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Condo-Retirement Homes Must Treat Everyone Fairly

“The trouble with retirement is that you never get a day off.” – Abe Lemons

What happens when a condo also happens to be a for-profit, corporate-controlled Retirement Home, but not all owners contribute equally to the mandatory assisted-living expenses? Well, in a recent Superior Court decision, the Court declared that it was unfairly prejudicial to have some owners contributing to these expenses in higher proportions than others. The practical ramifications of the decision – and whether the plaintiffs are any better off, despite their win – remains rather uncertain…

The Facts

With a lot of moving parts and related corporate entities, the facts get pretty muddy. We break them down as follows:

  • The condo complex contains 124 units and is registered as a Retirement Home under the applicable statute.
  • 113 of the 124 units in the complex are owned by a single corporate entity, who runs a “for-profit” business. The group of relevant corporate entities comprised the Defendants.
  • The Plaintiffs were 8 of the 11 remaining “individual owners.”
  • The company that provided the assisted-living services was part of the same corporate family as the corporate owner.
  • The Declaration and Bylaws provided that every owner (and tenant, or subsequent owner) must enter into the assisted-living services agreement, as a condition of ownership. Every owner was required to participate in the services program (health care, housekeeping, meals, laundry, and emergency response), and pay the monthly fees and costs associated with it.
  • The Board was majority-controlled (2/3) by designates of the corporate owner.

The main issue here dealt with who was paying what for the mandatory monthly services.

The Position of the Parties

The plaintiffs argued that they paid one amount for these services, but that the corporate owner was not requiring its tenants to pay the same amounts (This was done indirectly, by offering discounts and incentives through its related companies). They further argued that the financial burden of these services fell disproportionately on their shoulders, putting them on a different playing field when they tried to rent their units.

The Corporate defendants argued that the plaintiffs were paying the same price for services as they were five years ago with the prior service company, that they are getting what they paid for, and that being unhappy does not mean they are oppressed.

The Court Finds Unfair Prejudice and Unfair Disregard

Ultimately, the presiding Judge agreed that the corporate owner does not make its tenants enter into the same, or a comparable, services agreement as the plaintiffs are required to enter into. Such differential treatment was in breach of the Declaration and Bylaw, and amounted to unfair prejudice and unfair disregard under s. 135 of the Condo Act.

As our avid readers will know, the Oppression Remedy under s.135 requires that there be a breach of an owner’s “reasonable expectations” and that such conduct is oppressive, unfairly prejudicial, and/or unfairly disregards the owner’s interests.

The Judge found that the Plaintiffs reasonably expected that all occupants of the complex would be treated equally and charged the same amount for the same services and that the defendants’ conduct was unfairly prejudicial and unfairly disregarded the interests of the applicant (without the conduct necessarily being oppressive, nor in bad faith). While not awarding any damages, the motions’ judge did issue two declarations:

  1. that the defendants have engaged in conduct towards the plaintiffs that is unfairly prejudicial to the plaintiffs and unfairly disregards their interests within the meaning of s.135; and
  2. that the declaration and bylaw shall be enforced such that all occupants of the condo shall be required to enter into the same services agreement with the services manager.

Was this a win?

The real life consequences of these judicial declarations remain unclear. Plainly meant to level the playing field, this judgment may not have its intended effect. Faced with the obligation to enforce the services agreement equally, what might the corporate owner do?

  • As owners of 91% of the units, the corporate owner could proceed to amend the Declaration and Bylaws to address this issue, by exempting the individual owners of the services obligations, for example, or by clarifying who pays what [although such amendment may in itself amount to oppression or to a director’s duty to act in good faith].
  • The corporate owner could simply follow the plain meaning of the judgment and allow the individual tenants to pay the same fees to the service provider as its units do. Or alternatively, the corporate owner can increase the monthly fee paid by its 113 units (unlikely) to the amount the individual owners are paying.

Despite their “win,” we’re not sure the individual owners will get what they bargained for. They weren’t awarded damages, and while they may or may not get a substantial portion of their legal costs, are they much better off today than they were prior to the judgment? The only certainty here is that being a tiny minority of owners in a for-profit Retirement Home/Corporate-controlled Condo is confusing and not an ideal place to be the underdogs.

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