Condo Law Digest – June 2013

 

York Condominium Corporation No. 62 v. Superior Energy Management, 2013 ONSC 2615
Decision Date:  May 6, 2013

In May 2008 a representative of the property manager for YCC 62 entered into a fixed-price contract with Superior Energy Mgm’t for the supply of natural gas.  The property manager had not been authorized to do this and the Board of Directors never ratified the contract.  (Condominium corporations cannot contract unless there is a resolution of the Board.)  In July 2009, and then several times over the next few months, a representative of the property manager contacted Superior at the Board’s request, taking the position that the contract was not valid.  Superior did not respond to any of these attempts at communication, nor to a demand letter written by the Board’s counsel in November 2010.  In Sept 2012 the Board issued an application in the court.

Counsel for both parties agreed that the hearing should be limited to the question of limitations, with reference to sections 4 & 5 of the Limitations Act.  Counsel for YCC 62 argued that the 2-year limitations period should begin in November 2010, when the demand letter was sent.  The judge disagreed and dismissed the application. He found that the limitations period began, at the latest, in fall 2009, when the property manager wrote to Superior, taking the position that the contract was not valid.

Comment: Act promptly if you have concerns about the validity of a contract.

Judge v. Baywood Homes, 2013 HRTO 727
Decision Date: May 1, 2013

In early 2009 Mr. Judge and his wife decided to move out of their home and into a condominium.  They met with the sales staff of Baywood Homes, who told them that, if they purchased a unit, they would be given two  parking spots: one in front of the building and one farther away.  Mr. Judge was keen to have a parking spot in front of the building because of a number of health problems, including severe chronic pulmonary disease and a bad back.  Although Mr. Judge mentioned his bad back to the sales staff, he did not tell them about his other health problems, nor make a connection between them and his desire for a parking spot in front of the building. Mr. Judge did not add a provision about the parking spot to the Agreement of Purchase and Sale. The Judges took possession of their unit in July. When the parking lot was completed and marked in September, they found that both parking spots were a good distance from the front door.  Their counsel sent a letter to the vendor’s counsel, requesting a parking spot next to the building, but without mentioning Mr. Judge’s disabilities. The vendor refused.  Mr. Judge filed an application with the Ontario Human Rights Tribunal, alleging discrimination with respect to housing on the basis of disability.

The Adjudicator dismissed the allegation.  While he was satisfied that Mr. Judge had a disability, Mr. Judge failed to make his disability known to Baywood Homes.  Because Mr. Judge did not do this, he did not trigger the vendor’s duty to accommodate.  While the Adjudicator was sympathetic to the Judges’ feeling that the vendor had failed to fulfill an oral promise, he found that he had no jurisdiction over the matter.

Comment: The HRTO and the courts have repeatedly found that persons seeking accommodation must makes their needs known, and it is this notice that triggers accommodation.

 

"Bad Faith" – What it Means for Condo Board Members

My earlier post on Mediation and Bad Faith Bargaining is one of the most-read on this site, so when a couple of recent legal decisions relevant for condominiums invoked “bad faith,” I knew I had to write about it again.

Section 37 (1) of the Condominium Act specifies that every director and officer shall act “in good faith.”  What does this mean and how might it apply?  “Bad faith” is a slippery concept and is difficult to define precisely.  Basically, a person acts in bad faith when he or she intentionally infringes upon another’s rights, or intentionally fails to honour legal or contractual obligations.  The role of “intention” is key.  Acting in bad faith is different from failing to understand that you have obligations or being mistaken about them.

“Bad faith” is more than an abstract legal issue, as a number of condo board members have found out to their cost.  In two recent decisions judges have held condo board members personally responsible for court costs because they failed to act in good faith.  A look at these cases helps clarify condo board members’ legal responsibilities, as well as their obligations to unit owners.

The first case (Boily vs. Carleton Condominium Corporation 145) began innocently enough, with modifications to a courtyard.  The Board took the position that the changes were “simple repairs” and so required approval of a simple majority (50%) of unit owners.  A group of owners took a different view when they saw the proposed changes.  To them, the modifications looked like “substantial changes” that would require the approval of 2/3 of the owners, and so they attempted to organize a special owners’ meeting to present their concerns to the Board.  The special meeting would be held at the same time as the meeting the Board had already scheduled to vote on the courtyard modifications.

