Sunday, July 24, 2011

Condominium Estoppel Certificates

I am often asked by property managers what information should be provided by a condominium corporation when they are asked to provide what is commonly referred to as an "estoppel certificate"?  Curiously, this term is not defined in Alberta's Condominium Property Act (the “CPA”).
The nature of an estoppel certificate was discussed by the Honourable Mr. Justice K.D. Yamauchi in Lightner v. Owners: Condominium Plan No. 772 3097, 2009 ABQB 3.  At paragraph 33 he stated:

[33] The term “estoppel certificate” is not used in the Act. However, a person may request a
condominium corporation to provide a statement setting out certain information concerning the
financial and general status of the condominium corporation, including whether an owner is up
to date in its contributions. The information prevents the condominium corporation from
claiming a different set of facts and is “estopped” from so doing. It is not an agreement, as it has
none of the trappings of an agreement, such as an offer, acceptance and the exchange of
consideration. That said, a person could rely to their detriment on the contents of the statement
and could suffer damages as a result.

Justice Yamauchi did not distinguish between the two sources of estoppel certificates.  The CPA contemplates two basis upon which information (a certificate) can be requested.  Section 39(6) of the CPA provides that:

39(6) A corporation shall, on the application of an owner, purchaser or mortgagee or the solicitor of an owner, purchaser or mortgagee, or a person authorized in writing by any of those persons, certify

                                 (a)    the amount of any contribution determined as the contribution of the owner,

                                 (b)    the manner in which the contribution is payable,

                                 (c)    the extent to which the contribution has been paid by the owner, and

                                 (d)    the interest owing, if any, on any unpaid balance of a contribution

and, in favour of a person dealing with that owner, the certificate is conclusive proof of the matters certified in it.

A request for more detailed information may be requested pursuant to section 44 which provides that:

44   On the written request of an owner, purchaser or mortgagee of a unit the corporation shall, within 10 days after receiving that request, provide to the person making the request one or more of the following as requested by that person:

                                 (a)    a statement setting out the amount of any contributions due and payable in respect of the unit;

                                 (b)    the particulars of

                                           (i)    any action commenced against the corporation and served on the corporation,

                                          (ii)    any unsatisfied judgment or order for which the corporation is liable, and

                                         (iii)    any written demand made on the corporation for an amount in excess of $5000 that, if not met, may result in an action being brought against the corporation;

                                 (c)    the particulars of or a copy of any subsisting management agreement;

                                 (d)    the particulars of or a copy of any subsisting recreational agreement;

                                 (e)    the particulars of any post tensioned cables that are located anywhere on or within the property that is included in the condominium plan;

                                  (f)    a copy of the budget of the corporation;

                                 (g)    a copy of the most recent financial statements, if any, of the corporation;

                                 (h)    a copy of the bylaws of the corporation;

                                  (i)    a copy of any minutes of proceedings of a general meeting of the corporation or of the board;

                                  (j)    a statement setting out the amount of the capital replacement reserve fund;

                                 (k)    a statement setting out the amount of the monthly contributions and the basis on which that amount was determined;

                                  (l)    a statement setting out the unit factors and the criteria used to determine unit factor allocation;

                                (m)    a statement setting out any structural deficiencies that the corporation has knowledge of at the time of the request in any of the buildings that are included in the condominium plan;

                                 (n)    a copy of any lease agreement or exclusive use agreement with respect to the possession of a portion of the common property, including a parking stall or storage unit.

In addition to sections 39(6) and 44 of the CPA, section 48 of the CPA provides that upon written request of an owner, purchaser or mortgagee of a unit a condominium corporation shall provide a copy of the insurance policy to the person making the request within 30 days from the day of receiving that request, or provide a copy of the insurance certificate to the person making the request within 10 days from the day of receiving the request.

A condominium corporation is not obligated to provide the information indicated in section 44 unless a written request is made specifically seeking some or all of the information indicated in section 44 of the CPA.  Moreover, pursuant to section 74 of the CPA if copies of documents are provided that a reasonable fee may be charged to compensate the corporation for the expenses it incurs in producing and providing a document required under the CPA.   Section 74 would apply to much of the information contemplated in section 44; ie. management contracts, reserve fund studies, minutes of AGM's and Board Meetings, etc.

