There has been considerable debate in the condo industry since the release of the Superior Court of Justice's decision in Amlani v. York Condominium Corporation No. 473 ("Amlani"). While some have taken the position that corporations now cannot recover the costs of obtaining an owner's compliance unless and until a court order has been obtained, we remain of the view that corporations can continue to recover compliance costs in certain circumstances.
The Facts
Amlani centred around a unit owner who smoked in their unit. When they purchased the unit, the owner took care to ensure that there were no smoking restrictions in the building. After living in the unit for around two years, there were complaints about smoke emanation; and, in response, the corporation took steps to seal openings in the unit. Two more years passed until the corporation received further complaints.
In response to those complaints, the unit owner confined his smoking to a sunroom in the unit and installed air filters. When the corporation's legal counsel wrote to the owner to address ongoing complaints, the unit owner requested a dialogue to address the issue and ultimately moved out of the unit until a resolution was reached.
The corporation continued to take legal action, even after the owner had moved out. These steps included a final demand to stop smoking in the unit (after the owner no longer lived there) and scheduling a mediation with no input from the unit owner, contrary to its own by-laws. Eventually, the corporation registered a lien for all of the legal fees that it had incurred, including for correspondence after the time that the owner moved out and the costs of the mediation.
Following the registration of a lien against the unit, the owner commenced an application against the corporation. The unit owner was successful in their application. One of the main reasons for this success was the Court's rejection of the corporation's argument that the indemnification provision in its declaration permitted charging legal costs back to the owner.
Indemnification Provision
The Court placed particular emphasis on qualifying language in the indemnification provision that owners are responsible for indemnifying the corporation for costs incurred "to or with respect to the common elements and/or all other units." The fact that a significant portion of the legal fees charged back were incurred after the unit owner moved out, and there was accordingly no ongoing act, also appears to have played an important role in the Court's reasoning.
Amlani should be viewed in light its own particular facts, the wording of the corporation's indemnification provision and the behaviour of the corporation (which the Court found to constitute oppression). The Court ultimately found that "the Corporation's interpretation of the indemnity is unreasonable," not that indemnification provisions in declarations could never provide a basis to charge back legal costs without first obtaining a court order.
This view is strongly supported by previous decisions that have affirmed the ability of corporations to charge back compliance costs in circumstances where the corporation's indemnification provision is appropriately worded. As others have already pointed out, the Court's analysis of the particular indemnification provision relied on by the corporation would have been unnecessary if the Court had rejected the ability of a corporation to charge back legal costs without a Court order.
Properly worded indemnification provisions, for instance ones that contain specific references to the recovery of legal fees as common expenses that are often found in declarations drafted within the last twenty years or so, should continue to provide a basis to recover compliance costs from an owner without first obtaining a court order. The Court's obvious disapproval of the corporation's manner of handling this matter should also serve as a warning that condo corporations are obligated to deal with all owners in good faith, even when there is an actual basis for taking enforcement steps.
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.
