Volume 22, Issue Number 2, Winter 2016
Specific Legal Issues

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Decisions From the Courts

Decision Making, the Authority of Condo Boards, Mystery Leaks, and the Importance of Timely Repairs

By Mario D. Deo, Andrea Fammartino, Julia Lurye, Dalia Yonadam | Other articles by Mario D. Deo, Andrea Fammartino, Julia Lurye, Dalia Yonadam

3716724 Canada Inc. v Carleton Condominium Corp. No. 375 (Ontario Court of Appeal, July 22, 2016)

This recent unanimous ruling by the Ontario Court of Appeal is significant as there have been very few previous decisions about the decision-making authority of condominium boards and the need for the courts to show deference to condominium boards.

The Facts

In this case, the respondent, 3716724 Canada Inc., owned a number of commercial parking spots in a mixed-use condominium. It rented them out on a monthly basis; however, it wanted to start renting out the spots on an hourly basis, using a "pay and display" model instead to increase its profits. The declaration specifically permitted the use of the parking spots for a commercial hourly parking business and the parking spots had been used in previous years in a commercial hourly parking business.

The respondent sought the Board's approval to make the changes. The Board was concerned about safety as the condominium was located in a high-crime area with a significant transient population. As a result of these security concerns, the Board asked the respondent to obtain a security audit to aid in making its decision. The security audit concluded that one extra security guard would be sufficient to address the security concerns.

The Board advised the respondent that the security audit confirmed its concerns and that it would not approve the requested changes unless the respondent agreed to provide either (i) a parking booth at the parking lot entrance with a full-time attendant; or (ii) a full-time security officer who would patrol the area with the parking spots.

The respondent was willing to hire a security guard, but only if it was no longer required to make contributions to the security fees portion of their common expenses or if the appellant was willing to share the cost of the additional guard. The Board refused this proposal and noted that it did not have the legal authority to exempt the respondent from its obligation to pay common expenses.

In response, the respondent brought an application, alleging that the appellant's refusal to approve the requested changes was unfairly prejudicial and unfairly disregarded its interests, contrary to s. 135 of the Act.

The Trial Decision

The application judge found that the respondent's plan to operate a short-term parking facility in the condominium was a reasonable expectation. The application judge "had no doubt" that the Board's concerns were reasonable. However, he concluded that the appellant was not being reasonable by insisting on a full-time security guard.

The Ontario Court of Appeal Decision

On appeal, the trial decision was overturned as it was found that the application judge relied on evidence that was not properly before him and that the Board's decision should have been owed more deference. Ultimately, the Ontario Court of Appeal found that the Board had acted honestly and in good faith and that the Board's decision was within a range of reasonable choices.

Author's Note:

This case is significant as the Ontario Court of Appeal's ruling provides the most detailed appellate guidance yet on how judges are to approach their reviews of condominium board decisions, including how much deference is to be shown to them. In addition, while Canadian courts have applied the business judgment rule to condominium boards in the past, this marks the first time Ontario's top court has expressly affirmed that it is the correct approach.

LEAKS AND LIENS
Rao v. Toronto Standard Condominium Corp. No. 1764 (2016 Carswell Ont 11364) – Decision of April 7, 2016

Water leaks are never fun, especially in a condominium corporation. So who is responsible for the repair? Does the condominium corporation have a standard unit by-law? How about the insurance deductible, will it cover the damage? The list of questions goes on and on and sometimes, the answers are not so black and white. In this case, there was a water leak to the ceiling of a condominium unit located immediately below the unit owned by the plaintiff, Mr. Rao. This case is interesting because it raises the most commonly asked question in water leak cases: who is responsible for the payment of the resulting damages?

The condominium corporation determined that the water escape was from a lack of silicone in Mr. Rao's shower. The condominium corporation asserted that Mr. Rao was responsible for payment of all water leak-related damages because Mr. Rao failed to maintain his unit.

The condominium corporation repaired the unit below Mr. Rao's unit and charged him for the repairs. Subsequent to the repairs, a lien was registered on title to Mr. Rao's unit. The leak continued notwithstanding the repair to the silicone in Mr. Rao's shower and the plaintiff having stopped using his shower. The plaintiff commenced proceedings and claimed damages.