Here is when the Board’s shenanigans began: They refused to recognize that the owners’ had the correct number of signatures to requisition the meeting, and they initially refused to hand over the list of registered owners.  They did not move from their position that the approval of 50% of owners would be enough for the changes to go through, and advised that demolition would begin the day after the meeting.  The group of owners who opposed the changes sought an injunction to stop the demolition.  This was granted by a judge on June 22, 2011, with a promise to decide on the rest of the application on June 29, 2011.

It would seem that cooler heads prevailed after the injunction was granted.  The Board and the group of owners, together with their lawyers, reached an agreement, formalized in “Minutes of Settlement.”  The Board agreed not to proceed with the modifications unless they received the approval of 2/3 of the owners.

But the story does not end here.  When the Board failed to receive the 2/3 majority that it needed, they took the position that the “Minutes of Settlement” was not binding, and that they would wait for the judge’s decision on June 29.  The group of owners brought a motion to enforce the Minutes of Settlement, which the judge granted.  He also decided that the costs incurred to enforce the settlement ($13 560) were to be paid by the board members personally because they had acted in bad faith.  The two main factors in his decision were the Board’s actions regarding the special meeting (their refusal to recognize its legitimacy and their delay in providing the list of owners) and their attempt to wriggle out of the agreement that their own solicitor had negotiated on their behalf.

The second case (Middlesex Condominium Corporation 232 vs. Owners) is similar to the first.  Again, problems arose out of proposed repairs to the condominium – repairs that everyone agreed were necessary.  The Board had decided on a repair plan that would cost $750 000 and require the corporation to borrow $600 000.  A group of owners asked to see the relevant documents, to have time to study them, to post notices about the proposed repairs, and to have the Board suspend negotiations with their chosen contractors.  While the Board’s lawyer provided supervised access to the documents, the other requests were denied.  At the Annual General Meeting, the Board’s bylaw to authorize the $600 000 loan was defeated.  Then the owners held a specially requisitioned meeting where a new board was voted in.

Can you guess what happened next?  The old Board refused to recognize the legitimacy of the new Board.  In an attempt to get around the inconvenient fact that they had been voted out, the old Board filed an injunction with the court to have an administrator appointed.  The judge refused.  He said that the owners’ attempts to get a Board more responsive to their concerns was “entirely understandable and reasonable,” and that the injunction was brought with the sole purpose of preventing the owners from exercising their rights.  Because the application for the injunction was “tenuous and without merit,” he found the five members of the old Board personally responsible for $15 000 in costs.

What are the lessons here?  Probably the members of both Boards (Carleton 145 and Middlesex 232) thought they were doing the right thing and acting in the best interests of owners.  But this is not the point.  Condo Boards serve at the behest of owners.  Acting without the support of owners, or (worse) attempting legal maneuvers to thwart the will of owners, will not be looked upon favourably by the courts.  Board members must understand that, if they appeal to the courts without a legal basis for their actions they may be held personally responsible for costs if their actions be unsuccessful.  Obtaining reliable legal advice is absolutely crucial, as is keeping an open mind.  Any group of people that work together can develop a tendency to group-think, such that it is difficult to see the flaws in a plan that the group has adopted.  Being “certain” that you are doing the right thing is not enough.  And acting on that feeling of certainty, despite owners’ clear lack of support, is a very bad idea.

A slightly different version of the article appeared in the April 2013 issue of Condo Business magazine.

Condo Law Digest – May 2013

There's No Place Like Home

Welcome to the first of what I intend to be a monthly feature – a digest of some condo law cases from the previous month or so.

Harvey v. Elgin Condominium Corporation No. 3, 2013 ONSC 1273
Decision Date:  March 4, 2013

Each unit in this townhouse complex has a garage with a rooftop deck.  Several unit owners complained of water leakage in and around the decks.  The corporation commissioned an engineer’s report which detailed extensive structural flaws in the design of the decks and the need for repair. Mr. Harvey, one of the unit owners, charged that the repairs were not necessary in the first place, that they constituted “substantial changes” (and so required approval by 2/3 of the unit owners), and finally that the special assessments levied against owners to pay for the repairs were “oppressive”.  He sought to have the work stopped and the levies returned, and he sought punitive damages for the harm allegedly done to his credit rating when the corporation placed a lien on his unit to enforce the levy. Mr. Harvey was not represented at the trial.