The convention which has evolved in Calgary when a condominium corporation receives a request for an "estoppel certificate" is that a property manager will prepare, and often sign, a certificate which contains much of the information listed in section 44 of the CPA.  It should go without saying that whomever signs the certificate must have personal knowledge of the matters contained within the certificate.  Though this additional information is likely helpful, it is beyond the scope of section 39(6) and it is not necessary to be provided unless it has been specifically requested in writing.

This then returns us to the original question: what information should be provided by a condominium corporation when they are asked to provide what is commonly referred to as an "estoppel certificate"The answer  depends on what has been requested.  Most parties, including lawyers, requesting an estoppel certificate do not specify that they are seeking to be provided with the information listed in section 44 of the CPA.  Following from this a condominium corporation may provide a certificate containing  only that information listed in section 39(6) if the certificate clearly states that the certificate is being provided pursuant to section 39(6) of the CPA.  As such a certificate which complies with section 39(6) can be a proper answer to a request for an "estoppel certificate".  However, this would not be a proper answer to the request if the person requesting a certificate is clear to specify that they require some or all of the information listed in section 44 of the CPA.  

If a more robust estoppel certificate is being provided, condominium corporations and their property managers would be wise to specify that the information is being provided pursuant to section 44 of the CPA and be sure to not provide more information than that contemplated in section 44 of the CPA.

Friday, July 8, 2011

Winner of iPad Draw

The winner of the iPad is Vicki Matthews of Simco Management (Calgary) Inc.

I thank everybody who entered for their interest and encourage you to continue to read the Alberta Condominium Reporter blog in future.

Tuesday, July 5, 2011

Board Decisions and Judicial Deference

When might a Court exercise its discretion in place of the discretion exercised by a Board of Directors?  Amongst other sections in the Condominium Property Act (Alberta) [the “CPA”], section 67 of the CPA allows the Court of Queen's Bench of Alberta to review decisions of a Board of Directors and grant relief to an aggrieved party.

Boards of Directors are creatures of statute; that is, the CPA allows for the delegation of authority for the operation of a condominium corporation to the Board of Directors (without limitation see section 28, 37, 38, and 39).  The overarching principal is that "Every member of a board shall exercise the powers and discharge the duties of the office of member of the board honestly and in good faith".  This authority is usually amplified by the bylaws of a condominium corporation (see section 32).  In legal terms the CPA and the bylaws are the governing documents which grant authority and limit the conduct of a Board of Directors.  Policy passed by Boards of Directors, though enforceable, does not carry the same weight as a bylaw and invites scrutiny of the Court and application of section 67; see Maverick Equities Inc. v. Owners: Condominium Plan 942 2336, 2008 ABCA 221.

Section 67 of the CPA has been interpreted by the Court of Queen’s Bench of Alberta to be analogous to section 242 of the Business Corporations Act (Alberta).  That is, “improper conduct” as indicated in section 67 of the CPA is analogous to conduct which in a corporate context is “oppressive or unfairly prejudicial”; see 934859 Alberta Inc. v. Condominium Corporation No. 0312180, 2007 ABQB 640.  Thus section 67 of the CPA imposes an obligation on Board of Directors, among other parties, to not act in a manner which is oppressive or unfairly prejudicial to owners of condominium units; that is to not act improperly.

The application of section 67 of the CPA must be balanced against the general rule that the Court should provide considerable deference to decisions made by a Board of Directors. Hence, the application of section 67 of the CPA begs the question as to what types of decisions made by Boards of Directors will attract the scrutiny of the Court? The obvious answer is when a decision of a Board of Directors is improper or otherwise oppressive or unfairly prejudicial to an owner of a condominium unit.  However, this is not a clear answer because the conduct of Boards of Directors is not obviously improper or oppressive or unfairly prejudicial and is usually open for argument.  I declare my conflict in this regard because as a lawyer I benefit from this uncertainty and ambiguity.  Following this paragraph I have made reference to a few cases which illustrate some of the responses of Courts to an application by an aggrieved owner and provide guidance to the limits of Board action (the provisions in provinces other than Alberta are not identical but similar enough to be applicable).
  • Master L.A. Smart in the case Condominium Plan No. 772 1806 v. Gobeil, 2011 ABQB318 applied section 67 of the CPA to impose an obligation on a Board of Directors to reconsider a decision which directed on owner remove a shed which had been built.
  • In Chan v. Owners, Strata Plan VR-151, 2010 BCSC 1725 the Honourable Mr. Justice N. Smith of the British Columbia Supreme Court dismissed an application of an owner who sought an order barring the strata corporation from having a tree cut and seeking a declaration that she has been treated unfairly.
  • The Honourable Madam Justice D.L. Shelley in the case Owners Condominium Plan 7722911 v. Marnel, 2008 ABQB 195 ordered an owner to remove the bronze-tinted film which the owner had placed on the owner's windows failing which the condominium corporation was authorized to enter the owner’s unit upon seven clear days’ notice for the purpose of effecting the removal of the bronze-tinted film.
  • Sometime the Court is not as sympathetic to condominium Boards.  In The Owners: Condominium Plan No. 8111679 v. Elekes, 2003 ABQB 219 the Honourable Mr. Justice Peter M. Clark refused to find that an owner who had installed a satellite dish had acted improperly.
It behooves Boards of Directors to act with an even hand when exercising their authority.  If the decisions of a Board of Directors comes before a Court to be reviewed Boards of Directors will always be best served if every member of the Board of directors has exercised their power and discharged their duties as a member of the board honestly and in good faith, in accordance with the bylaws, and in the best interests of all of the owners in the condominium.

