesses; and

(e) Public Access.

Important Court Decision About Recovering Costs From Owners

In the Wexler case, the owner brought a claim against the condominium corporation in Small Claims Court for total damages of $2,525.14 for alleged harassment, for recovery of costs for clean-up of pigeon droppings (charged to the owner by the corporation), and for recovery of costs for legal advice obtained by the owner.  After a three-day trial, the owner’s claims were dismissed.  That left the question of responsibility for the costs (of the Court proceeding).

The Small Claims Court ordered the owner to pay the condominium corporation’s legal costs – in the amount of $20,000.  This was based, at least in part, on the “indemnification” provision in the condominium corporation’s declaration.  Because of that indemnification provision, and also because the Small Claims Court felt that the owner had unnecessarily prolonged the trial, the Court held that the owner should be obligated to pay more than the usual costs ordered in a Small Claims Court matter.  [The Rules of Court state that the losing party is (usually) obligated to pay a maximum of 15% of the amount claimed, as costs to the winning party.]  But again, the Small Claims Court said that the owner was obligated to pay higher than usual costs in this case.

The decision of the Small Claims Court included the following:

I recognize that the plaintiff was not prepared for trial and that she was disorganized; this directly contributed to unnecessarily prolonging the trial. As such, and because her action was dismissed and because the condominium corporation has a Declaration, By-Laws and Rules providing for full indemnity, and especially because it would be unfair that the unit owners should bear all the costs of this litigation when the condominium corporation is unnecessarily sued, I allow costs in the amount of $20,000, inclusive of HST and disbursements. 

 The owner appealed and was successful on appeal.  On appeal, the Divisional Court said that the indemnification provision, in the condominium corporation’s declaration, did not apply.   Based on the wording of the indemnification provision, the Divisional Court said that the provision “is not applicable as there has been no loss, costs, damage, injury or liability suffered or incurred with respect to the common elements and/or all other units caused by an act or omission by Ms. Wexler”.

 I don’t disagree with the above reasoning of the Divisional Court.  But here’s my concern:

What will this mean for condominium corporations seeking to collect OTHER costs or OTHER expenses – quite apart from Court costs – and seeking to add those amounts to an owner’s common expenses when those costs or expenses have been caused by an act or omission of the owner or by an occupant of the owner’s unit?

 Many condominium declarations contain an indemnification provision similar to the provision considered by the Court in the Wexler case.  So, based on the Wexler decision, those provisions will only apply to losses, costs, damages, injuries, liability etc. suffered or incurred (and caused by an act or omission of the owner or an occupant of the unit) “with respect to the common elements and/or all other units”.

The problem is:  Some costs (caused by an owner or occupant) might not be covered.

And we know from other Court decisions (and from amendments to the Condominium Act) that these sorts of chargeback or indemnification provisions likely need to be in the declaration (in order to allow a condominium corporation to add such amounts to the owner’s common expenses).  [Such a provision in the by-laws or rules may not be sufficient.]

Here’s the bottom line:  Condominium corporations should consider amending their declarations to replace these imperfect, inadequate indemnification provisions – for the sake of all of the innocent owners in the condominium.