Strata Alert: Condo Corporation awarded over $800,000 in legal costs in the recovery of $300,000 in owner arrears.
Amanda Magee, Associate Lawyer
Phone: 604-685-5438
Email: amm@lmlaw.ca
The Ontario Court of Appeal recently upheld a trial judge’s decision to award nearly $300,000 in common expense arrears that were owed to an Ontario condominium corporation, together with over $800,000 in associated legal costs. Yes, you read that right.
The defendants were the owners of 23 of 33 condominiums in a commercial condo complex in Ontario (the “Condo”). The Condo commenced an action in 2009 to obtain $289,070 in unpaid condo fees and special assessments, as well as an order for vacant possession of their 23 units. The main defendant C.A. Burdet, attempted to thwart the Condo’s action by transferring all but one of the units to an entity named “Enterprise Ted Rubac Enterprises Inc.” on the eve of trial. “Ted Rubac”, the Judge noted in the reasons, is C. A. Burdet spelled backward. The Court added “Ted Rubac” as a defendant to the action.
The defendants argued at trial that even though s. 85(1) of Ontario’s Condominium Act gives a condo corporation a lien for unpaid common expenses, that lien expires after three months if the corporation fails to register the lien, and that the Ontario legislation doesn’t give the corporation any power to sue for those common expenses.
The Ontario Court of Appeal pointed to section 136 of the Condominium Act which states “[u]nless this Act specifically provides the contrary, nothing in this Act restricts the remedies otherwise available to a person for the failure of another to perform a duty imposed by the Act”. The Court interpreted this to mean that the Condo still had the option to sue the owners to recover their full arrears since it could not have been the intention of the legislators that a condo corporation would be powerless to recover arrears of an owner simply for failing to register a lien. Accordingly, the Court upheld the trial judge’s award of almost $300,000 in arrears.
The Court of Appeal also upheld the same trial judge’s decision to award the Condo costs on a full indemnity basis for over $800,000 that it had incurred in legal fees and disbursements. The Condominium Act provides that a lien may include “all reasonable legal costs and reasonable expenses incurred by the corporation in connection with the collection or attempted collection of arrears”. The purpose of this provision is to shift the financial burden of obtaining compliance orders onto the guilty party rather than on the faultless remaining owners.
In this case, the trial judge had considered proportionality and whether the fees claimed were excessive compared to the total recovery amount at trial. The judge took into account various factors, including that the defendants had failed to pay their common expenses over an extended period of time, had ignored determinations made at a summary trial, and had appealed or sought to appeal all substantive determinations against them. The Court decided that in light of these and other factors, the defendants could not successfully argue that the legal fees incurred were not reasonable, given the considerable amount of time expended.
Here in British Columbia, section 118 of the Strata Property Act similarly provides that reasonable legal costs and disbursements may be added to the amount owing by an owner to a strata corporation under a certificate of lien. However, the B.C. Supreme Court had held that the phrase “reasonable legal costs” means the costs of the proceeding under the Supreme Court Rules tariff system, rather than the actual legal expenses of the strata corporation (Canada Trustco Mortgage Co v. Gies, 2001 BCSC 1016, Strata Plan KAS 2428 v. Batting, 2015 BCSC 2125).
Alternatively, if the strata corporation has a bylaw which allows it to collect solicitor-client costs in actions taken to recover common expenses, then the strata corporation may be permitted to sue the owner for the balance of its legal costs, although it may have to do so in a separate proceeding (Felice Rosenbaum Salson Developments Ltd. v. Strata Plan N9, [1998] B.C.J. No. 3000 (QL) (S.C.), Blackmore v. Strata Plan VR 274, 2004 BCSC 1121). It is therefore crucial for a strata corporation to have such an indemnity bylaw in place.
Strata corporations should always be careful to seek legal advice when drafting an indemnity bylaw, and should periodically have their bylaws reviewed to ensure that any indemnity bylaw in place is up to date and enforceable.
WHAT WE DO: Lesperance Mendes advises and represents strata corporations to collect unpaid strata fees and special levies on a flat fee basis. If you would like to learn more about our strata fee collection program, please contact Paul G Mendes, partner at 604-685-4894 or by email at pgm@lmlaw.ca
Lesperance Mendes Lawyers
900 Howe St #550, Vancouver, BC V6Z 2M4
(604) 685-3567