Sunday, March 27, 2011

Condominium Unit Owners Comprehensive Form Insurance

Owners of condominium units are wise to obtain Condominium Unit Owners Comprehensive Form Insurance.  It is important to distinguish this type of insurance from the insurance which the condominium corporation is obliged to maintain by the Condominium Property Act and by the bylaws of the condominium corporation.  The insurance which condominium corporation's obtain usually do not extend to include the "improvements" made by owners to their individual units nor include any of the personal property of the owner of the individual condominium unit.  Moreover, Condominium Unit Owners Comprehensive Form Insurance can extend to protect owners of units from losses which result from fires.

In this regard I recently met Karen Sandeman of Glenmore Insurance Brokers Ltd.  at a condominium corporation's Annual General Meeting.  Ms. Sandeman is, without limitation, very knowledgeable in the area of condominium owner's insurance.  Ms. Sandeman pointed out that in addition to covering owner's improvements and owner's personal property, among other things, that Condominium Unit Owners Comprehensive Form Insurance should provide coverage if a special assessment is imposed to cover a short fall in condominium corporation insurance as a result of damages due to fire.  That is, if the amount of insurance obtained by the condominium corporation is insufficient to rebuilt the units after a fire then the insurer providing condominium owner's insurance would top up the shortfall which is imposed by a special assessment on the owners in the subject condominium corporation.  If the owners in the recent condominium fires in Calgary had this form of insurance these owner loss would have been reduced if not eliminated.

I would highly recommend that any owner looking to find a comprehensive condominium owner's insurance policy consider contacting Ms. Sandeman or their own insurance agent.  As I indicated above, to be without a comprehensive condominium owner's insurance policy is to risk eventualities which no owner would want to risk.

Morrison Hershfield; Presentation of Michael Ball to CCI-SAC on the Role of the Consultant in a Major Condominium Capital Project

Every once in a while the Canadian Condominium Institute - South Alberta Chapter will host a lunch speaker whose presentation is stellar.  This happened on March 23, 2011 when Michael Ball of Morrison Hershfield presented on the Role of the Consultant in Major Condominium Capital Projects.  Mr. Ball took those in attendance through the story of a very poorly built multi-unit condominium which had a total breakdown of the condominium's building envelope.  This multi-million dollar project exemplified the value in involving a consultant/engineer knowledgeable in the area in which the capital project is being done to avoid the ugliness and cost of capital expenditures being done improperly.  Without limitation, Mr. Ball indicated that an engineers as consultants could provide:
  1. Investigative services with respect to leakage (roof/walls/below grade/windows), premature deterioration of cladding/roofing, structural capacity, warranty claims, and indoor air quality (mold);
  2. Detailed design (technical specifications and drawings, best-practice design);
  3. Construction services (tendering, contract administration, quality assessment and quality control)
  4. Litigation support and expert witness services; and
  5. Non biased third party facilitation between owners and contractors.
Without limitation, Mr. Ball noted that no project should proceed without detailed technical drawings being produced.  On its own insisting that a set of instructions - detailed technical drawings - be provided and followed creates accountability which otherwise may not exist.  Notwithstanding this plethora of support services which an engineer can provide, many condominium corporations make large capital expenditures without any assistance from an engineer/consultant.  Instead condominium corporations, to save money, sometimes rely entirely on the services of a self interested contractor and unfortunately sometimes to their detriment.

