Condo Reporter

Unsuccessful Law Suit by Condo Owner

Barbara Holmes — Tue, 14 May 2013 08:12:46 -0500

Posted by Barbara Holmes

In the case of Harvey v. Elgin Condominium Corporation No. 3 an unhappy condo owner sued the condominium corporation, claiming that the corporation undertook work that constituted a substantial change without proper authorization from the owners. As the work that was done was funded by special assessment, the unit owner requested reversal of the special assessment. He also requested that the Court order the directors to take training, and appoint an administrator, and claimed punitive damages.

The Facts

After several of the townhouse units experienced leaks, water damage and mould, the corporation hired a professional contractor and an engineer to investigate. The professionals concluded that the leaks resulted from construction design and implementation flaws of wooden decks constructed over the unit garages. The board concluded that corrective action was necessary to prevent harm to persons and further damage to property. Based on advice received from the contractor and engineer, there were two options available to fix the problem – replace the existing wooden decks with new wooden decks or, alternatively, replace them with vinyl decks. After having made its decision that corrective work would be undertaken, the board scheduled a meeting of owners to discuss and choose a style of the replacement decks. Votes were cast by 24 of 51 unit owners, and 20 of the owners voted in favour of the vinyl decks.

Initially (in 2006), it was intended that two decks would be replaced per year, with priority given to those units most in need of imminent repairs, based on advice from the professional advisors. However, in 2008, due to escalating complaints, the board determined that the two-unit-per-year schedule was not tenable and that the progress of the remedial work needed to be escalated.

As a result of this accelerated work schedule, the reserve fund was not sufficient and the corporation levied a special assessment. After the special assessment, the unit owner who instituted the court action claimed that the work being done constituted a substantial change under Section 97(4) of the Condominium Act, which required the approval of the owners of two-thirds of all the 51 units. On this basis, he refused to pay the special assessment and the corporation subsequently registered a lien on his unit. He subsequently paid the special assessment in order not to affect his credit rating with his mortgagee.

The Decision

At the end of a three-day trial, the Judge dismissed the owner’s claims completely. The Court concluded that:

(1) While there was a disagreement between the corporation and the unit owner, the corporation did not unfairly disregard the owner’s rights and did not engage in unfairly prejudicial conduct towards this owner;

(2) There was nothing in the corporation’s conduct that was harsh, vindictive, reprehensible or malicious;

(3) The work undertaken by the corporation was not a substantial change, but was remedial work required to maintain the corporation’s common elements and thus fell within the ambit of Section 97(1), in which case no notice to, or approval from, the owners was required;

(4) Although the vinyl decks differed from the original construction, they were considered to be appropriate in light of current construction standards.

While the unit owner was self-represented in the litigation, the condo corporation incurred legal fees in excess of $60,000 related to this litigation. In a future blog, we will review how the judge allocated responsibility for those legal fees.

There is still time to register to the Ottawa ACMO/CCI Conference - May 31, 2013

Admin — Fri, 10 May 2013 09:46:01 -0500

Posted by Admin

The ACMO/CCI-Ottawa Conference is a one day event that brings industry experts together in an informative and engaging series of talks and seminars designed to educate and inform Boards of Directors, condominium property managers and condo owners. Our own Rod Escayola will be speaking on Director’s liability and in particular on the Boily case. For more information and to register, please click here.

Registration of Condominium Liens - Time is of the Essence

Barbara Holmes — Wed, 08 May 2013 11:05:51 -0500

Posted by Barbara Holmes

In a recent case, YCC No. 82 v. Bujold, the Court of Appeal considered the interpretation of Section 85 of the Condominium Act (the “Act”) and, in particular, the timing requirements under the Act relating to notice of the lien and registration of the lien. Section 85 of the Act provides that a certificate of lien must be registered within three months after the default has occurred and that the Corporation must give written notice of the lien to the owner at least ten days before registration of the certificate. Condo corporations that are not diligently complying with these requirements risk losing their lien rights.

In the Bujold case, the corporation served the owner with a notice of lien on June 22, 2007 relating to arrears of common expenses that had accumulated since December 31, 2006. The lien was registered on September 25, 2007. In 2009, the corporation served a notice of sale, and subsequently brought a motion for summary judgment and an order for possession of the unit.

The trial judge dismissed the corporation’s claim on the basis that the lien had expired, as it was not registered within three months as required by the Act.

