Oppression Remedy Claims: Condo Beware

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Parking garage undergroundA recent decision from the Ontario Superior Court of Justice sheds some new light on the broad discretion the Court has when making orders pursuant to the oppression remedy and serves as a warning to Boards considering changes to their governing documents.

In 2005, Mr. Grigoriu and Ms. Bododea (the “Purchasers”) were looking to purchase a new condo. With their hearts set on a condo that had already sold out of parking and locker units, the Purchasers arranged to purchase a parking and locker unit located in an adjacent condo – Carlton Condominium Corporation No. 706 (“CCC 706”).

In 2010, CCC 706 wanted to address safety concerns and ensure that only residents and owners would have access to the condo building. So, CCC 706 achieved the required level of consent of owners (80%) to amend its declaration pursuant to section 107 of the Condominium Act, 1998 to prohibit non-residents from using or owning the parking and locker units. The Purchasers opposed the amendment, which would have the effect of prohibiting a future sale of their residential unit combined with the locker and parking units.

CCC 706 was aware that the Purchasers owned a locker and parking unit, but agreed to grandfather them so long as they remained residents of the adjacent building (i.e. they would continue to permit the Purchasers usage of the locker and parking unit). The Purchasers were the only owners of parking or locker units who were not also residents of CCC 706.

After the amendment passed, the Purchasers proposed a further amendment which would exempt their parking and locker unit from the new resident requirement. The proposed amendment did not garner the required 80% support and failed to pass.

A short while later, the Purchasers tried to sell their unit but had difficulty as a result of the amended declaration.

Although the decision was only rendered in May 2014, the case originally came before the Court in the summer of 2011. The judge at the time wanted to ascertain the value of the alleged damages and directed the Purchasers to list their residential unit in two separate listings: one with and one without the parking and locker unit. Unfortunately for CCC 706, the unit garnered no interest when listed without the parking and locker but did receive offers when combined with the parking and locker.

The purchasers brought an oppression remedy claim against CCC 706 pursuant to section 135(2) of the Act, alleging that by amending the declaration, CCC 706’s conduct was oppressive and unfairly disregarded the Purchaser’s interests.

Section 135(2) of the Act states:

On an application, if the court determines that the conduct of an owner, a corporation, a declarant or a mortgagee of a unit is or threatens to be oppressive or unfairly prejudicial to the applicant or unfairly disregards the interests of the applicant, it may make an order to rectify the matter.

In order to fall under the oppression remedy, the conduct must: (1) undermine the reasonable expectations of the party; AND (2) be coercive, abusive, or unfairly disregard the interests of the party. If this standard is met, the Court has broad power and discretion to award any order it deems just in the circumstances.

The Purchasers claim that they purchased the units with the reasonable expectation that they would later be able to sell the units together. However, as a result of the amendment to the declaration, they were unable to do this.

They sought an order for a proposed amendment to the declaration, which would enable them to sell their unit combined with the locker and parking unit.

According to the Court, “The conduct of the Board and the Corporation in amending the declaration had the effect of undermining the reasonable expectations of the applicants and unfairly disregarded their interests.” The failure of the Purchasers to sell their unit when listed without the parking and locker unit showed they were severely prejudiced by the amendment. As a result, the Court ordered the amendment.

Interestingly, the Court also implied that the board of CCC 706 should have warned the owners about failing to consent to the further amendment. When the second amendment was proposed, the board should have informed the owners that their refusal to consent to this amendment may later lead to a court finding that the Purchasers were treated unfairly and, accordingly, subject CCC 706 to substantial monetary damages as a result.

This case illustrates another example of how broad the Court’s powers are when an order is sought pursuant to the oppression remedy: typically, amendments to a declaration by court order are pursuant to section 109, which gives the court the power to amend the declaration where there is an “error or inconsistency”.

The case also serves to remind condominium corporations that even when the required threshold for amendments to the declaration are achieved, the Corporation still has obligations with respect to the treatment of all of the unit owners.

 

Topics:  Board of Directors, Canada, CC&Rs, Condominium Associations, Condominiums, Operative Documents, Oppression Remedy

Published In: Civil Remedies Updates, General Business Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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