In the writer's opinion the most important distinctions between many contractors and engineers are the fact that engineers go through a rigorous education and engineers are professionals who are obliged by their professional organization, APEGGA, to act ethicallyLawyers are similar bound to act ethically.  The Law Society of Alberta has endorsed a Code of Conduct which all lawyers must abide by in their relationships with their clients and with society at large.

Consultants without affiliation with an organization have no ethical obligation imposed upon them and may have insufficient education in the matters subject of the capital improvement.  It is imperative that condominium corporations ascertain this before proceeding with a capital project.  This is the heart of why I described contractors as potentially "self interested".  A less than knowledgeable contractor may recommend an intervention to a condominium corporation without a substantive basis for doing so simply because the contractor wants or needs the work or is ignorant.  Without an affiliation with a professional organization imposing an ethical obligation on the contractor a condominium corporation is relying entirely on the individual conscience of the contractor in respect of whether the intervention is necessary or if necessary if the contractor is sufficiently educated and skilled enough to conduct the capital improvement. 

The lesson demonstrated by Michael Ball to condominium corporations is to not be "penny wise and pound foolish" when it comes to dealing with contractors.  Obtaining the assistance of an engineer or similarly knowledgeable and skilled consultant will dramatically lessen the likelihood that condominium corporations will be taken advantage of by unscrupulous contractors.

Thursday, March 17, 2011

Managing the Risks of Board Responsibility for Deficiencies in the Common Property; Requesting Reports In Contemplation of Litigation

A Board of Directors of a condominium corporation is, with some limited exceptions, responsible for the common property located within their condominium project.  This obligation is created both pursuant to the Condominium  Property Act  (Alberta) and the bylaws of the condominium corporation.  When concerns arise with elements or aspects of the common property it is prudent for the Board of Directors, usually through the assistance of the condominium corporation's property manager, to have a third party contractor assess the elements and aspects of concern.  It is best if the contractor who provides the report is not also offering to do any required work and perhaps quoting on doing the work.  The addition of the prospect of being hired to do the work creates can create a conflict of interest and can lead self interested contractors to exaggerate the conclusions reached simply to scare the Board of Directors into hiring the contractor.

When an independent contractor inspect the elements and aspects of concern in the common property the contractor will usually produce a written report or summary of the results of the assessment.  The third party contractor report will often include recommendations in respect of steps which could or should be taken to deal with the elements of the common property which are of concern.   The provision of the report by the contractor provides knowledge to the Board of Directors.

This transition from a Board of Directors with a concern about the common property to one with knowledge of a deficiency usually brings with it a concomitant obligation.  That is the Board of Directors must follow the recommendations in the report or they run the risk that they have breached their fiduciary duty which they owe to the owners in the condominium corporation.  If the Board of Directors acts on the recommendations and remedies the deficiencies then the obligation of the Board of Directors has been satisfied.  However, what happens if the Board of Directors ignores the recommendations and does nothing to remedy the deficiences?  The recent case of Guenther v. The Owners, Strata Plan KAS431 out of the Supreme Court in British Columbia demonstrates this dynamic well.

The failure to follow the recommendations could give rise to the Board of Directors and individual Directors being sued by owners or mortgagees.  In this legal action the report of the third party contractor is required to be disclosed by the Board of Directors and forms the basis of the evidence which supports the allegation of breach of fiduciary duty.  In this regard the report is usually discussed at a meeting of the Board of Directors and the Minutes of that meeting will usually make reference to the report.  This process of receipt by the Board of Directors and reflection in the Minutes creates a record, available to all owners and mortgagees, that the Board of Directors are now aware of the deficiencies with the common property. 

It is not prudent for a Board of Directors to put themselves in this situation.  In legal actions the obligation to disclose documents is limited if a document is protected by privilege.  For those of you interested in exploring privilege beyond the scope of this blog entry you may wish to review the recent report prepared by Adam Dodek B.A., J.D., LL.M., of the University of Ottawa for the Canadian Bar Association.  One of the types of privilege which would be helpful to a Board of Directors is to retain the third party contractor to assess the elements and aspects of the common property in contemplation of litigation.  This form of privilege is associated with the general proposition that consultation by a client with the client's lawyer is protected communication.  To come within this type of privilege the Board of Directors should consult with a lawyer about the potential legal issues related to the elements and aspects of the common property of concern.  Following from this the Board of Directors should instruct their lawyer to retain the third party contractor on behalf of the Board of Directors.  The third party contractor then delivers the report to the lawyer.  The lawyer in turn provides the report to the Board of Directors.  When the report is discussed at the meeting of the Board of Directors this context is clearly stated in the Minutes and the Board would be wise to go in camera (that is off the record) to discuss the report.  This minimizes the reference to the report in the Minutes and makes it clear that the Board of Directors will be treating this report as privileged.

