Costs and Recovery
WHAT ACTIONS SHOULD BOARDS CONSIDER FOR 2021?
THIS IS THE FIRST IN A SERIES OF ARTICLES PREPARED BY MEMBERS OF OUR CONDOMINIUM GROUP. EACH ARTICLE WILL HIGHLIGHT ISSUES TO HELP THE BOARD AND MANAGEMENT ADMINISTER THE CORPORATION MORE EFFECTIVELY. WE TRUST YOU WILL FIND THESE USEFUL AND WE ARE HERE TO ANSWER ANY QUESTIONS YOU MAY HAVE.
The government of Ontario has recently expanded the scope of matters that are to be decided by the Condominium Authority Tribunal (“the CAT”). Until October 1, 2020 only requests for records could proceed through the online dispute resolution system established by the amendments to the Condominium Act.
Now disputes regarding pets, parking, storage, and motor vehicles will also be diverted from mediation and/or arbitration to the CAT.
The Condominium Authority of Ontario on its website explained the amendments as follows:
What new types of disputes can be filed?
Owners, mortgagees and condominium corporations can file applications with the CAT for disputes about provisions in a condominium corporation’s governing documents that deal with pets or other animals, vehicles, parking and storage, or indemnification/compensation provisions relating to those specific disputes.. Here are some examples of the types of disputes that can be filed:
a) Disputes about compliance with provisions in the corporation’s governing documents related to pets or other animals, vehicles, parking, or storage, and /or related indemnification/compensation provisions., e.g.
A condominium corporation can file an application against one or more owners because they have not complied with the governing documents.
An owner will be able to file an application directly against one or more owners and/or occupants for failing to comply with the corporation’s governing documents.
b) Disputes about the consistency and/or reasonableness of those provisions, e.g.
An owner can file an application against the condominium corporation because they think:
That one or more provisions in the corporation’s by-laws and/or rules relating to pets or other animals, vehicles, parking, and storage, is unreasonable and/or inconsistent with the Condominium Act.
That one or more provisions in the corporation’s declaration relating to pets or other animals, vehicles, parking, and storage is inconsistent with the Condominium Act.
Note: Under the Condominium Act, a corporation’s by-laws and rules are required to be reasonable. All three of the corporation’s governing documents must also be consistent with the Act.
c) Disputes about the applicability of provisions relating to pets or other animals, vehicles, parking, or storage, and/or indemnification related thereto, e.g.
An owner can file an application against the condominium corporation because it did not follow the correct process to implement/amend one or more of the corporation’s governing documents.
Note: Under the Condominium Act, there are requirements that must be met to amend a corporation’s declaration, or to make, amend, or repeal the corporation’s by-laws and rules. If these processes are not followed, an owner could argue that the provisions are not enforceable.
d) Disputes about indemnification, e.g.
Owners and condominium corporations can file applications relating to provisions in a corporation’s governing documents that govern indemnification or compensation related to the above-noted disputes.
The CAT is modelled after the British Columbia Civil Resolution Dispute Tribunal. The intention is to make it easier and less expensive to resolve condominium disputes. I applaud this initiative, but Ontario has unique problems. In both B.C. and Ontario costs cannot be awarded at the tribunal, however, there are differences between the two provinces:
In B.C. strata corporations, as they are known in B.C., have the authority to levy fines for infractions of the governing documents, which are known as bylaws or rules. For example, if someone parks where she is not entitled the strata corporation can levy a fine (after sending a bylaw violation letter and giving the person a time to respond to the violation letter and rendering a decision that a bylaw (or rule) has been contravened, every 7 days until the infraction ceases. In Ontario there is no right to fine unit owners for breaches of the governing documents.
In B.C. lawyers are generally prohibited from being a strata corporation’s representative for the purpose of claim before the tribunal. In special circumstances the CRT may agree to allow a lawyer to be the representative, otherwise most disputants are self-represented with a board member being ‘volunteered’ to be the representative for the strata corporation. To date in Ontario, I am not aware of parties asking that lawyers be excluded from the process.
In B.C., the strata corporations have standardized documents with variations. In Ontario. each condominium corporation has different documents, which govern the operation of the condominium corporation and behaviour of its residents.
In my view, the systems are not the same. It makes the difference in dealing with the disputes before the tribunals in the two provinces more pronounced. In B.C. there are fewer issues of document interpretation as the same provisions generally apply across the board. Not so in Ontario. Since each developer’s lawyer prepares documents, with individualized provisions, often the outcome of a dispute is based on the interpretation of the provision in question and because of this, lawyers are often needed.
It is clause d) above which has made me write this article because it leads me to the conclusion that, to collect compensation from unit owners when matters are directed to the CAT, it is critical that condominium corporations have indemnification provisions that are broad in scope and well drafted. So many condominium corporations have “weak” indemnification provisions in their documents. In my view, for those of you who are familiar with the Amlani decision, it was decided against the condominium corporation not merely because of the bad facts but also because the condominium corporation’s lawyers tried to argue that the indemnification provision in the corporation’s declaration gave the corporation the authority to collect its legal fees in the dispute – it did not.
The courts in Ontario have repeatedly held that the owners in a condominium community should not have to pay the legal costs of dealing with those who do not comply with a condominium’s governing documents. Those who are found to not comply should bear the cost. That is also why the government of Ontario included S.134(5) which allows this recovery beyond what a court orders in costs and its collection by way of common expenses.
There have been recent decisions of both the Ontario Court of Appeal and the CAT that require the actions of the Government of Ontario to correct what is becoming a position on cost recovery that makes no sense according to the legislation and previous court decisions.
Condominium corporations need to be prepared for the ability to collect their costs, whether engineering fees, repair costs and/or legal costs, when appearing before the CAT. To do that, the right to collect these fees must be set out in the condominium corporation’s documents.
We urge all boards to have their legal counsel review their documents to ensure that the provisions in place are supportive of seeking the compensation for the condominium corporation’s out of pocket expenses.