When a condo owner and a condominium corporation face each other in court, often the legal fees incurred become the true object of the litigation. There is no point in winning a case if it is going to cost you more in legal fees than what you recovered. For that reason, traditionally, the successful party can claim against the losing party a portion of the legal fees incurred. But even when the corporation is only awarded a portion of its fees, it can sometime still recover from the owner the actual costs incurred by the corporation.
A recent Ottawa case sheds some light on the difference between the legal fees a judge can impose on the owner who was unsuccessful in court against the corporation and the costs a condominium corporation can sometime recover as against that owner.
The facts of this case
Mr. Burdet and various entities he controlled jointly owned 23 of the 33 condominium units in CCC 396. As such, he represented the majority of the owners. However, for years, these owners refused to pay their common fees and special assessments to the corporation. Over the years, they ended up owing the corporation some $490,000 in common expenses! Naturally, this hurt the other owners who were stuck financing the operations of the condominium corporation. Several liens and notices of power of sale were registered against the defaulting units. The legal saga spanned over some 5 years, with a trial lasting some 10 days. Needless to say that this cost a mint!
At the end of the day, the corporation was successful. It then sought and was awarded some $790,000 in legal fees and disbursement (this included nearly $200,000 for the court appointed auditor).
How the corporation was able to recover its fees
The corporation was able to secure such an increase level of costs based on two section of the Condominium Act:
Section 85 of the Condominium Act which provides that the corporation’s lien covers the arrears and “all reasonable legal costs and reasonable expenses incurred by the corporation in connection with the collection of the unpaid amounts”.
Section 134 of the Condominium Act which provides that a corporation who obtains a compliance order against a defaulting owner can also add as common expenses to the unit “any additional actual costs” incurred by the corporation in obtaining the compliance order.
The take-away from this case:
- While a judge has inherent jurisdiction to award costs in the context of litigation, this does not prevent the corporation from claiming the actual costs incurred to secure the compliance of an owner;
- Owners have a legal obligation to pay their share of common expenses. Even when they are making a claim against the condominium corporation they cannot hold back the payment of condo fees;
- It is manifestly unfair that unit owners who pay their condominium fees be obliged to assume part of the litigation costs incurred to force compliance by a defaulting unit owner. Defaulting unit owners create harm to owners who are not parties to the action. There comes a point when such conduct becomes abusive and requires admonition in the form of an elevated cost award;
- The Condominium Act shifts the financial burden of obtaining compliance orders away from the condominium corporation (and the innocent owners) and onto the unit owners whose conduct necessitated the obtaining of the order
It is important to act swiftly to secure arrears by registering a lien and it is important, when all fails, to also be prompt in taking legal action against a defaulting owner to avoid going 5 years without the financial contribution of an owner who holds the rest of the corporation hostage.
Note: If the past is any indication of the future, expect this not to be the last chapter of this legal saga. We may hear from the Court of Appeal.