Canadian Condominium Institute (CCI) Directors’ Course – April 20, 2013

John Peart, James Davidson, Nancy Houle and Christy Allen of Nelligan O’Brien Payne LLP will be speaking at the Canadian Condominium Institute (CCI) Ottawa Chapter Spring 2013 Directors’ Course on April 20 and 21, 2013. Topics will include:

  • A General Overview of Condominium Law
  • Common Element Alterations
  • Condominium Insurance
  • Status Certificates
  • Reserve Funds
  • Management
  • Budgeting and Audit issues.

For more details, please click here.

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Grandfathering: Balancing the Flexibility and Predictability of Condominium Living

Condominium Corporations are empowered by legislation to amend their Declarations, and pass new By-laws and Rules. This means that the governing documents can change (in many cases with the involvement of the owners, as required by the legislation) and this flexibility is a critical aspect of condo living. On the other hand, there is also the counter-balancing desire for predictability. Some owners and residents rely on the governing documents as they are written. For example, if a resident has two dogs, and the corporation passes a new rule containing a one-dog limit, that owner is suddenly at a disadvantage.

Courts have held that a balance between the flexibility of creating or changing governing documents, and residents’ need for predictability can be achieved through the practice of ‘grandfathering.’ For example, suppose a resident is a smoker, and the corporation passes a new no-smoking provision, the resident might be grandfathered, meaning that they can continue to smoke in their unit. Grandfathering does not however, apply to every situation, or to every resident. If it did, the principle of grandfathering would be so broad as to effectively prevent the corporation from exercising its statutory powers to amend or pass new governing documents.

Three cases illustrate this point. The first is Durham Condominium Corporation No. 90 v. Carol Moore and Keith Wallace (Ontario Superior Court), which was released in September, 2010. In this case, the rear yard decks were part of the condo’s common elements. As with any other common element, modifying the decks required board approval, pursuant to the Condominium Act, 1998, and, in this case, the corporation’s Declaration. The Board adopted the following policy: they would only approve deck modifications if the dimensions of the modified deck did not exceed the original size of the deck. At the time the policy was adopted, a few decks were ‘oversized’, and were grandfathered by the corporation.

After the policy change, the respondent owners installed a deck that did not conform to the board-approved plans, or to the board’s new policy. The owners argued there was an element of unfairness since other ‘grandfathered’ decks did not have to meet the board-approved plans. Nonetheless, the Court ordered that the owners modify the deck, to bring it into conformity with the Board’s policy and the Board-approved plans. The Court stated that a condominium corporation can properly take steps to change its policies, with the appropriate grandfathering of existing conditions.

The second case is Willson v. Highlands Strata Corp., from the British Columbia Supreme Court in November, 1999. The petitioners in this case were the original purchasers of a unit. The Disclosure Statement stated that there were no restrictions on leasing the units. After turnover, the corporation passed a new by-law imposing restrictions on leasing the units. The Petitioners sought an order that they were exempt from the restrictions on leasing. The Court held that the absence of restrictions in the Disclosure statement did not prevent the corporation from imposing new restrictions on leasing. The court further held that the petitioners were not grandfathered under condominium legislation, because they leased their unit after the new by-law came into effect.

The third case is Metropolitan Toronto Condominium Corp. No 601 v. Hadbavny, from the Ontario Superior Court in October, 2001. The applicant was a unit owner. The corporation’s by-laws contained a one-pet limit, which had not been enforced. When the owner moved into his unit, the owner had one dog and, noting that the one-pet rule was not enforced, subsequently purchased a second dog, which the corporation demanded be removed from the unit. The owner sought an order that the second dog be ‘grandfathered.’ The Court granted the order stating, “how the Board managed the pet rule over the years… created a situation in which Mr. Hadbavny could reasonably expect that if he had two dogs who were not a nuisance, he would be permitted to keep them.” The Court said that the owner had relied on the board’s non-enforcement of the one-pet rule “to his detriment, and purchased his second dog in the reasonable expectation that no objection would be taken to it.” The corporation could not sleep on its rights, and then enforce the rules against people who relied on non-enforcement and had thereby put themselves in a position of disadvantage that they would not have put themselves in, had the provisions been enforced uniformly and in a timely manner.

