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Refusing to Allow Modifications to Common Elements Can Amount to Oppression

The Condominium Act prevents condominium corporations from treating unit owners unfairly and differently from the rest of the owners. This obligation is found under section 135 of the Condominium Act (the oppression remedy).

In Noguera v. Muskoka Condominium Corporation No. 22, the Corporation and its board of directors learned that not complying with such obligations can attract serious consequences. Indeed, the Court concluded that the Corporation’s and the director’s actions targeted two unit owners, which constituted oppression.

[Update on this blog post: The Court of Appeal ruled that the condo corporation had to act reasonably when seeking to impose a section-98 agreement.]

Factual Background

The Nogueras purchased unit #210 in May 2014. In 2016, their next door neighbours contacted them as they were planning to sell their unit, #211. The Nogueras were interested in purchasing unit #211 because they wanted a bigger unit to accommodate visiting family. As such, they made a proposal to the Corporation that they be permitted to make an opening between #210 and #211.

A motion to approve the proposal to alter the common elements was presented to the board at their March 2016 meeting. At the time, the board was composed of four (4) directors, including Mr. Nogueras and the owner of unit #211.  All board members were present at the March 2016 meeting, including the property manager. The owner of unit #211 recused himself for the part of the meeting dealing with the proposal. Mr. Nogueras remained for the discussion, but did not vote on the proposal. At the end of the day, a motion to approve the proposal to alter the common elements was moved, seconded and carried.

Section 98 of the Condominium Act provides that an owner may make an addition, alteration or improvement to the common elements provided that, namely, (a) the board has approved the proposed change by resolution and (b) the owner and the corporation have entered into an agreement. In the industry, such agreement is called a “section 98 agreement”. In the case at hand, the need for a section 98 agreement was discussed at the March 2016 meeting, but the agreement was not pursued by the property manager.

Based on the board’s approval, the Nogueras moved forward with their project. They retained a structural engineer to prepare and revise building plans to be submitted to the Town for approval. These plans were also submitted to the property manager in April 2016. In the context of its approval process, the Town required a letter from the Corporation confirming that it approved of the proposed changes. Such letter was provided in June 2016 confirming that: “All conditions have been met to the Board’s satisfaction.”

After obtaining all required approvals, the Nogueras moved forward with the purchase of unit #211 and became the owners of that unit in August 2016. Their renovation project began in the summer of 2017.

In the meantime, there were some changes to the board of directors and the relationship between the Nogueras and the board became difficult. Mr. Noguera was still a board member. The “new” board raised a number of issues with the March 2016 approval process and the absence of a section 98 agreement.

In November 2017, there were discussions between the parties regarding the need for a section 98 agreement and the fact that no other unit owner had ever been asked to sign such an agreement. The Nogueras agreed to sign an agreement and drafts were exchanged between the parties. However, the Corporation imposed the following clause:

The Improvements shall be removed by the Unit Owner, at the Unit Owner’s sole expense, before the Unit is sold.  Specifically, the Unit shall be restored to the condition before the Improvements were made, including but not limited to the reinstallation of the common element demising wall within the Unit and any changes that were made by the Unit Owner related thereto.

The board held meetings in January 2018 without giving notice to Mr. Noguera or the previous owner of unit #211 (both were still directors at the time). At one of these meetings, the board instructed the property manager to stop the work. Two (2) days lawyer, the Corporation’s lawyer sent a “heavy-handed” demand letter to the Nogueras.

In addition, the president of the board took steps to undermine Mr. Noguera within the condominium community, saying that he was evil and dishonest and that she wanted him off the Board. Mr. Noguera eventually resigned from the board.

The Nogueras commenced an application against the Corporation for an oppression remedy under section 135 of the Act. The Corporation also commenced its owned cross-application, seeking a number of reliefs.

The Court’s Decision

The Court was asked to rule on a number of issues.

First, the Court was asked to determine whether the proposed changes to common elements was duly approved by the Corporation at the March 2016 meeting. The Court looked at section 40 of the Act, which deals with conflicts of interest. The Court was of the view that Mr. Noguera was not in a conflict because the proposal was not material to the Corporation. The project was a “minor alteration” and had no financial impact on the Corporation. Therefore, there was quorum at the meeting and the board’s approval was not problematic.

Second, the Court was asked to interpret the minutes of the March 2016 meeting to determine the scope of the Corporation’s approval. In particular, there was a dispute about whether the board had approved one or more openings in the demising wall. The Court found that the board’s resolution did not limit the openings to one and that this question was a red herring. The Court commented that the Corporation’s attempt to start the approval process anew was inappropriate.

Third, the Court had to rule on the section 98 agreement. All parties agreed that such an agreement was required by the Act, but the dispute related to the terms of the agreement that the Corporation imposed. The Court concluded that the Corporation treated the Nogueras differently than the other unit owners because the form of agreement requested from them was different. In light of the history at the Corporation, the Court was of the view that the Corporation’s agreement was overreaching and should be limited only to changes to the demising wall. The Court ordered that the clause in question be amended accordingly.

Fourth, the Court also had to rule on the Corporation’s conduct, and in particular the president’s actions. The Court concluded that such conduct and actions were inappropriate. The judge stated as follows:

I do not attribute all the listed problems to bad behaviour targeting the applicants.  However, I do find that the Condominium wrongly disparaged the applicants, especially Mr. Noguera, wrongly excluded them from use of common elements, specifically the path, and wrongly fostered an atmosphere that made them uncomfortable.

Finally, the Court was asked to rule on the oppression remedy claim. Unsurprisingly, Court concluded that the Corporation acted in an oppressive and unfair manner towards the Nogueras and criticized the Corporation’s actions as follows:

The stance taken by the Condominium commencing in or about mid-2017 was oppressive and unfair.  The Condominium proceeded in breach of its governance obligations by holding board meetings without proper notice.  The Condominium proceeded as if it had little or no responsibility for the circumstances giving rise to the disputed approval and that stance was taken even in oral argument before me.  There is no doubt that the Condominium was responsible for a great deal of what happened here, most notably for an illegal past practice regarding s. 98 agreements that was in place before the applicants even became unit owners.  The approach taken with these unit owners, as if the Condominium had little or no role in the prior events, was harsh and unfair.  This is in stark contrast to the approach taken with other unit owners who had also made structural changes with now admittedly defective approvals.  I recognize that there was a range of types of structural changes, and opening the demising wall had not been done before, but the s. 98 requirement applies to all of the changes.  The Condominium treated the applicants more harshly than the other unit owners.  Associated conduct by Board members shows targeting and ill will toward the applicants.  Bearing everything in mind in the exercise of my discretion, I would foreclose the Condominium’s requested orders.

Ultimately, the Court awarded to the Nogueras general damages in the amount of $10,000.

Lessons Learned

It is essential that condominium corporations treat all unit owners in an even-handed manner and they should not unreasonably refused to allow modifications to common elements. If the corporation fails to do so, it can expose itself to an oppression claim. To ensure consistency over the years, the Corporation should always follow and enforce the Condominium Act and its governing documents. As board members change overtime, it’s the only way for condominium corporations to make sure that matters are dealt with in a consistent manner. Granting minor exceptions or turning a blind eye to a requirement may not be the end of the world today, but may have dire consequences in future situations.

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Updated January 28, 2020