Justice Leach dismissed Mr. Harvey’s action and his claim for punitive damages.  He found that the board’s decision to repair all of the decks had been well-founded.  The repairs did not constitute substantial changes, but rather fell within the definition of remedial work under s. 97(1) of the Condominium Act.  He rejected Mr. Harvey’s request for an oppression remedy, noting that the meanings of “oppressive,” “unfair” and “prejudicial” in the legal context differ from their ordinary language meanings. (Justice Leach referred here to Walia Properties Ltd. v. York Condominium Corporation No. 478).  He did not make any decision regarding costs.

Comment: Owners are well-advised to consult with a lawyer before commencing any action against a condominium corporation.

Kong v. Toronto Standard Condominium Corporation No. 1959, 2013 HRTO 687
Decision Date: April 24, 2013

On August 31, 2011 Ms. Kong and the corporation reached an agreement with respect to an application with the Human Rights Tribunal of Ontario.  The corporation agreed to caulk and seal the outside of the window of Ms. Kong’s suite, and to reimburse her for up to $3500 for the cost of repairs and other changes to her unit to improve air quality.  Ms. Kong filed an Application for Contravention of Settlement, charging that the window repairs had not been done to her satisfaction because she continued to be bothered by the presence of second-hand smoke in her unit. Furthermore, she had not been reimbursed for the repairs to her unit.  The corporation argued that no timeline for reimbursement had been set out in the original agreement.

The Adjudicator dismissed the Application for Contravention of Settlement, but directed the corporation to reimburse Ms. Kong immediately.  Although no timetable for reimbursement was specified, a standard of reasonableness was implied. The Adjudicator found that the corporation had fulfilled the agreement by caulking and sealing the window.  The written settlement did not assure or guarantee that the presence of all second-hand smoke would be eliminated.

Cases that should’ve been Mediated: (3) The Sisters Upstairs and the New Wood Floors

Every now and then I hear about a conflict that wasn’t mediated but should have been.  Mediation would have saved the participants time, money and aggravation.  In this case, you do not even have to accept my judgement that the conflict should have been mediated.  Three Lord Justices of the England and Wales Court of Appeal stated that the dispute could have been resolved thorough mediation, without recourse to the legal system, for a fraction of the £140,134 (roughly $224,400 Cdn) that the disputants eventually spent.

The setting is “Eaton Mansions,” a tony block of flats in London, England.  The suit was brought by Mr. and Mrs. Faidi, who own and occupied Flat 6.  Sometime before 2006, the defendant, Elliot Corporation, acquired the lease for Flat 8, directly above the Faidis.  The new owners applied for and were given permission to carry out renovations, including removing the radiators, tearing up the wall-to-wall carpeting, putting a new radiant heating system in the floor, and installing new hardwood flooring.  They went through all of the proper procedures and got permission before doing the renovations.  In August 2010 the flat was leased to a couple with three daughters, aged 14, 12, and 5.

Sometime after the family moved in upstairs the Faidis brought a suit against the Elliot Corporation, charging that the day-to-day activities of their new neighbours caused noise and disturbed them.  They would be spared this disturbance, the claim argued, if the floors were covered by wall-to-wall carpets.  Indeed, each lease specifies that the floors (with the exception of the kitchen and bathroom) should be covered with carpet and underlay.  The defendant argued that when the renovation plans were approved the regulation about wall-to-wall carpeting became moot.  What would be the point of installing new hardwood floors, only to have them obscured by carpets?  Besides, the new heating system would not work effectively if the floors were carpeted.

Judge Freeland, who heard the original case, dismissed the Faidis’ claim.  He relied on expert testimony that the noise insulation installed when the new floors were constructed exceeded the minimum required by the building code.  The judge even went to the trouble of visiting Eaton Mansions to see the floor for himself.  The three judges who heard the appeal (Lord Justices Ward, Lloyd, and Jackson) concurred, finding that it would be “futile and absurd” to go to the expense of laying hardwood floors if they were destined to be covered up by carpets.  (You can read the full text of their judgment here.)

