Collecting Costs from Owners
When an owner (or the owner’s tenant) causes the condominium corporation to incur costs, two questions arise:
- Does the condominium corporation have the right to collect those costs from the owner?
- Can the costs be added to the owner’s common expenses?
The Condominium Act contains some specific provisions about recovery of costs from owners. For instance:
- If a condominium corporation is required to take enforcement proceedings against an owner and/or the owner’s tenant, the condominium corporation may be entitled to recover all reasonable costs incurred by the condominium corporation in the Court process. And the corporation will normally have the right to add those costs to the owner’s common expenses. [See Section 134 (5) of the Condominium Act.]
- Under Section 92 of the Act, if a condominium corporation carries out maintenance or repairs on behalf of an owner, the related costs can be added to the owner’s common expenses.
- Under Section 105 of the Act, owners may be responsible for the corporation’s insurance deductible in certain circumstances. If so, the amount is added to the owner’s common expenses.
But what about other costs caused by an owner or the owner’s tenant that are not related to a court process? This could include legal costs (for warning or demand letters), extra management costs (for special enforcement efforts), engineering costs (for special investigations) or any other costs incurred by a corporation as a result of an act or omission of an owner or the owner’s tenant.
The corporation’s right to recover those types of costs – and to add those costs to the owner’s common expenses – can often depend upon an “indemnification” provision in the corporation’s declaration, by-laws or rules.
Note as well that, in order to add such costs to an owner’s common expenses, the amendments to the Condominium Act require that the indemnification provision (specifically stating that such costs are added to the owner’s common expenses) be in the declaration.
So, all of this leads to the following questions:
a) Does your declaration contain an indemnification provision?
b) Is that indemnification provision well-worded?
c) If the answer to (a) or (b) is “no”, should you perhaps be considering an amendment to your declaration (with consents from owners of 80% of the units) to add an indemnification provision to your declaration? Or maybe improve the wording of a current provision?
NOTE: Without such a provision in your declaration, when the amendments to the Condominium Act come into force, you may have to look for other ways to collect amounts owed by owners…such as a claim against the owner and/or tenant in Small Claims Court. Depending upon the specific facts, this may be a far less efficient alternative.
To read more on condominium arrears, take a look at our previous blog post.