We often think that democracy is the ultimate decision-making process in a Condominium Corporation. Well, it isn't so simple. A recent decision of the Ontario Superior Court forced a Condominium Corporation to amend its Declaration to protect the interests of unit owners who claimed oppression.
The first challenge to the general tenet that majority rules in condominium governance is that various decisions require various levels of support from the owners:
- Quorum for an AGM is fixed at 25% (unless a bylaw provides differently).
- A majority of the owners present at an AGM (12% of all owners) can therefore decide on many issues.
- Fifteen percent of owners are sufficient to call a special owners meeting.
- Fifty percent are required to adopt a bylaw.
- Sixty-six and 2/3 percent are required to approve a substantial change to common elements.
- Finally, an amendment to the Declaration requires the support of 80% (or 90% in certain cases).
This article will focus on the specific issue of amending a condominium Declaration and how a condominium Corporation must also consider whether an amendment to the Declaration (even if supported by 80% of the owners) risk oppressing an owner. Failure to do so may result in a court setting aside the amendment (or making an amendment of its own) despite the fact that the Corporation had the required support of 80% of its owners. A single oppressed owner may therefore be sufficient to force an amendment to the Declaration.
The factual background
This is the case of condominium owners who purchased a unit, a storage locker and a parking space from the developer. At the time of purchase, however, there were no available indoor parking space and no adequate storage locker in the building. The developer sold them instead a parking space and locker in the sister condominium Corporation (OCSCC 706), which was being built immediately beside the first one. As is often the case, these two condominium Corporations were concurrently developed, built and registered as two separate Corporations. At the time of purchase, there were no restrictions preventing non-residents from owning and using a parking and locker at OCSCC 706.
Some five years later, following some security breaches and acts of vandalism near the garage, the Corporation and its owners decided to amend their Declaration to specifically prevent the use and ownership of parking and lockers by non-residents. In essence, these amendments prevented these neighbouring owners from using or owning their parking and locker. This amendment also had the effect of preventing them from being able to eventually sell their unit with parking and storage. Their only option was to try to sell their parking and storage to OCSCC 706's residents or to the Corporation.
The Applicants to this court case were the only non-residents owners and therefore the only ones affected by this amendment. The Corporation opted not to enforce this prohibition against the Applicants but only for as long as they owned their residential unit in the neighbouring complex. They were still prevented from selling their parking together with their unit to a non-resident.
The Applicants brought a court application
When the Applicants decided to sell their unit, they found themselves unable to sell it with parking and locker due to the amended Declaration. They brought an Application under section 135 of the Condominium Act, claiming that the amendment to the Declaration was oppressive and unfairly prejudicial to them. They sought an Order directing the Corporation to amend its Declaration to exempt them and any subsequent owners of their unit from the prohibition against ownership and occupation of the parking and locker by non-residents.
When the matter first came before the Court, the presiding Judge directed the Applicants to attempt to sell their unit to ascertain the relative value of the unit. The Applicants put their unit on the market for nearly two years with two separate listings: one with their parking, and one without parking. There was virtually no interest in the unit marketed without parking. Conversely, there was significant interest in the unit with parking but all offers were conditional on the Applicants obtaining a further amendment to the Declaration to allow non-residents to own and use the parking.
When the matter returned to court in 2014, the Applicants argued that their inability to sell their unit without parking and storage showed that the effect of the Declaration, as it stood, was oppressive or unfairly prejudicial to their interests as owners. They asked the Judge to amend the Declaration under section 135 of the Act.
What is oppressive in the context of the Condominium Act?
Section 135 of the Act grants judges the authority to make "any order" when faced with conduct which "is or threatens to be oppressive or unfairly prejudicial to the applicant or [when it] unfairly disregards the interests of the applicant". Basically, in the presence of oppression, the Condominium Act grants a judge with very wide remedial powers to rectify the situation. The question in this case was whether this section granted the Courts with the authority to amend the Declaration under section 135 of the Act.
The Court reiterated that a conduct is oppressive if it is "burdensome, harsh and wrong" or if it "visibly departs from the standard of fair dealing" or if it is an "abuse of power". The purpose of this section is to protect the parties' reasonable expectations and to protect them from unfair treatment.
The Corporation argued that it had not acted with malice or with the intent to harm. It also argued that the Applicants were not being treated differently than the other owners since the prohibition against non-residents using or owning parking applied to all owners of OCSCC 706. Finally, the Corporation argued that, if the amendment was found to be oppressive, the appropriate remedy was a monetary award limited to the loss value of the parking and locker.
The Court did not agree with the Corporation. It concluded that the Applicants' unit was virtually unsellable without parking. The Applicants had purchased their unit in good faith with the expectation that they would be able to sell it with parking and locker and the evidence confirmed that they would not have purchased their unit otherwise.
The Court concluded that this restriction on use and ownership had the effect of undermining the reasonable expectations of the Applicants and of unfairly disregarding their interests. As such, it was oppressive.
The Court ordered the Corporation to amend its Declaration as requested by the Applicants, based in part on the fact that the amendments requested by the Applicants would not detrimentally affect the interests of any other unit owner in OCSCC 706.
This case confirms that courts have, as part of their remedial powers under section 135 of the Act, the authority to amend the Condominium's Declaration even when it contains no error or inconsistencies. Indeed, under section 109 of the Act, the Court's jurisdiction to amend a Declaration is reserved to cases where it is necessary or desirable to correct an error or an inconsistency in the Declaration.
This case also confirms that, before a Corporation is able to amend its Declaration, it not only requires the support of 80% of the owners (90% is certain cases) but it must also ensure that individual owners are not oppressed or unfairly affected by the proposed changes. This is not to say that a single owner can oppose an amendment without valid reasons. Oppression still has to meet the test of whether the Corporation's actions unfairly disregard the interests of a minority of unit owner(s). What really concerned Justice Warkentin in this case was that the Applicants' property interests (for which they had paid a lot of money) were being fundamentally affected despite the fact that there was an easy solution to this problem that did not harm other owners.
Gowlings' lawyer, D. Lynne Watt, acted for the successful Applicants in this case.
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.