Litigation is adversarial by nature; outcomes are usually “all or nothing.”  Robert Pearce, the lawyer who presented the arguments for the Faidis’ appeal, proposed that a “moderate” amount of carpeting in flat 8 (say, in high traffic areas) would have absorbed some of the noise yet still allowed the residents to enjoy their new floors and benefit from the heating system.  The justices agreed that this would have been a sensible solution; however it was not one that the courts could impose.  The judges stressed that this outcome (strategically placed carpets) could easily have been achieved through mediation.  Justice Ward said it best:  “Not all neighbours are from hell. They may simply occupy the land of bigotry. There may be no escape from hell but the boundaries of bigotry can with tact be changed by the cutting edge of reasonableness skillfully applied by a trained mediator. Give and take is often better than all or nothing.”

Ironically, the Faidis no longer live in flat 6; their son lives there now.  And the family upstairs has also moved on.

Reproduced above:  The Daughters of Edward Darley Boit by John Singer Sargent (1882), currently in the Museum of Fine Arts, Boston.  Image from Wikimedia Commons.

Dysfunctional Condo Boards: (Part Two) Strategies for Getting Your Board Un-Stuck

In my previous post, I discussed ways of preventing condo board conflict.  This post discusses some typical problems that condo boards face, and offers some solutions.

The board is divided into two opposing cliques, with differing positions on every issue.  Discussions get personal really quickly.  We insult each other rather than discuss the problems in the building.  There is a real lack of civility, and nothing gets done.

There is nothing wrong with board members holding different points of view.  What is crucial, is how you discuss and debate the options before you.  Even if you have not already agreed to keep things respectful, it is not too late to discuss how you wish to interact as a group and to commit to some ground rules.

When any disagreements arise, focus on problems, not on personalities.  Keep the discussion related to the issues before you, and not on the personal qualities of the people involved. Your best strategy here is curiosity. Ask questions, and try to let go of assumptions you may have already formed.  Try to understand why others hold the views that they do. Is the other party drawing on different sources of information?  Do you have more fundamental disagreements, such as diverging opinions about the staff and the manager, or different views on what is most important in the building?  Once these disagreements are on out in the open, it may be easier to discuss them effectively and eventually to move beyond them.

Given that groups of people will always have points of disagreement, how can you disagree in a respectful, productive manner?  First, raise concerns about specific issues, not about the other person’s character or world view.  Second, speak from your own perspective.  Rather than say, “You are too stupid and short-sighted to understand the value of preventative maintenance;” try, “I am concerned that if we do not address this issue before the winter, we will have worse problems by the spring.”

Remember, you do not have to be friends with your fellow board members, just as you do not have to be friends with your co-workers.  All you have to do is co-operate on a limited number of tasks.

The board members don’t trust one another.

We are used to thinking of “trust” as a personal quality.  We feel that some people are worthy of our trust, while others are not.  But this is only one way to think about trust.  Another way of approaching trust is to see it embedded in rules, procedures and processes.  When you drive down a busy street, what makes you “trust” that the other drivers will stay in their lanes, stop for red lights, and (for the most part) drive with regard for the safety of others?  The other drivers are strangers, so it cannot be that you have personal feelings of trust towards them.  Instead, you have to put your trust in traffic laws and in the fact that the laws are generally enforced.

The rules and charters of your condo corporation are similar to the rules of the road.  Make sure that your policies, including your “Conflict of Interest” policy, are clearly written, and that all of the board members understand them.  Make transparency the norm, so that documents such as receipts, bids, and contracts are available to all board members.  There will always be specific individuals whom you may not trust, and others who may not trust you.  If everyone puts their trust in procedures and policies, you should be able to work together effectively even if you lack confidence in one another.

What to do if one or more board members consistently flout or disregard the corporation’s policies and resist transparency?  Condo boards sometimes control a great deal of money and, unfortunately, fraud may be a possibility.  Consider consulting with the condominium lawyer.

The board members get along well.  Meetings are very calm.  There are no insults or harsh words.  But there is also no lively discussion; no one asks questions or raises concerns.  In fact, no one says much of anything….