The Court of Appeal confirmed that a lien automatically arises upon the date of default and expires three months after the default, unless a certificate of lien is registered. As the certificate of lien was registered on September 25, 2007 the liens that arose before June 25, 2007 had expired. However, as common expenses were payable on the first day of each month, a separate default occurred on July 1, August 1 and September 1 and the liens in respect of those defaults were potentially valid.

The Court then considered whether the notice of lien that was given on June 22, 2007 was sufficient to cover those subsequent liens arising between the date of the notice (June 22, 2007) and the registration date (September 25, 2007). In this case, since the lien for which the Corporation had already given notice had expired, the Court concluded that the notice of the expired lien could not cover subsequent defaults. The Court concluded that in this case, the lien in respect of the defaults occurring on July 1, August 1, and September 1, was not valid, as the condominium corporation did not provide adequate notice of its lien. Had proper notice been given, then all future defaults arising after the date of registration of the lien would be covered by the certificate of lien and no further notice would be required for those future defaults.

This case illustrates the worst-case scenario where Section 85 has not been strictly complied with. Management companies and corporations should put procedures in place to ensure that the timelines set out in the Act are met in order to prevent the corporation from losing its lien rights.

Directors Found to be in Contempt Ordered to Pay $96,000 in Legal Fees

Rod Escayola — Wed, 01 May 2013 18:43:13 -0500

Posted by Rod Escayola

We previously blogged about the Boily case involving a dispute between some owners and the directors of a Condominium complex in Ottawa. This dispute revolved around the proposed alteration of the condominium’s courtyard. Last March, a judge found the corporation and the directors in contempt of a prior court order and ordered them, for a second time, to reinstate the courtyard to its prior configuration and appearance at the directors' personal cost.

This week, the same judge ordered the directors to pay, personally, in excess of $96,000 in legal costs.

The Court concluded that the board's

stubborn refusal to accept the Applicants' success set them on a path of deliberate and continual contempt that should attract a costs award on a substantial indemnity basis. The Moving Party should not have to bear the costs of those actions.

Background facts leading to the order of contempt

This dispute goes back to 2011, when the board of directors proposed to do significant changes to the appearance and configuration of the condominium’s courtyard. Some owners objected to such extensive modifications, being of the view that they constituted a “substantial change” requiring the approval of 2/3 of the owners. The Board was of the view that it was only maintenance work, not requiring any approval or, at most, the approval of 50% of the owners.

In June of 2011, the concerned owners obtained an injunction preventing the board from proceeding with this work until a court ruled on the proposed changes. Shortly after this ruling, the board and these owners reached a settlement by way of which the design and appearance of the courtyard would be submitted to a 2/3 vote of the owners. The board lost that vote at the owners’ meeting but then took the position that there was no agreement. A week later, a judge ordered the directors and the corporation to reinstate the courtyard as it existed and ordered significant costs against the directors personally.

Unfortunately, despite this court order the directors went ahead with the work and implemented many elements in contravention of the 2011 order. In March of this year, a judge found the directors and the corporation to be in contempt of the prior court order and ordered the directors to pay, personally, the costs of reinstating the courtyard as it existed in 2011. For more on this, we invite you to review our blog on the March decision.

Cost Order Against the Directors

Unsurprisingly, to get to this point, both sides incurred significant legal and professional fees. To avoid having the other owners pay any of the fees incurred by both sides, the owner who brought the motion for contempt, sought to have his fees paid by the directors personally and also sought an order forcing the directors to reimburse the corporation their own legal fees. Indeed, the evidence filed in court indicated that approximately $106,000 had paid out of the reserve fund towards the Respondents own professional and legal fees. The concerned owners argued that this was contrary to section 93(2) of the Condominium At, which provides that the reserve fund must be used solely for the purpose of major repair and the replacement of common elements or assets of the corporation.

This week, in its most recent decision in this matter, the court ordered the directors to personally pay more than $96,000 in costs. In his decision, the judge found that this was one of those rare and exceptional cases where the directors’ conduct was worthy of sanction deserving of a costs award on a substantial indemnity basis. He wrote:

[34] The Respondents [...] seized upon the use of the word "courtyard" in my endorsement as an excuse to do what they always intended to do before these proceedings were even commenced. I will not reiterate the findings that I made against them in my decision other than to note that I found that "The Respondents breached the order wilfully and deliberately,-" and that "The Respondents acted neither honestly and in good faith, nor as a reasonably prudent person [...] The Respondents adopted a narrow and self-serving interpretation of my order and chose to reinstate elements that they preferred, despite the decision of this court".

