The unit owners of a condominium corporation share a legal interest in the corporation's common elements. As such, section 98 of the Condominium Act, 1998 (the “Act”) provides that an owner may not make an addition, alteration or improvement to the common elements unless the corporation’s Board of Directors has approved the change by resolution and the owner and the corporation have entered into an agreement (commonly referred to as a “section 98 agreement”) allocating the cost, maintenance, repair and insurance obligations as between the owner and the corporation.
In Toronto Common Element Condominium Corporation No. 1508 (“TCECC 1508”) v. William Stasyna et al (the “Respondents”), TCECC 1508 made an application to the Ontario Superior Court of Justice seeking a compliance order requiring certain unit owners—the Respondents—to remove certain alterations to common elements at the Respondents' request.
The Respondents owned three parcels of tied land in the residential housing development comprising TCECC 1508. Between 2004 and 2007, the Respondents undertook various landscaping to their backyards including trees, shrubs, patios and stones. In each case, the landscaping encroached on a common access walkway area that abutted the rear of their parcels and which was part of the common elements.
In each case, shortly after the landscaping was installed, TCECC 1508 sent a demand letter to the respective owners requiring them to remove the landscaping within approximately one month's time. The Respondents did not take any steps to comply and did not hear from TCECC 1508 until August 2009. During that time, however, other owners received similar notices and complied with them. At TCECC 1508's annual general meeting in September 2009, the owners decided that all common elements had to be returned to their original form by August 2010. The Respondents received written notice from the board of TCECC 1508 advising of this one-year grace period.
After the Respondents failed to remove the offending landscaping by the August 2010 deadline, the parties’ lawyers made modest efforts to settle the matter. Thereafter, instead of proceeding with mediation, TCECC 1508's lawyer brought a court application seeking a compliance order against the Respondents pursuant to section 134 of the Act. The court examined four specific issues.
ISSUE 1: LIMITATION PERIOD
The Respondents took the position that the application was statuebarred as it was commenced after the two-year limitation period following discovery of the landscaping by TCECC 1508. The court rejected this argument for a number of reasons, including: (i) TCECC 1508 sought compliance with the Act not merely with its governing documents; (ii) TCECC 1508 had never changed its position as to noncompliance but had simply attempted less drastic means of resolution; and (iii) the Declaration of TCECC 1508 contained an article stating that any failure to seek enforcement would not constitute a waiver of TCECC 1508's rights.
ISSUE 2: APPLICABILITY OF MEDIATION/ARBITRATION
The Respondents also argued that the court had no jurisdiction to hear the application because TCECC 1508 failed to first pursue mediation and/or arbitration pursuant to sections 132 and 134 of the Act. These sections require that, where there is a disagreement between a condominium corporation and an owner as to the declaration, by-laws or rules of the corporation, the parties agree to submit the dispute to mediation and arbitration and that doing so is a pre-condition to bringing an application to the court. The court held that the mediation/arbitration provisions of the Act do not apply to an application seeking compliance with the Act itself. More practically, mediation would not remedy the fact that the Respondents were not in compliance with section 98. TCECC 1508 was found to be entitled to bring its application directly to court.
ISSUE 3: EQUITABLE DEFENCES
The Respondents asked the court to exercise its equitable jurisdiction to find that TCECC 1508's application was precluded by the doctrine of laches, that is, that TCECC 1508's delay in prosecuting the noncompliance created an implied acquiescence to the landscaping such that it was unreasonable to prosecute the application. The court found that TCECC 1508 did not “sleep on its rights” and had sought compliance from the Respondents as early as 2005. Continued onpage 322
Secondly, the Respondents asked the court to apply the doctrine de minimis non curat lex (“the law does not concern itself with trifles”) on the basis that the changes to the common access walkway were insignificant in nature. The court again disagreed, finding that the changes were not of a minor or merely decorative nature but were instead incorporated into the land and affected access to the walkway.
Finally, the court noted that equitable remedies are discretionary and required the Respondents to come to court with clean hands. This was simply not the case where the Respondents had first chosen to ignore TCECC 1508's good faith notices demanding compliance.
ISSUE 4: COSTS OF REMEDIATION AND OF THE APPLICATION
On finding that the Respondents would be required to comply with section 98 and therefore restore the common elements appurtenant to their units to their original state, the court then turned his mind to the costs of the remediation and of the application itself.
The Respondents were made to pay for the restoration of the common elements which they had altered without the consent of TCECC 1508. The court found that this was only fair given that other unit owners who had received notices had done the same at their own expense.
As the successful party, TCECC 1508 sought its costs on a substantial indemnity basis based on the indemnity provision of its Declaration. In clearly seeking to craft a less onerous costs award against the Respondents, the court found that the “costs” mentioned in the Declaration do not specifically discuss legal costs arising out of a proceeding. The court held that even where there is a contractual right to recover legal fees, the right is still subject to the court’s discretion under the Courts of Justice Act. It was the court’s opinion that there was no entitlement to substantial indemnity costs as the Respondents’ conduct was no worse than that of TCECC 1508.
Although the court held that TCECC 1508 had a clear legal right to bring the court application, and regardless of the court’s prior finding that mediation prior to the application would have been of little value, when it came to costs the court put a great deal of importance on TCECC 1508’s failure to mediate the matter. The court found that “mediation, though not mandatory, could have resolved this conflict in a more cost-effective manner” and TCECC 1508 “unnecessarily wasted time and expense by insisting on bringing these proceedings”. It is difficult to reconcile these comments of the court with the corporation’s absolute right and obligation to enforce the Act vis-àvis unit owners coupled with the Respondents recalcitrance over the years leading up to the application.
TCECC 1508 was awarded costs on a partial indemnity basis discounted by 20 percent to take into account the court’s displeasure with TCECC 1508’s failure to attempt to mediate.
LESSONS TO TAKE AWAY FROM THE DECISION
A corporation’s Board of Directors finds itself in a tough spot when unit owners demand compliance from a non-compliant owner in an environment where the courts have issued a number of recent decisions expressing their displeasure at such issues working their way through to the courts.
The key is to manage these situations with a consistent and reasonably swift hand. Warning notices and demand letters should go out as soon as possible after discovery of non-compliance. If the offending unit owner fails to comply, a reasonable attempt at negotiation or mediation should be offered, where sensible. A well drafted mediation and arbitration by-law, with clear and firm deadlines, is essential. Even if such steps are sure to be a failure, a condominium corporation must be able to show an application judge that it made good faith efforts to resolve the issue prior to bringing it to court. Doing so will assist the corporation in recovering a greater portion of its legal fees through a costs award.
While timely and thought-out enforcement can be difficult in condominiums – where the Board of Directors can always change – it is crucial in ensuring a fast and satisfactory resolution to compliance issues while at the same time keeping costs down.