Legal

January 22, 2024 Published by Golden Horseshoe Chapter - By Johathan Miller

Navigating Damages in Ontario Condominiums: Understanding Responsibility and Recovery

From the Volume 18, Winter 2024 issue of the CCI GHC Condo News Magazine

Condominium living in Ontario offers a unique set of challenges, especially when it comes to insurance, maintenance, and repair after damage. One of the most intricate aspects of condominium law revolves around recovering damages from insured events.

The Condominium Act, 1998 (the “Act”), plays a crucial role in determining who is responsible for the costs incurred to make repairs due to major perils, such as water escapes or fire. Generally, the condominium corporation is obligated to insure both the units and common elements for major perils making the corporation responsible for repairs up to the level of the standard unit, excluding improvements.

The Act establishes that corporations bear the responsibility for damages exceeding the insurance deductible even if caused by an owner’s negligence.

This statutory requirement, dating back to the 1960s, leaves corporations with no alternative but to assume this responsibility. However, the question of who bears the repair costs up to the amount of the insurance deductible depends on the cause of the damage.

Where the damage is caused by an act or omission of an owner or someone who is in the unit with the owner’s permission, the Act allows the corporation to charge back the costs of repairing the owner’s unit up to the lesser amount of the cost of repair or the insurance deductible. Importantly, corporations do not have the inherent authority to charge back costs of repair to the offending unit owner for repairs made to the common elements or to other units. Instead, the Act requires that the corporation enact a by-law expanding the circumstances under which the costs of repairing common elements and other units can be charged to the unit that caused the damage – often referred to as an insurance deductible by-law.

The absence of such a by-law often limits the Corporation’s ability to recover costs for damages to other units and common elements; chargeback provisions in the corporation’s declaration are often insufficient to escape the need for an insurance deductible by-law.

To make things more complicated, the corporation’s ability to charge back costs to the unit that caused the damage is tied to there being an ‘act or omission’ by the unit owner that resulted in the damage. An ‘act or omission’ does not necessarily require there to be negligence on the part of the source unit owner but requires a connection between the owner’s actions or inactions and the resulting damage.

Take for example a water escape from a source within the unit boundaries that causes damage to the source unit, as well as to the common elements and other units. It is insufficient for corporations to rely solely on the fact that there was a water escape to claim that the source unit owner was at fault. Corporations, particularly if tested in legal proceedings, will need to point to an act or omission (ie. what the owner did or did not do) that resulted in the water escape. This can often frustrate a corporation’s ability to claim the costs from the unit owner because it cannot be determined what actually caused the water escape (or other loss) event.

Standard unit by-laws also play a significant role in dealing with the costs of repairing an insured peril. The Corporation’s obligation is to repair the damage up to the level of the standard unit. Without a standard unit by-law (or a standard unit schedule from the Declarant) the corporation will have a hard time establishing what repairs constitute improvements and where the corporation’s obligation to repair ends. Having a standard unit by-law in place will limit the corporation’s obligations to repair if there is no act or omission, or if the corporation does not have an insurance deductible by-law making the source unit responsible for the cost of repairs.

Condominium law in Ontario presents intricate challenges, especially when dealing with damages and insurance responsibilities. Understanding the Act is crucial for both condominium corporations and unit owners. By navigating the complexities of insurance deductibles, by-laws, and the definition of ‘act or omission,’ stakeholders can better comprehend their roles and obligations in the aftermath of damages, fostering a more transparent and fair resolution process.

Johathan Miller
Shibley Righton LLP