The courts found that Mr. Rao was not liable for expenses he was obligated to pay to the condominium corporation in relation to the leak. The condominium corporation was ordered to pay all amounts back to Mr. Rao. As a result of the source of leak not being definitively determined to be from the plaintiff 's unit, the courts found that the condominium corporation did not establish that the leak was a result of any act or omission of Mr. Rao or any failure of the plaintiff to maintain his unit. There was no final report produced detailing exactly the source of leak, how or when it was determined or how and when it was stopped. The condominium corporation failed to produce any credible evidence or a reasonable explanation as to why the leak continued notwithstanding the silicone and caulking applications, as were done and recommended by the corporation's plumbers. Most importantly, the corporation failed to reasonable explain why the leak continued in the face of Mr. Rao having stopped using the ensuite shower altogether.

Authors comments:

This case highlights the importance of appropriate evidence to prove the cause of a water leak.

York Region Condominium Corp. No. 922 v. Lu, 2016 ONSC 2565

This decision highlights the consequences of a unit owner failing to cooperate when repairs are necessary to his/her unit. Lu was the owner of a unit in the condominium corporation. On January 8, 2014, flooding was discovered in the basement of Lu's unit and an emergency clean up and repair was carried out that day. After the flood, the corporation required further entry into the unit to investigate it and carry out additional repairs, including mould removal. There was a concern that the mould could spread to other units and the condominium corporation would be in contravention of section 117 of the Condominium Act, 1998.

Over the next 10 months, despite repeated attempts by the condominium corporation to gain access to the unit and offers to set up a meeting with the unit owner, Lu refused to permit entry to the unit and blocked a number of requests for entry for superfluous reasons. For example, he demanded authorizations, licencing and background material for contractors and other specialists hired by the condominium corporation to carry out repairs prior to letting anyone into the unit.

This only served to delay the condominium corporation from complying with its obligations under section 92 of the Act. In October, 2014, counsel for the condominium corporation wrote to Lu, warning that if he refused entry, then the condominium corporation would commence an application against him seeking an order for entry. Despite repeated warnings, the owner first blocked access to his unit by requesting confirmation that the lawyer was authorized to act on behalf of the condominium corporation and to communicate with him regarding the repairs, and eventually ignored any further demands for entry to his unit.

The condominium corporation's insurance company agreed to cover the cost of the outstanding repairs for the basement flooding in Lu's unit. However, as a result of Lu's lack of cooperation, the condominium corporation's insurance company closed its file and provided the corporation with an estimated amount for the repairs.

The condominium corporation commenced an application under sections 92, 117, 119, and 134 of the Condominium Act, 1998, for a declaration that Lu breached sections 117 and 119 of the Act, and for an order permitting the condominium corporation to enter the unit as necessary to investigate the damage and carry out required repairs to the unit and common elements.

Lu did not file any affidavit material. At the hearing, he submitted to the Court that he was open to the condominium corporation entering his unit at any time and has told them so. However, Mr. Lu failed to provide any documents confirming that this was the case.

The Decision

The Court rejected Lu's submission that he was compliant with the condominium corporation's requests for entry to his unit for reasons that "defy logic". The Court found that Lu continued to refuse entry to his unit even after receiving the requested information. Further, the condominium corporation had a valid concern that the mould may spread and has the potential risk of both damage to the property or personal injury to persons on the property. The Court held that Lu's lack of cooperation was the sole reason for the condominium corporation having to issue an application, and the cause for delay in effecting the necessary repairs to his unit. In addition, the Court found that Lu delayed the application from moving forward expeditiously, resulting in unnecessary costs.

On the issue of costs, the Court noted that, although it was hard to justify the amount of costs sought given the actual amounts at stake, given Lu's conduct and attempt to mislead the Court, costs in the amount of $12,000 were appropriate and were awarded against Lu, payable immediately.

Author's Comments:

This case highlights the consequences of a unit owner refusing to permit entry to a condominium corporation on unreasonable grounds. Had the unit owner been compliant, as he claimed to have been, the repairs would have been carried out with haste and for less cost. This is a lesson for all unit owners to cooperate!