Collecting Enforcement Costs – The Challenge for Ontario Condominium Corporations

In the case of Chiarelli v. Toronto Standard Condominium Corporation No. 2339, the condominium corporation had registered a lien against the owner’s unit for recovery of legal costs incurred by the condominium corporation allegedly due to the owner’s non-compliance with a short-term occupancy provision in the condominium corporation’s Declaration.

The Court ordered that the lien be discharged.

[The lien also included costs (incurred by the condominium corporation) for replacement of a smoke/carbon monoxide detector in the owner’s unit. The lien for this amount was also found to be improper, for lack of proper notice.]

In ordering that the lien be discharged, the Court upheld the principle – expressed in the Amlani decision – that condominium corporations cannot lien for recovery of enforcement costs without a supporting Court order.  And the Court said that this principle applies despite any wording in the condominium corporation’s Declaration.  Here’s what the Court said:

Whether it is an “interpretation” of the declaration, or the plain meaning of the declaration, Amlani stands for the proposition that a declaration that purports to add legal costs associated with enforcement and compliance to a unit’s common expenses without a court order “contravenes” s. 134(5) and is thus unenforceable.

…

In summary, whatever the content of its Declaration, 2339’s legal costs in connection with its efforts to ensure compliance with its Declaration cannot be added to common expenses without a court order pursuant to s. 134(5). Such costs cannot, therefore, be subject to a lien pursuant to s. 85(1).

The bottom line is as follows: The legacy of the Amlani decision appears to be that Ontario condominium corporations cannot add enforcement costs to an owner’s common expenses without a supporting order. As I explain below, in my view this is very disappointing news for Ontario condominium corporations.

In my respectful view, the Court in the Amlani case could have come to a different conclusion. In my view, a well-worded indemnification provision (in a condominium Declaration) – allowing for enforcement costs to be added to an owner’s common expenses – is not inconsistent with Section 134(5) of the Condominium Act. [The Amlani case could have been decided simply based upon the poorly worded indemnification provision, and also based upon the strong facts favouring the owner, in that case.]

Section 134(5) (when it was passed as part of the Condominium Act, 1998) was never intended to create a new requirement (namely a Court order) for condominium corporations to lien for recovery of enforcement costs. The purpose of Section 134(5) was simply to ensure (as much as possible) that condominium corporations achieve 100% recovery in Court processes against non-compliant owners, when such Court processes become necessary. But of course most condominium disputes are (thankfully) resolved without legal proceedings.

In my view, the biggest problem with the Amlani decision is the impracticality of it.

Condominium corporations are obligated by statute (Section 17(3) of the Condominium Act) to take reasonable steps to enforce the Corporation’s governing documents.  Put simply: When reasonably appropriate (as determined by the Board – again, acting reasonably), condominium corporations are duty-bound to enforce their governing documents. This is a vital aspect of condominium law and administration – a fundamental ingredient for successful condominium communities. Condominium residents – living in close communities – need this support from their condominium corporations.

So in summary: Condominium corporations are (in many, many cases) forced by law to incur legal (and other) enforcement costs.

Now, as a result of the Amlani decision, in order to recover those costs (from the non-compliant owners), condominium corporations are forced to incur additional costs (to take further enforcement steps, by applying to Court or to the Condominium Authority Tribunal/CAT or by pursuing mediation and arbitration under Section 132 of the Condominium Act). And by virtue of section 134(5), condominium corporations will seek to recover these additional costs from the non-compliant owner – which means that the non-compliant owner may be held responsible for significantly more in costs related to their noncompliance, than they would if the condominium could simply lien for those costs.

And of course condominium corporations are arguably duty-bound to take those further enforcement steps because of the simultaneous duty to enforce the indemnification provisions that are contained in most condominium governing documents. The indemnification provisions are themselves based upon the long-standing principle – the implied agreement between condominium owners – that non-compliant owners should bear full responsibility for the costs that they cause to the community. 

Put simply: Condominium communities are expecting their Boards to recover enforcement costs from non-compliant owners.

So in summary: This new interpretation of Section 134(5) of the Condominium Act is now forcing condominium corporations across Ontario to incur extra expense (which may or may not be fully recoverable) to pursue legal proceedings in order to recover unavoidable enforcement costs from the responsible owners. And in my view, this only adds to the overall “expense of ownership” for all Ontario condominium owners – including the non-compliant owners. This is in nobody’s interest (except, of course, the interests of the lawyers involved in the enforcement processes).

Several years ago, the province introduced proposed amendments to the Condominium Act, which would have allowed disputes about chargebacks to be resolved by the CAT, in a summary manner – without need for a full-blown legal process. In my view, the proposed amendments would have gone a long way to resolving these issues. To my disappointment, those proposed amendments have now been abandoned.

Stay tuned to Condo Law News to keep up to date on the latest developments on condominium law!