One of the ways a condominium corporation can lose the right to bring a claim against the declarant for construction deficiencies, or an application against an owner for non-compliance, is by waiting too long. In the eight years since the Limitations Act was introduced, Ontario courts have made it very clear, failure to commence an action or application within the applicable limitation period will result in dismissal of the proceedings.
The Limitations Act provides that for most causes of action there is a two year limitation period running from the day that the claim is discovered. A claim is discovered on the earlier of:
- the date when the injury, loss or damage occurred; or
- the date on which a reasonable person, in similar circumstance, would have known of the injury, loss or damage.
The Act presumes that a claim is discovered on the date when the injury, loss or damage occurred. It is up to the party commencing the claim to prove otherwise.
In the condominium context, the recent decision in Toronto Standard Condominium Corp. No. 1789 v. Tip Top Lofts Development Inc. (2011) (ONSC 7181) (“Tip Top Lofts”) supports the general rule that the limitation period for deficiencies discovered through a performance audit begins to run on the date that the performance audit is issued to the condominium's board. As a result, a condominium corporation has two years from the date the performance audit is received to commence a claim for construction deficiencies. If the claim is not commenced within this period, the right to bring a claim is lost.
There are strategies to “suspend” the running of the two year limitation period for commencing a claim for constructions deficiencies. Section 11 of the Limitations Act permits parties to enter into an agreement to have a third party assist in resolving a claim. This gives the parties additional time to negotiate and/or mediate towards a resolution, while preserving the ability to bring an action if a settlement is not reached. Where the parties have entered into a written agreement, the limitation period is su spended from the date of the agreement until the earlier of the date that the claim is resolved, or the resolution process is terminated, or a party withdraws from the agreement, at which point the limitation period begins to run again.
An agreement pursuant to section 11 of the Act was proposed by the declarant in Tip Top Lofts but the condominium corporation declined to enter into the agreement. The court held that settlement discussions, without a formal written agreement between the parties, pursuant to section 11 of the Act, does not suspend the running of the two year limitation period. Similarly, the court held that the process of conciliation found in section 17 of the Ontario New Homes Warranties Plan Act does not suspend the running of the two year limitation period.
Enforcement and compliance related matters are also subject to a two year limitation period. Extensive case law supports the position that if a condominium corporation fails to seek compliance with its Declaration, By-laws, or Rules, within two years of the date that it becomes aware of the violation, it may be prevented from commencing an application for compliance. However, as was recently reinforced in Waterloo North Condominium Corp. No. 37 v. Silaschi (2012) (ONSC 5403) (“Silaschi”), the two year limitation period does not apply to a breach of the Condominium Act, 1998.
In Silaschi, the unit owner carried out alterations to common element windows appurtenant to the unit. The condominium corporation became aware of the unauthorized alterations in 2006. In 2012, the condominium corporation commenced an application for an order deeming the owner in breach of section 98 of the Condominium Act, 1998. The unit owner argued that the condominium corporation is prevented from commencing the application by virtue of the two year limitation period. The court held that the two year limitation period applies only to internal governance documents, such as the Declaration, Bylaws and Rules. Where there is a breach of a provision of the Condominium Act, 1998, such as section 98 in this case, the two year limitation period has no application. There may however be other arguments that a unit owner can rely upon to defeat a condominium corporation’s proceeding for enforcement.
Courts have also been liberal with the two year limitation period where the breach is continuous. If a condominium corporation can demonstrate that the unit owner’s breaches are continuing, the court will often deem the two year limitation period to commence on the date of the most recent breach, as opposed to the date that the breach first occurred.
Whether dealing with construction deficiencies, breach of contract, negligence, collection of arrears, or enforcement matters, the two year limitation period must be taken into account.
For new condominiums, it is especially important to engage legal counsel at an early stage to address deficiencies in construction. If proceedings are not commenced within two years of discovery, or the parties have not entered into an agreement pursuant to section 11 of the Limitations Act, the condominium corporation may lose the right to bring a claim against the developer for construction deficiencies. An agreement pursuant to section 11 of the Limitations Act should always be reviewed by legal counsel to ensure that proper assurances are in place to protect the condominium corporation’s ability to commence an action in the event that a resolution is not reached.