Condominium dispute resolution changes on November 1st

On November 1, 2017, condominium dispute resolution in Ontario will change with the introduction of a new Condominium Authority Tribunal (“Tribunal”). Unfortunately, until the ‘Rules of the Tribunal’ are published, we do not know whether it will provide “an easier and more cost-effective method for resolving disputes” as claimed, or possibly an expensive one.

The New Condominium Authority Tribunal and “Records”

The jurisdiction of the Tribunal is exclusive and therefore the dispute resolution provisions of the Condominium Act, 1998 (the “Act”) regarding mediation/arbitration and Court will not apply with respect to matters within the jurisdiction of the Tribunal. Initially, however, the Tribunal’s jurisdiction will be limited to matters related to “records” (under section 55 of the Act and Regulation 48/01), but it is intended to expand its jurisdiction later to include breaches of rules, requisition disputes, amounts payable by way of additions to common expenses, etc., although no date has yet been provided for any such expanded jurisdiction.

Specifically included in the jurisdiction of the Tribunal on November 1, 2017 are the matters relating to the following sections of the Act and Regulation 48/01, regarding “records”:

s. 55 (1) & (2) of the Act: Regarding “adequate records” and period of retention;
s. 55 (2.1) of the Act: Method of retention;
s. 55 (3) – (6) of the Act: Examination of records and exceptions to examination rights;
s. 55 (8) of the Act: Penalty for non-compliance, now up to $5,000;
s. 55 (2.2) of the Act, if with respect to 13.12 (3) or (4) of Regulation 48/01: Disclosure of records to managers.
As well as Regulation 48/01, sections 13.1 – 13.11 which all relate to records.
And lastly, applications by purchasers to examine records pursuant to s. 55(3) of the Act.

The Tribunal will have jurisdiction to award interim and mandatory Orders and damages up to $25,000, as well as a penalty of up to $5,000 for failure to disclose records. With such increase in the penalty for failure to disclose records (from $500 in Small Claims Court to up to $5,000 before the Tribunal), Corporations may face greater administrative demands in connection with the exercise of owners’ rights of access to records.

Specifically excluded from the Tribunal’s jurisdiction (both now and in the future) are the matters relating to the following sections / Parts of the Act and other matters:

s. 20: Easements; and s. 26: Occupier’s liability;
s. 82.1 & s. 82.2: Corporation’s sale of the property and rights of dissenters;
85 & 86: Lien upon default and priority of lien;
117(1): Prohibited conditions and activities (but not including noise, nuisance, etc., pursuant to s. 177(2);
Part VII: Regarding amalgamation; and Part VIII: Regarding termination;
A dispute involving the determination of title to any real property.

In addition, relief for oppression (s. 135 of the Act) will remain within the exclusive jurisdiction of the Court, and the Tribunal has no authority to order a person to vacate a property permanently or rule on the constitutional validity of legislation.

The modest filing fees for the Tribunal will be only; $25 for access to an ‘unassisted on-line dispute resolution system’, $50 for assistance from a dedicated mediator, and $125 for a decision from a dedicated adjudicator, for a total of $200.

However, what are the costs that might be incurred if a dispute proceeds through to “a decision from a dedicated adjudicator”, will they be only $200 or considerably more? As the adjudicator will be appointed and paid by the Condominium Authority, as opposed to a private arbitrator whose fee is paid by the parties (subject to a possible award of costs), will the adjudicator’s time be at no charge?

When mediation and arbitration were introduced into the Act it was intended to simplify the dispute resolution process otherwise only available in Court. However, unsuccessful parties to arbitration could see costs doubling as awards could include lawyers’ costs as well as the cost of the arbitrator, whereas Judges in Court proceedings are paid by the Province.

What we do know is that the Tribunal may be able to award, subject to the rules of the Tribunal, the costs of another party, as well as the costs of the Tribunal itself! Currently, full lawyers’ and arbitrators’ costs, as well as additional actual costs in Court, can be awarded against an owner in breach of the rules. Will that owner become subject to full indemnity costs for lawyers’ and adjudicators’ fees before the Tribunal as well? If so, then the government’s claim of a more cost-effective venue may vanish. Unfortunately, we do not yet know the answer to that question as such awards of costs of another party and of the Tribunal will be subject to “the rules of the Tribunal”, and those rules have not yet been published.

If the Tribunal orders an owner to pay compensation or costs to a corporation then the corporation can add the amount to the owner’s common expenses. If the Tribunal orders a corporation to pay an owner compensation, costs or a penalty, then after 30 days of non-payment the owner may set-off the amount against their common expenses payable.

Proceedings before the Tribunal may be held orally or in writing, in person, by telephone, video conference or electronic mail, or through use of other electronic means in accordance with the rules of the Tribunal (which have not yet been published), and it will be required to adopt the most expeditious method while affording parties an adequate opportunity to know the issues and be heard. The Tribunal will also be able to dismiss applications without a hearing if they are considered to be frivolous or vexatious, etc. Parties may also be directed to participate in an alternative dispute resolution mechanism (mediation / conciliation / negotiation), however, there is no mention yet of any related costs. Appeals from the Tribunal may be made to the Divisional Court on a question of law only.
Unlike arbitration, Orders of the Tribunal must be published, but with private information redacted.

The Tribunal will be funded as part of the estimated $9M annually ($1/unit/month) that the Condominium Authority started charging on September 1 (payable on December 31), subject to possible awards of its own costs as referred to above, and possible future increases payable by owners each month.

Once the Tribunal is given jurisdiction to deal with disagreements with respect to declarations, by-laws and rules, it could serve to be a very effective dispute resolution venue – provided that its rules do not permit expensive costs awards payable to itself.

Proposed Changes to Mediaton/Arbitration and Court Proceedings

Amendments to the Act regarding mediation/arbitration and Court proceedings are currently proposed, however, no date has yet been provided as to when they might come into effect.

It is intended, in future, to provide that easements and covenants, whether positive (requiring that a step be taken) or negative (prohibiting an act or activity), will run with the property that receives a benefit or is subject to a burden, thereby reversing the law that positive covenants were not enforceable except by direct agreement (which in the Amberwood case, a decision of the Ontario Court of Appeal, resulted in considerable inequity for owners).

Perhaps the most significant proposed change is that the current right of a Corporation to add “additional actual costs” to the common expenses of an owner (if it obtains a compliance Order including damages or costs pursuant to s. 134 of the Act) will now be available to owners as well by way of set-off. If an owner obtains an Order against their Corporation under s. 134 of the Act which includes damages, compensation or costs, then the owner can add their “additional actual costs” and set-off the amount payable against their common expenses. Further, it is proposed that such rights will be extended to Corporations and owners who obtain an oppression remedy under s. 135 of the Act.

Lastly, while not directly on topic, in the writer’s view one of the best proposed amendments to the Act is the addition of section 26.2 which will provide that developer/declarants cannot limit their liability and Corporations’ remedies by declaration, by-law, agreement or instrument prior to turn-over. That provision, when enacted, should reverse the practice of developers limiting their liability for construction deficiencies by agreement and by-law prior to turn-over, as upheld by the Ontario Court of Appeal in the 2014 West Harbour case.

Prepared by Blaine Fedson

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