As for the funds the board took out of the reserve fund to pay their legal and professional fees to defend this matter, the Judge left it to a majority of the unit owners to decide whether they wished to subsidize the Board's contempt. Unless the other owners do anything about it, the board’s legal fees will therefore be imposed on all owners. The judge did, however, order that none of these fees be allocated to the owners having brought the proceeding as they should not have to subsidize the board’s contempt.

The directors and the corporation are appealing both the finding of contempt and the decision on costs. In their Notice of Appeal the directors are also seeking, in the alternative, an order imposing on all of the owners (rather than on themselves alone) the costs of reinstating the courtyard and the podium.

These decisions, irrespective of the appeal's result, provide a very expensive cautionary tale for all condominium directors demonstrating the importance of meeting the standard of care imposed on condominium directors in section 37 of the Condominium Act. This is particularly important when dealing with controversial issues.

Furthermore, although trite to say so, the board has no discretion to not comply with court orders! Failure to do this can have dire consequences.

Condominium Sales Could Lead to Large Tax Bills

Keir Wilmut — Tue, 23 Apr 2013 16:33:45 -0500

Posted by Keir Wilmut

If you sold a condominium in Canada’s booming housing market, don’t count your profit just yet – the Canada Revenue Agency could soon be knocking on your door with a large tax bill.

Canadians typically don’t have to pay taxes on the profit we earn when we sell our homes – as long as the home was our “principal residence.” To qualify as a principal residence, the CRA considers factors including whether a person lived in the home, and whether it was designated as a principal residence.

However, the CRA – in what has been dubbed the “Condo Project” – is increasingly challenging Canadians’ designation of their condominium unit as their principal residence.

The distinction can result in a significant tax bill. If you bought a condominium for $300,000 and sold it for $500,000, as long as it qualifies as your principal residence you don’t have to pay any taxes on your $200,000 profit.

However, if the CRA deems that condominium unit to have been an investment property, you would have to pay tax on this gain. In the highest tax bracket, this could result in a tax bill of $46,000!

Making matters worse, if the CRA determines that you were in the business of buying and selling condominium units, the tax bill could be $92,000. If they find evidence that you made a false disclosure, they could levy fines bringing the total tax bill to a whopping $138,000!

Red flags that might lead the CRA to take a closer look at the sale of a unit include:

an owner who sells a unit shortly after registration, even if he or she had signed a purchase agreement years in advance;
an owner who says he or she intended to move into a condominium unit, but subsequently changed his or her mind;
an owner who purchased a condominium unit before it was built and then sold his or her right to buy that unit pursuant to an assignment clause; and
an owner who buys and sells multiple condominium units.

Even moving into a condominium may not be enough to satisfy the CRA. One woman purchased a condominium in 2006, and moved in in 2011. However, after moving in she decided it was too small, and moved out fifteen days later. The CRA hit her with a bill for $72,000 in tax, and $36,000 in penalties.

If you get hit with an unexpected tax bill, or if you are considering selling a condominium unit you meant to move into but never quite did, we recommend you talk to a lawyer.

Rod Escayola Featured in the Condo Voice

Admin — Wed, 17 Apr 2013 09:31:47 -0500

Posted by Admin

Rod Escayola is a contributor in the current issue of CCI’s the Condo Voice (Toronto Edition) . In his article “Noise Complaints in Condos: The Perils of Failing to Enforce Condo rules” Rod does the autopsy of a noise complaint gone wrong. Rod proposes a three-step approach to standardize how corporations and property managers deal with noise complaints.

“Compliance issues, and in particular noise complaints, can be very difficult to resolve. Tolerance to noise is very subjective. What is disrupting to someone may not be to the next person. The reality is that anyone who lives in the city, and in particular in a condominium complex, must expect to be exposed to some level of noise. The corporation should intervene, however, when there is a breach to the Act, the declaration or the rules as they pertain to noise and nuisance. Corporations and property managers must take noise complaints seriously and act on them with haste and resolve”.

Please click here to request a copy of the article.

Can Police Enter Condominium Common Elements Without a Search Warrant?

Barbara Holmes — Wed, 17 Apr 2013 09:12:23 -0500

Posted by Barbara Holmes

As reported in the Ottawa Citizen, in a recent drug trafficking case the Ontario Superior Court considered whether the police could enter, without a search warrant, the common elements of the condominium building in which the accused resided.

