In condominiums located close to university and college campuses there is frequently dissension between resident owners and investor/landlord owners as to who is entitled to occupy the units. While investor/landlord owners want to maximize their rental income, resident owners have concerns about unrelated transient tenants negatively affecting the sense of community in the condominium.
In a recent case, Ballingall v. Carleton Condominium Corporation No. 111, several owners commenced legal proceedings to enforce the “private single family residence” restriction contained in the Corporation’s declaration. Despite this restriction in the declaration, a number of the units in the condominium were leased to multiple, unrelated residents (most of whom were students) on a short-term basis. Some of the units were leased out by the room, while others were leased to one tenant who found roommates to share the unit. In many cases there were locks on all the bedroom doors. There was no definition of “private single family residence” in the declaration.
Several years before this litigation ensued, the Corporation’s legal counsel published a newsletter about two Ontario Court of Appeal decisions (Nippissing Condominium Corporation No. 4 v. Kilfoyl and Chan v. Toronto Standard Condominium Corporation No. 1834) which clarified the meaning “single family” in the condominium context. (We blogged about these two cases in a prior blog post.) Based on the decisions in these two cases “where a condominium corporation’s governing documents state that units are to be occupied by a single family, but no definition of that term is provided, “family” means “ a social unit consisting of parent(s) and their children, whether natural or adopted, and that includes other relatives if living with the primary group.”
Relying on the advice of the Corporation’s legal counsel, the Board proposed amending its rules to “broaden the definition of “single family” accepted by the Ontario Court of Appeal, while at the same time, making it clear that multiple, unrelated, transient tenants did not fall within the expanded definition” and to grandfather all existing occupancies that did not fall within that broader definition. This proposal resulted in considerable controversy among unit owners, with one director, in particular, spearheading the opposition to this proposal. As a result, the proposed amended rule was voted down at the AGM.
After the meeting, the Board advised the unit owners that moving forward the Corporation would be enforcing the single family restriction in the declaration using the definition set out in the Court of Appeal cases, with existing occupants being grandfathered. In addition, acting on the advice of legal counsel, the Board passed a motion to include wording about the single family restriction in the corporation’s status certificates. This generated more dissension and controversy and consequently two of the Board members that were supporting the enforcement of the single family restriction resigned from the Board.
The new Board then proposed its own amendment to the rules. This proposed new rule included an expanded definition of “single family” similar to what had been proposed and rejected previously – however this new proposed rule grandfathered all owners for a period of ten years. This proposed grandfathering provision would allow all owners (including those that were not currently renting their units) to lease their units to multiple, unrelated, transient tenants.
The Court ruled in favour of the applicant owners on a number of issues. In particular, the Court concluded that:
- Each unit owner is bound by the single family restriction in the declaration and entitled to insist that all other owners be similarly bound. This applies to all owners even if they did not read the restriction in the declaration or were not advised of the restriction by their lawyer or real estate agent prior to purchasing their unit.
- The Board is obligated to enforce the single family restriction in the declaration.
- The Corporation was not estopped from enforcing the declaration because there had been some breaches in the past. The non-waiver clause contained in the declaration supported the Court’s decision in this regard.
- The proposed grandfathering provisions were unreasonable as they were inconsistent with the declaration. The grandfathering clause was seen by the Court as “the Board trying to do by the back door what it cannot do by the front door, namely amend the Corporation’s declaration regarding the single family restriction.” Consequently, the proposed rule was declared invalid and the Board was given 60 days to amend the grandfathering clause to be consistent with the declaration, failing which the Corporation must interpret and enforce the single family restriction consistent with the definition determined by the Ontario Court of Appeal.
The Court also considered the standard of care imposed on directors and whether the conduct of the current Board was oppressive.