On December 2, 2014, the Ontario Court of Appeal issued its
decision in the case of Orr v. Metropolitan Toronto
Condominium Corporation No. 1056.
The most important takeaway from this case for condominium
managers and board members is the importance of having an accurate
status certificate with few (if any) deviations from the form
prescribed under the Condominium Act, 1998 (the
"Act"). If there are special
circumstances that necessitate the insertion of a special
provision, always verify the accuracy of the statement and have the
provision reviewed by the corporation's solicitor. After this
recent decision, the risks of not doing so are greater than
The Purchaser, Orr, entered into an agreement to buy what she
believed to be a three storey town house unit. Prior to closing her
purchase transaction, she requested a status certificate from the
condominium corporation's property manager. The status
certificate prepared by the property manager stated that
"there are no continuing violations of the declaration,
by-laws, and/or rules of the Corporation". Although that
statement was inserted by the property manager, it is not required
by the Act. After the completion of the purchase, and while
renovating the third floor, it was discovered that the statement
was inaccurate because the vendor of unit 113 had illegally built
into the common element attic space above the unit to create a
third storey. The condominium corporation's Declaration and
Description defined the townhouse as a two storey unit like all the
others in the development.
Justice Lauwers, writing for a unanimous Court of Appeal, held
that the condominium corporation owed the Purchaser a duty of care
in the preparation of the status certificate. Although the
employees of the management company prepared the status
certificate, they did so as agents for the condominium corporation
which was therefore ultimately responsible for the contents of the
status certificate. Justice Lauwers further held that if a
condominium corporation is going to assert that "there are
no continuing violations of the declaration, by-laws, and/or rules
of the Corporation" in its status certificate, it must
make an effort to verify the accuracy of the assertion.
MTCC 1056's management agreement contained a provision that
the property manager shall inspect the "common elements
appurtenant to the unit" before completing a status
certificate. The Court held that the property manager confined his
inquiries to the condominium documentation and the information in
the townhouse's unit file, and that if he had inspected the
"common elements appurtenant to the unit" he
would have discovered that the third floor of townhouse 113 was
illegally built into the common elements.
The court held that the management company did not owe the
Purchaser an independent duty of care because it was acting as
agent for the condominium corporation in preparing the status
certificate. However, the management agreement, as in most
management agreements, contained an indemnification provision which
made the property manager "responsible for the accuracy
and completeness of all information contained in the Estoppel
Certificate". Accordingly, the court held that the
management company must pay the condominium corporation for all
financial liability arising from the negligent misstatement
contained in the status certificate issued to the Purchaser.
The management agreement further provided that the manager was
not responsible to the condominium corporation "for any
information within the knowledge of the Board but not communicated
to the manager and which should be included in the estoppel
certificate." The management company argued that some of
the condominium corporation's board members had knowledge of
the illegal alterations carried out by the prior owner of unit 113
and such knowledge should be attributed to MTCC 1056. On this
issue, Justice Lauwers was reluctant to impute the knowledge of a
condominium director to its board as a general matter, as doing so
would have the potential to vastly increase the liability of
condominium corporations and would make risk management on their
part all but impossible.
The damages and legal fees in Orr v. MTCC
1056 will likely be in the millions of dollars, all
because a property manager elected to insert an unnecessary 15-word
statement in the status certificate. We encourage boards of
directors and managers to review their respective status
certificates and management agreements. If the status certificate
of your corporation contains provisions that go beyond those found
in the standard form set out in Ontario Regulation
48/01 (i.e. Form 13), always verify the accuracy of such
provisions and have them reviewed by the corporation's
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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