The police investigation was focused on Yanni Papadolias, a suspected drug dealer. The police had reason to believe that illegal drugs were being stored somewhere in the condominium building that Mareth White, a colleague of Papadolias, resided in. The police entered White’s condominium building several times through an unlocked side door and, on one occasion, by following the mailman as he entered the building. On one visit, the police visually inspected White’s locker without actually entering into the locker. During one of these visits to the condominium, the police saw Papadolias leaving White's unit carrying a liquor box. It was subsequently determined that the liquor box contained illegal drugs. Based on this, the police then obtained a warrant to search White’s unit and subsequently found a large quantity of marijuana and cocaine in White’s unit.

The judge determined that the warrant to search White’s unit would not have been obtained without the information that the police had obtained from their earlier, unauthorized visits to the building. Accordingly, the evidence obtained from the search of White’s unit was excluded and White was not convicted of the drug trafficking charge.

The court determined that the previous police visits to the common elements of the condominium constituted trespassing and infringed on White’s privacy rights. Even though the police did not enter White’s residential unit or locker during these unauthorized visits, the judge stated that White’s privacy rights started at the condominium garage door. As an owner’s interest includes not only ownership of his/her unit, but also a percentage interest in all of the condominium’s common elements, the judge’s reasoning is consistent with this concept.

In this case, the police entered the condominium property without the knowledge or consent of the condominium corporation or management. However, in other cases, the police may request the condominium corporation or management to assist in their investigation. Our previous blog “When Police Arrive at Your Condo” tells you what to do when this happens.

Rod Escayola to speak on Directors Personal Liability on May 31, 2013

Admin — Tue, 09 Apr 2013 10:08:33 -0500

Posted by Admin

ACMO and CCI Ottawa have teamed up for a one-day Conference and Trade Show in Ottawa on Friday, May 31^st, 2013. The conference brings industry experts, from the legal sector, management companies, trades and developers together to discuss timely and relevant issues geared to condominium property managers, Boards of Directors and home owners. Our Rod Escayola is a featured speaker on the topic of Directors Personal Liability. For registration and conference information click here.

Barbara Holmes Featured in the Home News Magazine

Admin — Thu, 28 Mar 2013 16:10:19 -0500

Posted by Admin

Barbara Homes is a contributor in the current issue of the Home News Magazine (Etobicoke Edition) . In her article “Five things You Should Know About Condominium Living Before You Buy,” Barbara discusses the most important things potential buyers should know before they purchase their new condominium home. She discusses the unique features of condominium living including, corporate governance, rules, budgets and reserve funds.

“Buying a condominium is a lifestyle change that on the one hand, provides conveniences and services that you don’t get when you own a house. On the other hand, condominium owners need to adapt their lifestyle to fit within the condominium community.”

To read Barbara’s commentary in full, please click here.

Pigs in Condominiums?!?

Keir Wilmut — Thu, 28 Mar 2013 11:37:09 -0500

Posted by Keir Wilmut

We have written numerous times on this blog about pets in condominiums – pet provisions in Declarations, enforcement of pet rules, nuisance pets, numerous pet evictions, and more. We’ve even run a popular seminar titled “It’s Raining Cats and Dogs”.

But some residents of New York City are dealing with something even we have yet to tackle: they want to keep pigs in their units!

Unfortunately for these New Yorkers, the city's health code forbids keeping pigs as pets. To keep their porky pals, owners have resorted to renovating their units, moving when they are discovered, and lobbying the city to change the health code.

Sadly for any pig lovers considering a move north of the border, Toronto’s Municipal Code prohibits keeping pigs in the city (along with cattle, goats, elephants, kangaroos, tigers, and a zoo full of other animals).

Condominium owners would face an even greater hurdle: even in condominiums that allow pets, most Declarations restrict allowable pets to ordinary household animals such as dogs, cats, birds, fish, and sometimes some small caged animals like hamsters. Keeping livestock is typically specifically prohibited.

Even if the Declaration is silent on the issue, condominium corporations are able to pass “reasonable” rules that restrict pet ownership. Many condominium corporations have used this ability to ban pets of more than 25 or 30 pounds – bad news for the owner of the New York pig named “Cholula,” who tips the scales at a hefty 200 pounds!

The relatively svelte swine “Petey” might have a better chance of getting to stay. At just 40 pounds, he was purchased as a therapy animal. In some Ontario cases, judges have looked to the Human Rights Code and ruled that owners of therapy animals can keep them, despite Declarations with clear no-pets clauses.

If you would prefer to eat a pig rather than keep one as a pet, you’re in luck: one Toronto restaurant is offering a discount on bacon sandwiches to anyone who bikes or runs a route through the streets of Toronto in the shape of a pig.