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Condo’s Legal Bills Sent to be Assessed

A recent court decision, Temedio v NNCC No. 6reminds condominium corporation to be reasonable and measured when enforcing their rules and warns against excessive legal fees charged to owners. This case,  provides some useful insight into the situation that unfortunately, many owners find themselves in: being asked to pay their condominium’s legal bills when they breach the rules.

What the Condominium Act Says

Let’s start with seeing what the Condominium Act provides on this topic. The relevant portions of the Condominium Act on this are 134(1) and (5) and 85(1), (2) and (5), should you be so inclined as to check.

Condo corporations may apply to the court to enforce any of its governing documents (rules, by-laws, or declaration) and that its actual legal costs incurred in obtaining this enforcement order can be charged back to the unit in question. In other words, if an owner or occupant is in breach of one of the condominium’s rules (or by-laws etc), and the condominium is forced to obtain a court order to resolve the problem, its legal fees can be charged back to that unit like any other common expense. A lien can then be registered in respect of these fees.

While it may seem harsh, this system actually protects owners at large. If condos were not able to charge these fees back to the offending owner, it would then be forced to recoup these costs from other innocent owners who have not breached the rules.

However, as you will see below, this ability to recover legal fees only goes so far.

What Happened in Temedio

In Temedio, an owner involved in a legal dispute with her condominium corporation regarding rule enforcement ended up being charged more than $80,000 in legal bills. This is how it happened.

In 2017, the Corporation commenced an application against her seeking to evict the unit’s occupants (who were her daughter and autistic grandson) from the unit due to noise complaints. In the end, the Corporation was only partially successful in court. While it did obtain an order that the occupants of the unit comply with the rules, the court refused to evict them, terming this relief “draconian” and “not an appropriate remedy”. This lower court decision is available here.

At the conclusion of the hearing, the court ordered Ms. Temedio to pay legal costs in the amount of $2,500. Following this, the Corporation advised Ms. Temedio that she was responsible for its actual costs, which had reached $52,000.

Ms. Temedio attempted to appeal this decision, but missed the deadline to do so and was unsuccessful. She was thus ordered to pay a costs award of $5,000 for the appeal. The Corporation notified her that its actual costs on the appeal were over $29,000, which she was also responsible for.

Faced with mounting legal bills, and having later received a notice of power of sale, Ms. Temedio brought an application to have the lawyers’ bills assessed under the Solicitors Act. She was partially successful on this application, and the Court of Appeal took it a step further, granting her all the relief she was seeking.

Assessments

An assessment is a formal process by which the court reviews a lawyer’s bill to determine if it is just and fair remuneration for the work done on the file. Section 9 of the Solicitors Act allows someone other than a client to have a bill assessed if that person is liable to pay that bill. The time limit to do this is 12 months from the date the bill was delivered (unless special circumstances are shown).

In this case, the Court of Appeal found that there were indeed “special circumstances”. The Court raised the concern that when a person (other than the client) is liable to pay a lawyer’s bill, not all of the same incentives that may exist between the lawyer and the client to ensure the bill is reasonable may be present. Thus, in considering whether there are special circumstances, a more generous approach is required when the person applying for the assessment is not the client.

The Court was concerned with the fact that, while the Corporation was unsuccessful in obtaining an eviction, it was still demanding that Ms. Temedio pay for the entire amount.  Ultimately, the Court ordered that the Corporation’s legal invoices all be assessed and that the lien on Ms. Temedio’s unit not be enforced until the assessment was complete.

Lessons Learned

So what can we take away from this case?

Most importantly, while pursuant to the Condominium Act condo corporations are able to charge back the actual amount they incur in enforcing compliance, these “actual amounts” can be subject to assessment. This means that Corporations should be reasonable and measured in their approach to dealing with enforcement matters. Firing all cannons at will and seeking unnecessarily harsh remedies (like eviction), when a lesser remedy will do the trick, may come back to haunt the Corporation. In such circumstances, obtaining a partial victory may not be sufficient to allow the Corporation to completely rely on section 134 of the Act to recoup all of its fees incurred.

In order to enforce compliance, and protect all other owners from having to subsidize this bill, the most effective method will be for the Corporation to only take what steps are necessary to resolve the problem. It is accordingly imperative to  obtain legal advice as to how to walk this line.