The result of this process and treatment is that the Board of Directors can argue that the report need not be disclosed if litigation is commenced from a failure of the Board to remedy the deficiencies. Moreover, the protection of the document allows the Board of Directors to respond to the recommendations in a more orderly manner rather than becoming panicked by strong recommendations of the third party contractor or even worse by a self interested contractor.

In situations where there is a possibility that a Board of Directors will not follow or not follow the recommendations provided by an independent contractor in a timely manner, Directors and Boards of Directors would be wise to consider retaining a lawyer to do their best to cloak the production of the contractor's report under the privilege of the report being made in contemplation of litigation.

Saturday, March 5, 2011

Hoarders, Disorderers and the Public Health Act (Alberta) and the Role of Alberta Health Services

I am always pleased when I acquire greater understanding of areas of the law which have impact on condominium corporations.   Over the last few months I have had the opportunity to review the Public Health Act  (Alberta) and learn how this act has been applied by Alberta Health Services.  The comments which follow are a summary of legislation and process followed by Alberta Health Services when dealing with a condominium unit which has not been well maintained and may have become dilapidated by a hoarder or disorderer.

The Nuisance and General Sanitation Regulation passed pursuant to the Public Health Act  states in section 2, among other things, that "no person shall create, commit or maintain a nuisance" and that a "person is deemed to have created, committed or maintained a nuisance" if:
  1. any premises that is in a condition;
  2. a sink, privy (I think this means bathroom), urinal, or drain in a condition; or
  3. any accumulation, a deposit of offensive matter, waste or manure wherever situated;
"that is or might become injurious or dangerous to the public health or that might hinder in any manner the prevention or suppression of disease".

Pursuant to section 60 of the Public Health Act, if Alberta Health Services is advised of a potential nuisance and "an executive officer believes on reasonable and probable grounds that a nuisance exists in or on a private place or that the private place or the owner of it is in contravention of (the Public Health Act) or the regulations, the executive officer may, with the consent of the owner or pursuant to an order", among other things, "enter in or on the private place at a reasonable hour and inspect it".

The Public Health Act reference to an "executive officer" translates into a senior employee so designated by Alberta Health Services.  If after conducting an inspection the executive officer forms the opinion that there is "reasonable and probable grounds to believe that a nuisance exists" then the "executive officer may issue a written order in accordance with this section".  An executive officer's order is very powerful and pursuant to section 62 can include, without limitation:
  1. requiring the vacating of the place or any part of it; 
  2. declaring the place or any part of it to be unfit for human habitation; 
  3. requiring the closure of the place or any part of it;
  4. requiring the doing of work specified in the order in, on or about the place; and
  5. requiring the removal from the place or the vicinity of the place of anything that the order states causes a nuisance.
These provisions in the order can be summarized as leading to a condemnation of the condominium unit and identifies the work that needs to be done by the owner to bring the condominium unit back into reasonable condition.  Further power in the order comes from the threat in section 63 of the Public Health Act.  This section provides that if the owner of the condominium unit subject of the executive officer's order fails to do the work "the executive officer or a person appointed by the executive officer may, together with any persons that are necessary, enter the public place or private place and carry out the order".   The Public Health Act also provides that the expenses incurred in doing the work, if not paid within 60 days after a demand for payment, may advise the municipality in which the condominium unit is located within and the expenses incurred shall be added to the tax roll as an additional tax against the condominium unit and "forms a lien on the land in favour of the municipality".  This means that the municipality would have a first charge against the condominium unit in priority to all other claims including the condominium corporation and any lenders.

Based on this legislation one would think that once Alberta Health Services inspects a hoarded or disordered condominium unit and issues an executive officer's order that condominium corporations could expect that if the owner does not comply with the executive officer's order that Alberta Health Services will then do the required work.  Curiously what I have recently been advised is that this is not the preferred route of Alberta Health Services.  Instead the preference of Alberta Health Services is that the subject condominium unit is secured pursuant to the executive officer's order and the owner is denied access to the subject condominium until the work ordered to be done has been done by the owner.  Notwithstanding this powerful remedy, Alberta Health Services has advised that it would rather not have to do the work.

