Game Changers

Recently, two cases were released that could potentially have significant bearing on the governance of condominium corporations – one relating to the collection of common expenses, and the other relating to the role of the chair at unit owner meetings.  Both cases are, in my view, correctly decided; however, both are also unfortunate in the impact they will have in how condominium corporations, directors, property managers and lawyers carry out their duties and responsibilities.

York Condominium Corporation No. 82 v. Bujold [Ontario Court of Appeal – April 3, 2013]

Game Changer:  Notices of Lien (“Form 14”) must be issued in the same month as the Certificate of Lien is registered. 

Within the Condominium Act, 1998 (the “Act”), it is unclear as to how long a Form 14 will remain valid.  The Act only states that the Form 14 must be issued at least 10 days before registering the Certificate of Lien against title to the unit.  It does not state how long it will remain valid.  In balancing the interests of a unit owner against those of a condominium corporation, it is not an uncommon practice to accept a part-payment after issuance of the Form 14 so as to “extend” the deadline for registration of the Certificate of Lien.  For example, if the Form 14 is issued in regards to three (3) months of common expense arrears, the payment of one month’s common expense was thought to allow the condominium corporation to delay registration by one month – the logic being that the amount secured under the lien will not exceed three (3) months.

In Bujold, the Form 14 was issued on June 22, 2007.  The Certificate of Lien was not registered until September 25, 2007.  The Court of Appeal held that “…each default gives rise to a new lien…s.85(4) requires that the corporation give written notice of the lien”; in my view, this suggests that notice needs to be given for each lien arising from each default… I do not think that requiring a condominium corporation to provide notice of each default before registering the lien creates a hardship.  Once registration is achieved in a timely fashion, s.85(3)(b) makes it clear that all future defaults are covered by the Certificate of Lien and  notice will no longer be required.

In simple terms, while the Certificate of Lien, once registered, secures all future defaults, the Form 14 only relates to the specific months (maximum 3 months) covered under it.  The Form 14 will not apply to any “new” default – such as that created by extending the original deadline for registration of the Notice of Lien.  Either no extension is given, or a new Form 14 (at additional cost) must be issued to apply to the “new” default.

Practice Advice:  If you are willing to receive a part payment to delay registration of the Certificate of Lien, ensure that the unit owner is aware that the Form 14 will need to be re-issued and that there will be additional costs as a result.

Davis v. Peel Condominium Corporation No. 22 [Superior Court of Justice – Ontario – June 4, 2013]

Game Changer:  It is difficult to consider the merits of this case without drawing the conclusion that it was an intentional attack on the reputation of the lawyer acting as chair (which said attack failed entirely).  If any of us envisions lawyers within the condominium bar acting collaboratively (with a view of avoiding unnecessary litigation) to benefit their clients, this goal has suffered a material setback.

This is a case that ought not to have gone to court. 

At a meeting to remove the Board, the Corporation’s lawyer gave up the chair following a challenge by the lawyer for the requisitionists.  The lawyer for the requisitionists assumed the Chair.  The financial records of the condominium corporation were suspect and it was unclear whether certain unit owners were in arrears.  The new Chair ruled on whether certain owners could vote, choosing to err on the side of inclusion.  The Board was removed.

There are two points to this case that are particularly troubling.  First, the applicant argued that because the chair was retained by the requisitionists, she was duty bound to support the requisitionists’ agenda.  Putting logic aside, if accepted, this position draws into question how any lawyer, acting for a condominium corporation, can ever take on the role of chair (given that that lawyer would be taking instructions from the Board).  The same argument could be made against the Corporation’s initial lawyer who took the position that 16 owners could not vote - this position would have been incorrect in respect of 13 of such owners, and would have wrongfully defeated the vote to remove the then existing Board. 

Second, the applicant argued that the Chair’s rulings were made in bad faith and in any event, resulted in ineligible votes being cast in the face of non-compliance with s.49(1), which states inter alia that an owner loses his/her right to vote if he/she is in arrears over 30 days.  This argument was made in court, after the financial records of the Corporation had been recreated, and after it became known that 13 of the 16 unit owners could legitimately exercise their vote.  Again, this simply defies logic. The result of the meeting, being the removal of the Board, would not have changed.  In the face of this evidence, the applicant insisted on going to court, and effectively wasting the Corporation’s money, when it was evident that the outcome of the meeting was exactly as it ought to have been.

In Davis, the chair was properly elected by the unit owners.  Once elected, any person acting as chair, has a duty to act fairly, in good faith, honestly, and without malice; however, a chairperson can be disqualified by his/her actions, in which case voters can elect a new chairperson [source:  Nathan’s Company Meetings – 9^th Edition]. 

Decisions relating to proxies, ballots or results of polls, if thought to be oppressive or unfair, are appealable to the court; however, the evidence in Davis re-confirmed that the outcome of the meeting and the decisions of the chair were correct. This case smacks of Harvey v. Elgin Condominium Corporation No. 3 [2013 O.J. No. 935], in that it should not have gone to court - except in Harvey, the applicant was unrepresented.  In Harvey, the plaintiff was required to pay costs to the condominium corporation on a substantial indemnity, not full indemnity, scale.  Davis is yet another case where it is unfortunate that the principals of s.134(5) (full indemnity) are not ordinarily available when a condominium corporation successfully defends an application that should never have been brought in the first place.

Practice Advice:  (1) Any person acting as chair must be able to set aside personal agendas and terms of any retainer (and direction from any specific client) in order to act in a manner that advances the best interests of the condominium corporation; and (2) the Condominium Act needs to be revised to include a provision for full indemnity for any successful party – condominium corporation or unit owner; plaintiff or defendant when an application is brought under Sections 134 or 135 of the Act. 

Case Law:

York Condominium Corporation No. 82 v. Bujold: http://canlii.ca/t/fwtxb

Harvey v. Elgin Condominium Corporation No. 3: http://canlii.ca/t/fwsls 

All of the information contained in this article is of a general nature for informational purposes only, and is not intended to represent the definitive opinion of the firm of Elia Associates on any particular matter. Although every effort is made to ensure that the information contained in this newsletter is accurate and up-to-date, the reader should not act upon it without obtaining appropriate professional advice and assistance.

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