Legal

April 19, 2017 Published by Toronto and Area Chapter - By Patrick Greco, Megan Mackey

Decisions From the Courts

From the Spring 2017 issue of the CCI Toronto Condovoice Magazine.

Ottawa-Carleton Standard Condominium Corporation No. 961 v. Menzies et al. – Ontario Superior Court of Justice dated December 8, 2016

Few recent condominium cases have made newspaper headlines as much as this recent decision out of Ottawa, coming hot on the heels of increased concerns in the industry over short term unit rentals through websites such as Airbnb, in which Justice Beaudoin stated: "Single family use" cannot be interpreted to include one's operation of a hotel-like business, with units being offered to complete strangers on the internet, on a repeated basis, for durations as short as a single night. Single family use is incompatible with the concepts of "check in" and "check out" times, "cancellation policies", "security deposits", "cleaning fees", instructions on what to do with dirty towels/sheets and it does not operate on credit card payments.

The Facts

The condominium corporation brought an application to enforce its Declaration which states that residential units are to be occupied "...only for the purpose of a single family dwelling...", and to enforce a new rule which prevented owners from entering into leases of less than four months. The application was brought against the owners of a residential unit that was being rented out for terms as short as one night through at least nine different websites, including Airbnb. com, Kayak.com, Hotels.com, and Orbitz. com. The listings offered full use of the amenities, and went so far as to warn guests not to mention the rental to others in the building and not to leave keys with the concierge. The condominium corporation also named the tenant, DGM Management Corp. ("DGM"), as a respondent. DGM was a company controlled by the unit owners which arranged for the short-term rentals.

The respondent unit owners admitted that the unit had been used for short term rentals. They defended the court proceedings by arguing that the matter should have been submitted to mediation and arbitration instead of to court. This argument did not succeed because a tenant was involved. Under the Condominium Act, proceedings against tenants are not subject to mediation and arbitration. The respondents also claimed that the matter should not proceed until the other 243 unit owners received notice of the application.

Key findings

The court ordered the unit owners and tenant to comply with the Declaration and Rule which prohibited tenancies of less than four months. The court found that "single family use" could not be interpreted to include the operation of a hotel-like business. In coming to this conclusion, the judge noted things such as "check in" and "check out" times and "cancellation policies" are incompatible with the concept of the "single family use" required by the Declaration.

The court also found that the rule requiring a lease of at least four months was reasonable because it did not strip unit owners of their rights to lease their units to "traditional", longer-term tenants. The rule was held to be enforceable.

Author's Note

This case confirms that condominium corporations can prohibit short-term leasing if their Declaration or Rules so permit.

This case also highlights the importance of transparency and diligence when enforcing governing documents. The court found that there was no need to add all unit owners as respondents in court because all owners had a clear opportunity to challenge the rule when it was enacted and had not done so. The condominium corporation's diligent enforcement efforts were reflected in the evidence it was able to put before the court, including details of the numerous short-term leasing sites on which the unit was advertised, the many online customer reviews, and the relevant details as to unit misuse and resulting complaints. A proper record of complaints, incident reports, warning letters, etc., increases the odds of success of any condominium enforcement matter.

Seto v. Peel Condominium Corporation No. 492 – Ontario Court of Appeal dated July 8, 2016

The Ontario Court of Appeal held that a condominium corporation cannot levy costs against unit owners when this is contrary to the terms of the Declaration. While this may seem like common sense, the facts of this case highlight the challenges of budgeting and allocating common expenses.

The Facts

Dixie Park Mall is a commercial condominium corporation. It contains a food court which is reserved for the exclusive use of eight food court units. The food court units generate significantly more garbage than all of the other units. The cost of removing and disposing of garbage from the food court is a significant budget item.

The Declaration states that the cost of cleaning, furnishing, maintaining and managing the food court is to be paid solely by the owners of the food court units. However, Schedule "E" of the Declaration states that the cost of removing garbage from the common elements is to be paid by all unit owners. The food court seating area is an exclusive use common element.

