In a recent Ottawa case, the court confirmed that a condominium corporation can (and should) prohibit the leasing of condo units to unrelated tenants when the condo declaration limits the use of the units to “private single families“.
The Facts of This Case
In this case involving a 38-year old condominium corporation, two factions faced each other: the owners occupying their units and the investors who were seeking to maximize the income-earning potential of their units by renting them to unrelated students of the nearby university.
The declaration was clear: it provided that “each unit…shall be occupied and used only as a private single family residence and for no other purpose…“. One of the corporation’s rule even added that “Rooming/boarding houses are prohibited“.
Still, numerous units were rented to unrelated tenants. Some were leased by the room while others were leased to one tenant who would then either sublet or find roommates to lessen the cost. In other cases, unrelated students would be covered by a single lease. Many units had locks on each bedroom door. By the time this matter made it to court, nearly 48% of the units were rented out. More importantly, approximately 22% of the units were rented to multiple, unrelated tenants. Even the president of the corporation was in breach of the single-family provision. He lived in one unit, but rented 4 others to unrelated students for the duration of the school year.
This condominium community struggled with this divisive issue over numerous years with one of the directors (now the president) strongly opposing and campaigning against any attempt to enforce this clause of the declaration. The judge described the campaign that followed as “overt hostilities”. Eventually two directors resigned as a result of the unrelenting pressure and the board’s inability or unwillingness to enforce the single-family residence rule.
A group of owners (including the board’s past president) eventually went to court to demand that the declaration be respected. After the commencement of litigation, the new board attempted to adopt a rule grandfathering potentially every unit from the application of the single-family provision for a period of 10 years. The corporation argued that it had historically not enforced the single-family clause and that, in any event, it was reasonable for the corporation to adopt a rule suspending the application of the declaration to allow for a smoother transition. Some resident-owners were of the view that this grandfathering clause was unacceptable and that they were entitled to benefit from the declaration.
The Court’s Decision
The court confirmed that, unless the declaration defines otherwise the meaning of the expression “private single family”, it means exactly what it says: units cannot be rented to multiple, unrelated, transient tenants, such as unrelated students sharing accommodation for a short period of time. In fact, the judge opined that the sharing of a kitchen, living room and bathroom while each student occupies separate bedrooms may in fact constitute a rooming house – which had always been prohibited at this corporation.
The judge concluded that the corporation had an obligation to enforce this provision of the declaration despite the fact this clause may not always have been enforced in the past. The judge explained that this prohibition against this type of rental had always been in the declaration for everyone to see. Landlords could not now complain that they had not been advised of this by their lawyer or realtor at the time of purchase. There was no evidence that the corporation had led the landlords to believe that renting to unrelated tenants would be in compliance with the provision of the declaration. The judge also noted that this was not a case where there was a rampant breach of the declaration and noted all the steps the corporation had taken in the past in an attempt to address this problem. As importantly, this declaration also contained a strong non-waiver clause.
A non-waiver clause is a clause allowing the corporation to enforce its rules in the future even if it has failed to do so in the past. Basically, having been allowed to breach a rule in the past could not be used as an excuse or defence to continue to breach it in the future.
The judge also struck down the corporation’s proposed rule aimed at suspending the single-family provision for 10 years. This proposed rule was found to be inconsistent with the declaration and unreasonable in the circumstances because of its length in time and because of its scope (the proposed rule even allowed non-landlords to start renting their unit in breach of the declaration). The judge concluded that 10 years was not temporary or transitional, but that it was a significant period in the life of a condominium and of its residents.
There are three lessons to take away from this case:
- Likely, the most important lesson for corporations is that they must enforce their declaration rather than try to find a way around it. Owners are entitled to have the declaration enforced.
- Corporations must be careful when they adopt rules. The rules must be consistent with the Condominium Act, the declaration and the by-laws. The rule must also be reasonable. Corporations should consider having their rules reviewed by legal counsel before adopting them to avoid the turmoil and cost of litigation.
- Finally, this case may give condominiums additional tools to address the increasing problem of short-term rentals to transient tenants such as those attracted by AirBNB and other comparable organizations.