This creates a situation where the remedy of the condominium corporation may, because of deficiencies in the condominium corporation's bylaws, be less powerful than that of Alberta Health Services.  This raises the question of whether the involvement of Alberta Health Services outweighs the potential detriment of the issuance of an executive officer's order.  In this regard it is important to understand that executive officer's orders which condemn properties are listed, amongst other orders, on Alberta Health Services website and are accessible to all persons.

A failure by Alberta Health Services to do the required work if the owner will not or does not creates a situation where responsibility for dealing with the dilapidated condominium unit shifts to the condominium corporation.  This in turn will lead to a review of the bylaws by the condominium corporation to determine the remedies available to the condominium corporation.  Ideally the bylaws provide that the condominium corporation may do the work subject of the executive officer's order (this is usually after a demand to the owner has been made) and that the amounts of money expended in doing the work shall be added to the condominium contributions payable by the owner of the dilapidated condominium unit.  Without this provision in the bylaws a condominium corporation may be left with its expenses becoming an unsecured debt without priority over other instruments registered against the title to the dilapidated condominium unit.

Sunday, February 27, 2011

Reimbursement by an owner of a condominium unit of the payment of an insurance deductible by the condominium corporation

It is settled law that condominium corporations in Alberta are not permitted to sue an owner for loss or damages caused by an owner if such loss or damages are required to be covered by insurance placed by the condominium corporation.  However, the law is not as clear in respect of whether a condominium corporation can seek reimbursement from an owner of a deductible which has been paid by a condominium corporation pursuant to an insurance policy in respect of an insurance claim made in respect of the owner.  It is suggested that in light of recent decisions of the Alberta Courts that the ability to claim reimbursement is dependent on the manner in which such obligation is stated in the bylaws of the condominium corporation.

Section 47 of the Condominium Property Act (Alberta) requires, among other things, that condominium corporations “place and maintain insurance on the [condominium] units, other than improvements made to the units by the owners, and the common property against loss resulting from destruction or damage caused by any peril prescribed by or otherwise required by the regulations to be insured against”.  Section 61(1) of the Condominium Property Regulation (Alberta) lists the perils which must be insured against and references “any other perils as required in the bylaws”.

The Honourable Mr. Justice Jean Côté of the Court of Appeal of Alberta in Condominium Corporation No. 9813678 v. Statesman Corporation, 2007 ABCA 216  allowed an appeal by the appellant and developer, Statesman Corporation, and concluded that the lawsuit of Condominium Corporation No. 9813678 against Statesman Corporation must fail because there is generally no right to sue a party who is also an insured under a policy of insurance.  Statesman Corporation was an owner of units in the condominium and an insured under the condominium corporation's insurance policy.  Justice Cote commented generally about the underlying purpose of condominium insurance at paragraph 35:

 “Those concerned in a condominium development do not want to have to worry about such unpredictable and complex topics. They want to exclude fault, risk, causation fights, tedious technical investigations, and expense. Statute and bylaws direct the condominium corporation to take out one policy for all, to avoid delay, expense and uncertainty. They replace lengthy litigation with an immediate no-fault purse for all.”

Justice Cote went on at paragraph 72 to state this limiting principal and clearly state that the bylaws are a contract amongst the owners and the condominium corporation:

 “The bylaws of this corporation provide that all insurance must have a waiver of subrogation against the owners and against the corporation’s manager. And they say that policies must name as insureds all owners from time to time. Those bylaws are a contract among the corporation and all its members.”

The Statesman case did not deal directly with the issue of reimbursement by an owner of a condominium unit of the payment of an insurance deductible by the condominium corporation.  However, the case clearly states the principal that all condominium owners are bound by the bylaws and that this is a contractual obligation.  Hence if the bylaws of a condominium corporation clearly state that an owner of a condominium unit should be obligated to reimburse a condominium corporation for the payment of the insurance deductible then it follows that an owner is contractually obligated to reimburse the condominium corporation.

Notwithstanding the compelling logic of this proposition, Honourable Mr. Justice Donald Lee of the Court of Queen's Bench of Alberta in Shivji v. Owners: Condominium Plan No. 0122336, 2007 ABQB 572 denied the claim of a condominium corporation for $23,467.35 for damages caused by an owner's tenant setting the thermostat to zero which caused the pipes to freeze and burst.  The deductible of the condominium corporation was $25,000.00.   Justice Lee considered the Statesman case, among other cases, in his reasons but does not address directly the issue of whether the insurance deductible should be reimbursed by an owner if the bylaws specifically state that it should.   