In summary, when establishing a new policy, Rule, By-law or Declaration provision, it is important to bear in mind that in appropriate cases, some residents or situations should be ‘grandfathered,’ bearing in mind the following principles:

  • Grandfathering is intended to reflect a fair or reasonable compromise between the need for flexibility and the desire for predictability.
  • Grandfathering may be appropriate where an owner or resident has relied upon the previous circumstances or the corporation’s previous provisions.
  • Grandfathering does not apply in all cases. For grandfathering to apply, the owner or resident normally must have made a commitment that is difficult to undo, so that it would be harsh or unreasonable to impose the new requirement on the particular owner or resident. However, grandfathering normally won’t make sense if the grandfathering would allow an unreasonable risk of harm to persons or property.
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Important Recent Court Decision Respecting Corporation’s Repair and Maintenance Mandate

There have been very few Court decisions to help us draw the line between projects falling within the Board’s mandate and projects requiring involvement of the owners – i.e. to help explain Section 97 of the Condominium Act. But we now have a very helpful decision on point: Harvey v. Elgin Condominium Corporation No. 3.

The facts in the Harvey case were as follows:

Elgin Condominium Corporation No. 3 is a 51-unit townhouse-style condominium, with “roof decks” above the garages. Fifteen years after the original construction, the roof-decks were failing and leaking, due to “extensive construction design and implementation flaws.” The corporation’s engineers recommended that the roof decks be replaced, and offered two options:

Option 1: New wooden decks and railings (replacing the original wood); or

Option 2: Vinyl decks, coupled with aluminium railings.

The engineers recommended option 2 because it would be less costly and easier to service and maintain, and would also avoid the elevation and drainage problems of the original design. These advantages outweighed the fact that vinyl decks would require added care to avoid puncture of the decking and underlying membrane.

The Board held meetings of the owners to discuss the two options, and even held an ordinary vote of owners on the options. Out of 24 voting owners, 20 voted in favour of Option 2. The Board then chose option 2, and levied the necessary special assessments, in the amount of $10,000 per unit, to proceed with the work.

One of the owners, Mr. Harvey, objected strenuously to the proposed work and ultimately sued the condominium corporation. Among other things, Mr. Harvey said that the project constituted a substantial change to the common elements, requiring a 2/3 vote of the owners because the cost of the roof deck replacement would greatly exceed 10% of the corporation’s annual budget. He asked for an Order that the work stop and that all special assessments be reversed.

The Court dismissed Mr. Harvey’s claims, finding that the project and special assessment fell within the Board’s mandate. The Court said that the Board had the right to proceed under either Section 97 (1) or Section 97 (2) (b) of the Act. Here are some of the key extracts from the Court’s decision:

…the wording of s. 97(1) understandably contemplates a degree of latitude appropriate to the circumstances, and evolving construction knowledge and methods. Not surprisingly, our courts therefore repeatedly have held that replacement of ‘old’, ‘defective’ or ‘worn out’ common elements with ‘new’, ‘improved’ or ‘upgraded’ material, equipment or designs still constitute ‘repair’ and ‘maintenance’, and this is so even when the result has a different, more contemporary, aesthetic appearance.

…[the condominium corporation] was entitled, [and indeed obliged, pursuant to its statutory duties of repair and maintenance], to embark on the garage deck remedial work without the need for unit owner notice or approval, let alone approval by the special majority vote contemplated by s. 97 (4) [which applies to ‘substantial changes’]

This case clarifies that condo corporations are entitled, and indeed obliged pursuant to their statutory duties, to attend to repairs and maintenance, even when the proposed new features may be somewhat different than the original.

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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!

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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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