Costs, Costs, Costs… Another Court Decision Considers Recovery of Legal Costs

The recent decision of Metropolitan Toronto Condominium Corporation No. 596 v Best View Dining Ltd provides further direction respecting when a condominium can recover legal expenses by way of lien.

The case involved an ongoing dispute between a mixed-use condominium, a commercial unit owner, and the commercial unit’s tenant (who operated a restaurant out of the commercial unit). Since the restaurant’s opening, the condominium’s residential occupants had been disturbed by the restaurant’s excessive noise and activities.

The condominium brought an Application to enforce compliance with its governing documents. It obtained an Order requiring the commercial tenant to abate the noise. The Court also awarded the condominium its costs in the amount of $87,810.09 (including engineering costs, hotel costs, and legal costs) up to the date of the Application, September 22, 2017. These costs were paid by the commercial unit owner and its tenant.

Despite the Court Order, the noise issues continued. In December 2017, the condominium brought a contempt motion against the commercial owner and tenant for breaching the noise abatement Order.

The contempt motion was eventually adjourned while the commercial tenant took additional steps to abate the noise. However, the condominium incurred $38,786.85 in additional engineering and legal costs to deal with the noise issue. When the commercial owner failed to reimburse the condominium for these costs, they were added to the unit’s common expenses and a lien was registered on July 24, 2018. The commercial owner and tenant then brought a motion seeking to discharge the lien. They argued that registering the lien before the contempt motion was decided was premature.

The Court ultimately held that the lien was proper. The Court determined that the lien was largely for legal costs associated with enforcing the September 2017 compliance Order. It held that although those amounts were not common expenses recoverable pursuant to section 134(5) of the Condominium Act, they were properly recoverable as common expenses pursuant to section 85(1) of the Act. 

In making this determination, the Court relied on the Court of Appeal’s reasoning in Metropolitan Toronto Condominium Corp No 1385 v Skyline Executive Properties Inc. This case held that costs incurred to enforce a compliance order are different from costs associated with obtaining the order. But enforcement costs can be taken into account in determining arrears under section 85, given that this section allows a condominium to claim for unpaid common expenses, plus all reasonable legal costs and expenses incurred in connection with collecting arrears.   

[Editor’s Note: In our view, this is a generous interpretation of Section 85 of the Condominium Act, which is of course helpful for condominiums that incur costs after obtaining a compliance Order. In reviewing the decision, we note that the condominium had strong indemnification provisions in its governing documents – allowing the condominium to chargeback the enforcement costs incurred to the non-compliant owner – which supported the position taken by the Court. Prior to adding a chargeback to a unit owner’s account, it is important to carefully review the governing documents to see if they contain one or more provisions to support the chargeback (and adding the chargeback to the owner’s common expenses!).]

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