It is suggested that, so long as the bylaws of a condominium corporation clearly specify that it is the obligation of an owner to reimburse the insurance deductible paid by the condominium corporation, it remains open for condominium corporations to argue that by virtue of the bylaws, which the owner is contractually bound, the owner is liable to reimburse the insurance deductible.   The insurance deductible is a portion of the loss which is not paid for pursuant to the insurance policy.  The owner is through the condominium corporation the insured under the insurance policy and would normally as a home owner be required to pay the insurance deductible.  The insertion of the condominium corporation between the insurance company and the owner should not change this.  Where a deductible is required to be paid the owner must be liable for this financial connection to the loss which is being claimed pursuant to the condominium's insurance.  Otherwise this implicitly allows an owner to pass on to the balance of the owners all but the owner's proportionate unit entitlement portion of the insurance deductible.  It is suggested that this result should be avoided if the bylaws are clear. 

Some cases allow for recovery and others have not.  Of note other Provinces in Canada have allowed for the recovery of the insurance deductible if the language used in the bylaws is reflective of the owner being "responsible" for the insurance deductible regardless of fault or negligence.  Following from this it behooves condominium corporations to review their bylaws to be sure that their bylaws are clear in respect of an owner's obligation to reimburse the payment of an insurance deductible made by a condominium corporation. 

Monday, February 7, 2011

Evicting an Owner of a Condominium Unit for Improper Conduct

In 2010 both the Alberta Court of Queen's Bench and the Alberta Court of Appeal provided guidance to condominium corporations in respect of when the remedy of eviction of an owner would be available.  This blog will provide the judicial history of the remedy of eviction of an owner and comment on these recent decisions.  It is important to distinguish eviction of a tenant which is expressly provided for in section 54-57 of the Condominium Property Act (Alberta) ["CPA"] from eviction of an owner. 

Eviction of an owner is not expressly provided for in the act and Courts have accepted that eviction of an owner is a remedy which can be granted when an owner's conduct is found to have been improper ("improper conduct") in accordance with section 67 of the CPA.  The remedy of eviction of an owner was first granted in 2003 in the OCP #0221347 v. N.Y.   This case was relied on by lawyers in Calgary since 2003.  Though not expressly indicated in N.Y. it was generally  understood that eviction of an owner was a serious remedy and the Court would only grant an eviction Order in the most  serious of circumstances.

In 2010 the Alberta Court of Appeal in CC #8110264 v. Farkas  concluded that the Honourable Mr. Justice Burrows of the Alberta Court of Queen's Bench erred in not granting the condominium corporation some relief and in stating this expressly recognized the availability of the remedy of eviction of an owner:

There having been breaches of the bylaw, the condominium corporation is entitled to a remedy, although the record does not justify the remedy of eviction. The appeal should accordingly be allowed, and an order granted that the respondent cease making any noise that unreasonably interferes with the use and enjoyment of other units. In the event that there is any breach of that order, the condominium corporation may apply on notice to the Court of Queen’s Bench to determine what further procedures or remedies are appropriate.

In a 2010 decision of the Honourable Madam Justice Veit of the Alberta Court of Queen's Bench in OCP #8222909 v. 837023 Alberta Ltd., 346804 Alberta Ltd., and 1139897 Alberta Ltd. the Court did a thorough review of the case law relating to the remedy and provided guidance as to when the remedy will be available.  Justice Veit metaphorically entitled one section of her written decision: “How should breaches by condominium owners be treated? Is a condo owner more like a bee in a hive or a queen in a castle?”  In this section Justice Veit reviewed Canadian and U.S. case law and articulates a general caution in applying U.S. legal principles to Canadian condominium law.  Justice Veit then went on in a further section entitled "What is the appropriate sanction for the breaches?" to clearly identify what is now the most specific statement of the law as to when the remedy of eviction will be available to a condominium corporation against an owner.  Justice Veit stated that the remedy of eviction is a serious remedy and should only be granted as part of an incremental approach to improper conduct:

As indicated above, I am of the view that the Condominium Property Act proposes an incremental approach to improper conduct. Eviction, as proposed by the applicants, is not an incremental remedy. Some opportunity should be given to the restaurant owner to remedy the breaches before the most serious relief possible should be invoked.