Your board may be well-mannered, but is it truly efficient and effective?  A board that seems harmonious and conflict-free might be as dysfunctional as the board that screams at one another.  The most effective teams are not necessarily always in agreement.  They may have intense discussions and disagree on any number of issues.  The difference is that they focus on problems, and not on personal differences.

Keep in mind that boards are accountable to condo owners and are supposed to act in the owners’ best interests.  Sometimes that might mean disagreeing with your fellow board members, raising concerns, and weighing the pros and cons of a number of different options.  Remember that questioning the advice of the condo manager or board president is not a sign of disrespect or disloyalty.  As long as you raise matters respectfully and refrain from personal attacks, bringing up legitimate concerns is part of being an effective and responsible board member.

The president dominates the board.  No one stands up to him, and some board members are even afraid of him.

It would be nice to think that we were through with bullies when we left school playgrounds.  Sadly, bullies can be any age and they are found in all walks of life.  Bullies rely on others being too afraid or too craven to stand up for themselves and for others.  If there is a bully on your board, you may have to tread very cautiously.  When you raise concerns, be extra-careful not to let the discussion get personal.  If someone gets personal with you, guide the conversation back to the issues under discussion.

Confronting a bully is hard, and you will have to decide yourself whether confrontation is the best strategy in your situation. We often focus on the costs and risks of acting, yet fail to consider the costs and risks of not acting.  Avoiding a problem almost always contributes to its longevity.  The longer you let others get away with bad behaviour, the harder it will be to call them on it in the end.

Finally, if you and your fellow board members are in conflict, think about what you might be doing yourself to contribute to the on-going poor dynamic.  Have you formed assumptions about the other members?  Do you fail to listen carefully, because you feel that you already know what they will say?  Are you so convinced that your own views are correct that you refuse even to hear about other options?  If you answered “yes” to any of these questions, you have taken the first step in realizing that conflict is two-sided, and perhaps the first step in turning around a dysfunctional board.

If the challenges seem too great for the board to turn things around on their own, consider bringing in a mediator.  Mediators are neutral third parties who are trained in conflict analysis and resolution.   They can help facilitate and manage discussion so that all parties are heard, tensions are diffused, and the board can get back to making good decisions.

Note:  I formulated these ideas with the help of Dr. Pamela Hudak, and a slightly different version of this article appeared in the Spring 2012 issue of The Condo Voice, a publication of the Canadian Condominium Institute.

Dysfunctional Condo Boards: (Part One) Preventing Harmful Conflict

The Directors of Distillers Company Limited The following are excerpts from letters sent to condoinformation.ca an independent website set up to help condo owners:

I was elected to the Board and was the first new member that this Board had had in 8 years. They never accepted me, never considered what I had to say, had meetings without me and I was totally isolated…

Myself and another Board member don’t agree with what the others and especially the president are deciding because they’re just throwing money at problems that could be solved with better communication and a bit of leg work on the part of our staff. But the two of us just vote with them, in my case because I am afraid of reprisals….

Our Board of Directors resembles mafia like boards controlled by a godfather president. The president of my condo has controlled the board for 20 years [… ] As well, he has installed the soviet style politburo cronies who don’t ask questions and only raise their hands when asked.

Does any of this sound familiar? Of the 1, 144 letters sent to the site, more than half discussed problems with condo boards.

When condo board members are caught in conflict the consequences can be far-reaching. Decisions are postponed and the property deteriorates as problems are not addressed. Owners wonder what’s going on and become frustrated with the lack of communication from the board. Meetings may be overly long and frustrating, causing stress for members and their families.

Why do some condo boards have engaged, hardworking members who protect the best interests of the owners, while others are mired in conflict and dysfunction? If you are a condo board member, what can you do to make sure that you and your fellow members can work together effectively?

Whether you are on a newly formed board, or your board has been together for some time, there are steps you can take to make sure that you work together effectively and respectfully.

Spend some time getting to know one another. You don’t have to become best friends with your fellow board members; you don’t necessarily even have to like them. But knowing a little bit about their backgrounds and about who they are as people can go a long way to insure that your interactions stay respectful. Knowing that Sally spends her weekends looking after her elderly parents, or that Jim did a tour of duty in Afghanistan, might help keep things in perspective when differences of opinion arise.

