Register   |  Login
 
 
 
http://www.twitter.com/cdnapartmentmaghttp://www.twitter.com/cdnapartmentmaghttp://www.twitter.com/cdnapartmentmag

 

 

 
 
 


 
 



 

Correcting Bad Behaviour
Email    
 

August, 2010

By Jeff Morris

Why do owners ignore warning letters about noise complaints, unacceptable pets or unsightly improvements? Condo owners do not always fully appreciate the cost consequences they face when formal proceedings are commenced to address non-compliance. Often, the costs are in the thousands of dollars – and many owners are shocked to discover this at the mediation. If the matter is not settled by mediation, the costs can escalate to tens of thousands of dollars.
 

  

One remedy to stop ongoing violations is to obtain a cease and desist order of compliance from a judge under Section 134 of the Ontario Condominium Act. The Ontario Court of Appeal has previously ruled that Section 134 effectively shifts the financial burden associated with obtaining a compliance order from the innocent condominium corporation and unit owners to the guilty unit owner who necessitated the obtaining of the compliance order.
      
More recently, in the 2010 case, Muskoka Condominium Corporation No. 39 v. Kreutzweiser, an owner was ordered to pay over $19 thousand in costs to the corporation. The case dealt with an owner with two cats which roamed freely around the condominium complex. The condominium board received complaints from other unit owners about the cats defecating and leaving dead prey on common elements of the condominium property. After ignoring numerous warning letters, the corporation made an application to court seeking a compliance order for removal of the cats.
 

 
The corporation also repeatedly warned the owner of the cost consequences of enforcement proceedings. In awarding full indemnity costs which means that the corporation recovers 100 per cent of its legal and other expenses to enforce the rules, the judge states: “No part of these costs should be borne by the respondent’s neighbours who are blameless in this matter. The corporation declaration provides that any owner is bound to indemnify the corporation for any loss occasioned by his or her action.”
     
In another recent case, MTCC No. 985 v. Vanduzer, the corporation went to court to enforce removal of a gazebo that did not comply with the exclusive use common area of the condominium. The court not only awarded substantial indemnity costs of $18 thousand, but also an additional amount, giving the corporation full indemnity, which would cover all the corporation’s legal bills from its lawyers for obtaining the compliance order.
     
There are some important lessons from these decisions. First, the owner should be clearly warned in advance about the claim for full indemnity of all the corporation’s costs. Second, the corporation’s right to full indemnity is not a carte blanche and the court will examine if the totality of the corporation’s legal expenses in relation to the matter is reasonable and therefore recoverable from the owner. Third, costs related to obtaining a Section 134 compliance order can be collected as common expenses for the unit and this would allow it to register a lien pursuant to Section 85(1) of the Act for unpaid common expenses. 
     
For some disputes, like noise issues, the corporation may not proceed directly to court for a Section 134 compliance order, but is required to institute the mandatory mediation and arbitration provisions under section 132 of the Act. The mediation procedure requires the parties to sit down with a neutral mediator to work out a resolution which is satisfactory to both sides. If the mediation fails to produce an agreement, the parties will proceed to arbitration, where an arbitrator, like a judge, issues a decision which is binding on the corporation and the owner.
     
Section 132 of the Condominium Act gives a mediator the discretion to order that one party pay an unequal share, or all of the mediator’s fees and expenses, if the mediation fails. Unfortunately, there is no clear statutory provision allowing the corporation to claim its legal fees leading up to and including the mediation, when the mediation fails to produce a resolution.
     
However, if the matter proceeds to arbitration, the courts have confirmed that it is within an arbitrator’s discretion to order full indemnity of all the corporation’s costs if it is justified, after looking at the prior conduct of a party when making such an award. These costs can be massive, as in Italiano v. Toronto Standard Condominium Corporation No. 1507, where the owner was obligated to pay in excess of $75 thousand for the corporation’s legal fees and arbitration costs arising from noise complaints. Although there is no provision under the Condominium Act for the corporation to collect these costs as common expenses, the court held that a corporation can collect an arbitral costs award in the same manner as common expenses if they are so specified in the declaration. 
   
There is clear statutory and court authority for the corporation to collect all its legal costs and other legitimate expenses related to a successful court application to obtain a compliance order under Section 134 of the Act. This is also true for its legal and arbitration costs after a notice of arbitration is issued and receipt of a favourable arbitration award.
     
It is less certain whether other costs, such as advance consultations with the board of directors, legal fees for a mediation, administration or management fees or the cost for enforcement proceedings can be fully recovered from an owner, especially as common expenses. It is possible that the ruling in the recent Kreutzweiser case opens the door to these recoveries based on a strongly-worded declaration and bylaw requiring an owner to fully indemnify the corporation from all costs which the corporation may incur caused by an act or omission of the owner, or any contravention by the owner with any provision contained in the Condominium Act, the corporation’s declaration, by-laws and rules.
     
Perhaps enforcement proceedings can be avoided completely if owners fully understand the very significant legal costs they many face if the corporation is successful. Educating owners about the enormity of legal proceedings and attendant costs may go a long way to preventing or correcting bad behaviour.
     
Jeff Morris is a lawyer and now practices as a mediator for condo and commercial disputes. His website is www.jeffmorrismediation.com.

  
 
 
 
< Back  
 
Copyright © CondoBusiness All rights reserved.  



 

MediaEdge Branding
Privacy Policy
);