Enforcing Obligations: Tips for Dealing with the Problematic Condo Owner

Condominium owners and condominium corporations alike have obligations to fulfill in their unique relationship. The Condominium Act, as well as the Declaration, By-Laws, and Rules of a condominium itself, set out these obligations in detail. But what happens when one side does not hold up their end of the bargain?

In Carleton Condominium Corp. No. 25 v Patrick Eagan (2015 ONSC 4353), the Ontario Superior Court exercised its authority to order a neglectful owner to comply with his responsibilities. In that case, Patrick Eagan denied access to Envirocontrol to inspect his unit for bed bugs. Over the course of the next year and a half, he continued to ignore directions to allow his unit to be treated, directly cancelled scheduled treatments himself, and continually refused to prepare his unit for treatments; and all this while the owners directly across from him were forced to treat their condo due to his continued neglect.

Not surprisingly, the Court had little difficulty finding that Mr. Eagan had breached his duties under the Condominium Act. But what is perhaps more helpful for condominium corporations to know moving forward is that in spite of obvious neglect, and even disdain, for an owner’s obligations, courts will not simply grant the condominium corporation whatever it wants, no matter how wronged they were.

Here are some important things to remember if your corporation ever finds itself in a similar predicament.

1) Keep in mind that both parties have duties in this relationship. Although Mr. Eagan breached his own obligations, it is important to note that in this case the Carleton Condominium Corporation appropriately took all reasonable steps, such as providing information to the owner, scheduling a treatment appointment, and conducting its own inspections, to ensure that the owner of the unit was in compliance with the Condominium Act. Though the court found that he was not, the fact that the corporation itself had lived up to its end of the bargain made it easier to find fault in the other party.

2) Courts can only order someone to fix an existing problem, not future problems. Although the condominium corporation in this case was granted an order for Mr. Eagan to immediately prepare his unit for bed bug treatment, the judge refused to grant an order forcing Mr. Eagan to maintain his unit “in a condition that does not pose health, safety, and/or fire risk.” Of course, Mr. Eagan is required to do this anyway, as these are some of his general obligations; but just because he breached them does not mean a judge will order somebody to refrain from breaching them again. Courts expect people to follow the law, even if they’re contravened it before.

3) Relationships like these can be complicated – as always, if you are confronted with a problematic condo owner, be sure to consult with an experienced condominium lawyer to help you get the best results possible!

Is it possible to ‘revive’ condominium lien rights?

In a previous decision of the Superior Court, the Court said that it is possible to “revive” lien rights after expiration of the normal three-month lien period, by bringing an Application for recovery of the arrears under Section 134 of the Condominium Act, 1998. According to that previous decision, a condominium corporation then acquires a fresh right to register a lien (for the amount awarded under Section 134). In this way, the corporation can recover “old” arrears by way of lien.

However, of particular note in the previous Court case is the fact that no mortgagee was involved.  In other words, no other registered encumbrancer appeared to be impacted by the Court Order permitting the registration of a lien for the “old” arrears.

In the recent Ontario Superior Court decision in TSCC No. 198 v. Stefco Plumbing & Mechanical Contracting Inc., 2013 ONSC 7709, the Court again dealt with the rights of a condominium corporation to seek an Order permitting it to register a lien for “old” arrears. But in the Stefco case, there was an existing mortgage, and the mortgagee was involved in the Court Application.

The Court confirmed that the condominium corporation’s Application was commenced under section 134 with a view to effectively “reviving” its lien rights under section 85 of the Act.

The Court reviewed section 85 of the Act, which governs a condominium corporation’s lien rights. The Court took particular note of the requirement under that section to provide a mortgagee with notice of the condominium corporation’s lien. The Court concluded that the purpose of the notice requirement is to permit mortgagees to take whatever steps may be necessary (and available) to protect their interest in the property, and the Order sought by the condominium corporation would have had the effect of denying a mortgagee the opportunity to protect its own interest.

The Court ultimately refused to grant an Order permitting the condominium corporation to register a lien for the “old” arrears, because this would have been prejudicial to the mortgagee. [The Court did grant judgment to the condominium corporation for the amounts owing by the unit owner. However, as a standard judgment creditor, the condominium corporation would have no security over the owner’s unit.]

In our view, the Stefco decision makes sense. As a general rule, a lien must be registered within three months of the default. And the primary purpose of this three-month lien period is to protect the unit mortgagee(s). However, I also add the following notes:

(a) It seems to me that there may still be room to argue that a condominium corporation can “revive” its lien rights by way of Application under Section 134 of the Act, but on the understanding that the revived lien will not take priority over any unit mortgage.

(b) The Courts have also confirmed that payments received by a condominium corporation can often be applied to the earliest arrears, thereby “rolling forward” the three-month lien period.

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We are pleased and excited to introduce Condo Law News, a blog published by the Nelligan O'Brien Payne LLP Condominium Law Group. We have extensive experience in all areas of condominium law, including new condo development and conversions, as well as mixed use residential and commercial developments.

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