Knowledge is power. Familiarize yourself with the condo act, and with the rules and procedures of your own condo. Understand your rights as an owner, and your responsibilities as a board member.

Decide on ground rules for your interactions. Resentment can arise when people have different expectations for how meetings will be run. Taking a little time to work things out in advance can save a lot of time and effort down the road. Will all members agree to do their homework and be prepared for meetings? How long will discussions go on before a vote is called? When decisions are reached, will the board members support one another, even if they don’t agree with the outcome? Should members agree to keep their discussions confidential, and to avoid negative gossip about internal group dynamics? Committing in advance to respectful conduct helps to ensure that meetings stay focused and productive.

Next time: Some typical problems, and how to move beyond them.

Note:  I formulated these ideas with the help of Dr. Pamela Hudak, and a slightly different version of this article appeared in the Spring 2012 issue of The Condo Voice, a publication of the Canadian Condominium Institute.

Conflicts that Should have been Mediated: (2) The Elusive Parrot

Condo Conflict Resolution: Elusive Parrot
Photo credit:  SantaRosa OLD SKOOL (via flickr)

Every now and then I hear about a conflict that wasn’t mediated but should have been.  Mediation would have saved the participants time, money and aggravation.

What is the cost of breaking a rule?  If you live in a condo in Ontario the cost can be very high indeed.  One of the provisions of Ontario’s Condominium Act is that condo owners who fight compliance applications can be obliged to pay the condominium board’s legal costs, as well as management fees and surveillance costs.  An owner who doesn’t pay up might find a lien placed on his unit.  The reason for this extraordinary provision (which is not enjoyed by individuals or corporations) is to discourage owners from pursuing frivolous lawsuits against boards.  After all, the legal costs for a condo board are shared by all owners, and it would not be fair for the corporation as a whole to suffer because of one litigious owner.  Condo owners who go to court over compliance issues have to be pretty confident that they have a strong case.

(Please note that I am not a lawyer and the above paragraph is not intended to be taken as legal advice!  If you are a condo owner in dispute with a board, please consult a lawyer, preferably one with experience in this area.)

The cost of breaking the “no pets” rule for their condo building almost cost Michael and Margarita Bazilinsky more than $40,000.  At some point, late in 2010, judging by squawks heard in the corridor, a parrot took up residence in the Bazilinskys’ unit.  Mr. Bazilinksy claims that he was merely parrot-sitting for a friend, and he supplied affidavits from three independent parties (a personal trainer, a real estate agent and an electrician) affirming that there was no parrot in the unit.  The board inspected his unit in early 2011 and found no evidence of a parrot.  They were convinced, however, that Bazilinskys had smuggled the parrot out of the unit for the day, and pointed to what they deemed “suspicious” footage on a surveillance camera of the Bazilinskys taking a covered box out of their residence.  In August 2011 Mr. Bazilinsky consented to an order to remove the elusive parrot, and to pay the board’s court costs of $3000.

The board then exercised their right under the Condominium Act to recover “actual additional costs” related to their eviction of the parrot.  They placed a lien on the Bazilinskys’ unit for $41,599.  Last month a judge ruled that this amount was excessive, and ordered Mr. Bazilinsky instead to pay $6500 of the board’s legal fees, less the $5000 he had to spent in court costs to bring the recent motion.

I learned about this case from an article in the Globe and Mail by Ian Merringer, who mentions that both parties claim that the other party had waived opportunities for mediation.  The Condominium Act includes a mediation process intended to resolve disputes before legal costs become excessive for either party.  From the brief description and the outline of facts presented in the article, it would seem that both parties had something to gain from an attempt to mediate.  Even if the Bazilinskys had eventually to find another home for the parrot, a mediated agreement to that effect would have cost significantly less than the legal costs they eventually incurred.  Mediation would have saved money and probably also time for the board.  And let’s not forget that the Bazilinskys and the board members are neighbours who are likely to see one another in the corridors and other public areas of the building.  I can’t imagine that their interactions now are anything but tense.  While they might never have been friends in the first place, listening to each other and working towards a mediated agreement might at least have given them the dignity of mutual respect.

Read about another Conflict that Should have been Mediated (curiously, also involving an animal.)