Justice Veit then went on to state:

Even though this condominium’s by-laws do not anticipate the eviction of owners, and even though the legislation does not expressly authorize the eviction of owners, there may well be situations in which the extreme sanction of eviction would be appropriate. For example, if, an owner allowed dangerous substances to escape from his unit and, after an appropriate warning, refused to stop the offending conduct, eviction may the only safe and reasonable option. A breach of a by-law that caused structural damage to condominium property may justify eviction. Indeed, even a serious breach that was not dangerous might, if repeated despite warnings were unavailing, justify eviction. This restaurant owner has been a nuisance to the other owners, but there is no evidence that his breaches were dangerous either to the other owners or to their tenants or to the structure of the condominium itself. Just as, in criminal law, the most serious sentence available is not reserved only for the most serious offence committed by the most serious offender, it is not necessary to reserve eviction for the most serious breach by the most culpable condo owner.

As this case did not deal with conduct of a residential owner, instead dealing with the conduct of an owner of a restaurant and commercial condominium, its application to the conduct of residential owners may be limited to the general application of the principal of incrementalism and the Courts will likely continue to have to assess the seriousness of the impugned conduct.  The writer is motivated to make two comments as a result of Justice Veit's written reasons.  First it is prudent for condominium corporations to amend their bylaws to specifically provide for the remedy of eviction and in this regard to detail the basis upon which the remedy ought to be granted.  Second, condominium corporations should be sure to detail over time the efforts expended to gain the compliance of a recalcitrant owner with the bylaws of the condominium corporation; that is detailed notes of all incidents should be kept, fines imposed if the bylaws allow same, and demand letters be sent.  Condominium corporations cannot expect to be granted the remedy of eviction without first having followed an incremental approach.

Though not binding on Courts in Alberta, the Ontario Superior Court of Justice also issued a decision in 2010 dealing with egregious conduct of an owner.  In the case Metropolitan Toronto Condominium Corporation No. 747 v. Korolekh the Court granted the remedy of forced sale in favour of the condominium corporation against a recalcitrant owner; to the best of the writer's knowledge this remedy has not sought and has not been granted in Alberta.  However, section 67 of the CPA appears to be broad enough to allow for this.

It will be curious to see how serious the conduct of an owner will need to be for the Courts in Alberta to grant either the remedy of eviction of an owner or even possibly the remedy of forced sale of the owner's unit in light of these cases.

Tuesday, January 25, 2011

Consequences of Allegations of Improper Conduct of a Board Member

A report in Canadian Lawyer Magazine,, advises that a dispute in a condominium in Ontario over a condo-fee increase grew  into a "bitter feud" that resulted in the Board member "facing a number of criminal charges, including four counts of criminal harassment, intimidating a witness, and threatening death".  The consequences on the Board member was that he was prevented from joining the legal profession which he had trained for.  The Board member is now appealing the decision that "he wasn’t of good character" to a Law Society of Upper Canada panel.  Board members should always be civil in their demeanor and in their communication.

Friday, January 21, 2011

The rise of internet defamation and consequent litigation

I have over the last year taken an interest in defamation that arises in condominium communities.   Sometimes this takes place on the web.  Many owners think that the web offers them immunity particularly if the identity of the owner is masked by a pseudonym.  This is not the case.  The Vancouver Sun reported at that there has been a rise in litigation relating to defamation on the web.  For those interested, though not specifically related to the internet, the following Supreme Court of Canada cases deal comprehensively with the issue of defamation and the right of freedom of speech: Manning and the Church of Scientology of Toronto v. Hill (SCC) and Grant et al. v. Torstar et al. (SCC).

Thursday, January 20, 2011

An Introduction of Richard I. John, Lawyer and Alberta Condominium Reporter

Hello to everybody who finds this blog (blawg).   After much deliberation about how I would participate as a lawyer on line I have decided to surrender to Google.  I also must compliment from Heenan Blaikie's Ontario office for inspiration.  Heenan Blaikie is sharing insights focused on condominium law in Ontario.  My focus will be on condominium law in Alberta.

I am a lawyer in Calgary, Alberta, Canada whose practice is focused on all matters related to real estate and as part of my practice I am actively involved in the area of condominium law.  It is my intention to use this blog to share insights into condominium law.  To begin I share a link to a very significant website called and more particularly to the Condominium Property Act (Alberta).