The CAT recently released a very interesting case with a lot of useful information packed into it, including some guidance on when a board policy really ought to have been a rule.
Let’s dive right in!
Facts of this case
The owner in this matter lived in her unit for ten years. She had several visitors, but one in particular who apparently visited very frequently, always driving the same Honda. The visitor often parked in the condo’s visitor parking spot.
Based on how frequently this was taking place, the condo took the position that the driver of the Honda was not a visitor, but was actually a resident. This meant that they couldn’t parked in the visitor’s parking, according to the Declaration.
This resulted in a series of parking tickets being issued by the condo (on the basis of what the condo labeled a “policy”), and the unit’s owner commencing a CAT application, wherein she sought compensation.
Questions before the CAT
Accordingly, the CAT had to determine 3 issues:
- Did the condo have the ability to determine whether the Honda driver was a resident rather than a guest?
- Was the condo’s visitor parking “policy” valid and enforceable?
- Was the owner entitled to costs/compensation from the condo?
Guest vs. Resident
While the condo initially indicated that it had overwhelming evidence that the Honda driver was a resident, by the end of the hearing, this turned out not to be the case.
The condo relied on a principle called the “business judgement rule” which means that the decisions of the board of directors should be given a lot of weight, and should not be called into question, unless it is evident that the board has acted unreasonably or unfairly.
The CAT did not agree with the board and concluded that there simply wasn’t any evidence suggesting that the condo had thought out or defined how the terms of its declaration would be applied. Instead, it appeared that it inconsistently applied criteria that seemed to have been designed to specifically target the Honda driver.
In the end, the CAT was not able to define whether the driver was a guest or a resident without more evidence.
Rules vs. Policies
The next issue for the CAT was to decide whether the Corporation’s “policy” was really a “rule”. This is important, because what each of these can do and the process to adopt them differ. Ultimately, in this case, the CAT concluded that the Corporation’s “parking policy” was really just a rule, which had not been properly enacted. As such, it was unenforceable.
Rules are meant to do one of two things:
- promote the safety, security or welfare of owners or
- prevent unreasonable interference with the use and enjoyment of the units, common elements or assets of the corporation.
To be valid and enforceable, rules must be reasonable and must be adopted following the formal process set out in section 58 of the Condominium Act. This process includes circulating the proposed rule to the owners for period of at least 30 days. During this period (and later) owners can requisition a meeting to vote on the rule.
Once properly adopted, and assuming the rule is reasonable, the rule is enforceable. It can therefore prevent a certain conduct or impose certain obligations aimed at promoting the safety, security or welfare of owners, etc…
What is interesting is that the Condominium Act does not actually include any mention or description of “policies”. As a result of this, the legislation does not provide any guidance on what policies can do and on the process to be followed to adopt them.
Still, both the CAT and courts across Ontario have recognized the validity of condominium policies (in the right circumstances). In fact, in two recent cases dealing with the current pandemic, courts have recognized that the enactment of health-related policies during the COVID-19 pandemic is an appropriate exercise of the corporation’s authority.
By their nature, policies can be adopted without the requirement of being circulated to or approved by owners. As such, they are easier to adopt. What is important to keep in mind however is that policies cannot replace rules.
Generally speaking, policy are not meant to impose new obligations on owners where none existed. Policies are meant to provide a “consistent and reliable framework” to guide the corporation’s decision-making process. They can, for instance, guide the corporation on how it will enforce a rule or on how it will respond to recurrent requests it gets from owners. It helps apply consistency to the corporation’s decision making process.
So while a policy can likely not impose new obligations on owners where none existed, it can define or provide clarification on an existing obligation or on how a corporation will enforce this existing obligation. The mask policies adopted by many corporations is the perfect example.
Condo corporations already have a duty to control, manage and administer the common elements. And owners already have an obligation not to carry on an activity that is likely to cause injury to an individual. Add to this the provincial and municipal regulations imposing the obligation to wear masks on interior common elements.
On the basis of the above existing obligations, a condo corporation can (and in fact in some municipality must adopt a policy) explaining and defining how the corporation is interpreting these obligations and how it will enforce it.
The Applicant was awarded $200 for her costs. While she had sought to receive $25,000 in damages, the CAT denied her this relief as there was no evidence that she had suffered actual, genuine damages (beyond frustration). The CAT noted that it does not have the jurisdiction to impose “fines” in circumstances like this one.
There was a lot packed into this case! I would encourage managers, directors and owners to review it! You can do so here.
In our view, the lessons that can be taken from this are:
- If a corporation is going to ask an owner to comply with the governing documents, it is vital, that the board have a clear understanding of what “compliance” would mean and require. This standard must be clearly defined and applied equally to all owners. Compliance with the governing documents should not mean different things for different owners, and it should not be used in such a way that targets any owners in particular. This is not to say that all compliance matters are the exact same. Of course every case is different and has its own nuances. The lesson here, is that it is important to clearly define what the governing documents require to obtain compliance, and make sure that this is applied uniformly.
- While this next lesson flows from the one above, it is worth giving it its own bullet here. While the business judgement rule will lend some deference to boards of directors, it is not a be-all-end-all shield. Accordingly, it is very important to make sure that you fully understand your governing documents and what authority they give to the Corporation. When in doubt, you should turn this question to your favourite condominium’s lawyer.
- This case is a good reminder to make sure that any rule your corporation seeks to enforce has been enacted properly and in accordance with section 58 of the Act. Otherwise, they may just get invalidated! Again, when in doubt, we recommend asking your friendly neighborhood condo lawyer.