The condominium corporation decided that since the food court unit owners created the most garbage, those unit owners should pay for the cost of removing and disposing of garbage. In order to support this cost allocation, the condominium corporation claimed that garbage disposal was part of "cleaning" the food court, for which food court owners were responsible.

The Application Decision

The application judge held that garbage disposal costs could not be levied against the food court units. The Declaration clearly states that waste disposal from the common elements is a common expense to be paid by all unit owners. Waste disposal was therefore not part of the cost of "cleaning" the food court. It was improper for the condominium corporation to levy all waste disposal costs against the eight food court units.

The application judge ordered the condominium corporation to reimburse food court unit owners for waste disposal costs.

The Ontario Court of Appeal Decision

The condominium corporation appealed on the basis that the application judge ignored the historical practice of charging waste disposal costs to food court unit owners. The condominium corporation also claimed that the application judge's remedy had the effect of excusing the food court unit owners from having to pay for the cost of disposing of waste from their units.

The Court of Appeal rejected the notion that past practice could be used as a basis for contradicting the plain language of the Declaration. All units owners were responsible for the cost of disposing of garbage left in the common elements, including the food court. However, the Court of Appeal did agree that unit owners were responsible for the cost of disposing of garbage from their units.

Author's Note

The Declaration clearly stated that the cost of disposing of garbage from the common elements was to be paid by all unit owners. The decision to remove garbage disposal from the corporation's budget and levy it against food court unit owners may have been a misguided attempt to keep common expenses down. Alternatively, this may have been an attempt to make the payment of common expenses "more fair". Even if cost allocations seem unfair, condominium corporations should not engage in "creative accounting" to reduce common expenses if doing so would contradict the provisions of the Declaration.

Middlesex Condominium Corporation No. 229 v. 1510231 Ontario Inc. – Ontario Superior Court Decision dated October 11, 2016

This recent case is significant because it clarifies what a neighbouring land owner is required to do to support an easement over its land. Some condominium corporations have easements that allow residents to travel over neighbouring properties. Easements can be common in densely populated urban areas, and are sometimes used in new developments. It turns out that easements rights may not be as secure as one might think.

The Facts

A condominium corporation and a neighbouring land owner shared ownership of a retaining wall which ran along the banks of a creek that bordered both properties. The retaining wall supported the properties and, as such, it supported the easements that the condominium corporation had over the neighbouring property. These easements included a road which provided access to the condominium corporation and a sanitary sewage pipe which carried sewage from the condominium to the municipal sewer system.

The legal terminology for describing easements can help explain how they operate. In this situation, the condominium property is referred to as the "dominant tenement" because it has rights over a neighbouring property. The neighbouring property is called the "servient tenement".

The retaining wall was built pursuant to a Development Agreement between the developer and the City of London. There was no shared facilities agreement in place for the maintenance and repair of the retaining wall. The retaining wall collapsed a few years after it was built. A separate lawsuit suggested that the collapse was due to negligent design or construction. Neither the condominium nor its neighbour took any steps to repair or remediate the wall. Consequently, condominium residents could not use their easements in the same manner as they did before the collapse. The condominium sued the neighbouring land owner, claiming that the neighbour had an obligation to repair and maintain the retaining wall for the benefit of the condominium's easements.

The Decision

The court held that the neighbouring land owner did not have a duty to repair the retaining wall. The condominium's lawsuit was dismissed in its entirety.

The court explained that the nature of an easement is always negative: the obligation on the neighbouring land owner (the servient tenement) was either to suffer or to not do something. Easements cannot require the servient land owner to take any steps or to expend any money.

It is important to note that the neighbouring land owner had nothing to do with the wall's collapse. If the neighbouring land owner had been directly responsible for the collapse, it may have been required to take steps to restore the easement.

Author's Note

An interesting point is that the court refused to enforce ongoing maintenance provisions relating to the retaining wall which were contained in the Development Agreement and in recent building permits. The condominium corporation was not a party to the Development Agreement or to the permits and therefore could not rely on them.