In a recent case, Pearson v. CCC No.178, the court considered
whether a condominium corporation could recover as common expenses
the legal costs it incurred for legal advice related to the defence
of Small Claims Court actions commenced by an owner.
The unit owner had commenced three Small Claims Court actions to
enforce compliance with the declaration by the condominium
corporation relating to landscaping and financial disclosure. All
of the actions were dismissed without any costs awarded on the
basis that Section 134 ofthe Condominium Act (the
"Act") requires that an application for a compliance
order must be brought in the Superior Court.
Although the corporation was self-represented in the Small
Claims Court actions, it incurred legal expenses in the amount of
$6,501.95 for advice related to its defence. When the owner did not
pay this amount, the corporation registered a certificate of lien
against the owner's unit. The owner took the position that the
corporation could not recover these legal costs by registering a
lien as there were no costs awarded by the court in the Small
Claims Court actions, and there was no provision in the Act or the
declaration that permitted this.
The court agreed with the unit owner. The judge said that the
language of the declaration was to be strictly construed in a
manner consistent with the plain and ordinary meaning of the words.
In this case, the declaration clearly stated that legal expenses
incurred by the corporation in taking an action against an owner
could be recovered in the same manner as common expenses. There was
nothing in the declaration that permitted the condo corporation to
claim indemnification for its legal costs in defending an
Section 134(5) of the Act provides that if a corporation obtains
an order awarding damages or costs against an owner, then the
damages and costs and any additional costs in obtaining the order
can be recovered as common expenses. Where no award of costs is
made by the Superior Court, this section is not applicable.
Not only was the lien declared invalid, but the corporation was
ordered to pay costs related to this action declaring the lien
invalid. Although the unit owner claimed costs of $9,361 the court
only awarded costs of $5,000 plus disbursements and HST, as the
owner's Small Claims Court actions were all dismissed. However,
these unsuccessful court applications by one owner ultimately ended
up costing all of the unit owners over $20,000 in legal fees!
If a corporation hopes to recover legal costs by way of a lien,
the corporation should be carefully reviewing its declaration with
its legal counsel to determine in what circumstances it is
permitted to do this.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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