Condos Must Act Reasonably When Seeking Compliance

Well, loyal readers, it looks like the most recent Superior Court decision, Amlani v YCC 473 has caused quite a stir in the Condo blogosphere. Our last post on this decision concluded that Condos Cannot Lien the Cost of Seeking Compliance. Some of our esteemed colleagues have since agreed with our take that costs for compliance can never be liened (without a court order), while others have suggested that compliance costs may be liened as long as the indemnification provisions in the Declaration are clear and detailed enough. Time will tell how the Courts develop the Amlani decision. In the meantime, in light of this uncertainty as to the full meaning of this decision, condo corporations are best to consult with their condo lawyer before liening or charging back expenses incurred in the context of compliance.

In this second installment of our post-Amlani series, we look at one way to make this all a little simpler: Condo Corps, through their Boards, manager and lawyers, must act reasonably when addressing compliance issues.

Reminder of the facts of this case

Mr. Amlani lived in a condo complex where smoking was not prohibited. When some neighbours complained of the smell of cigarettes escaping from his unit, he limited his smoking in an enclosed sunroom and used air filters. When this did not suffice, the matter was turned to the corporation’s lawyer.  Mr. Amlani actively sought to cooperate and dialogue with the corporation in a sincere attempt to resolve the issue. He offered to hire an engineering company, at his costs, to resolve the problem and  actively sought to mediate the matter. While the Corporation did eventually attend part of a mediation, it kept escalating the matter, with increasing cost being charged back to Mr. Amlani. They eventually put a lien on the unit and commenced a power of sale proceeding.

For a more detailed review of the facts of this case, feel free to review our prior post on this.

What is not reasonable?

The Court in Amlani was quite harsh in its review of the conduct of that particular Corporation. The Court found, amongst other issues, that:

1. The Corporation acted oppressively in refusing to discuss the issue in dispute between the parties;
2. The Corporation refused to discuss simple, low-cost solutions that likely existed, instead taking the position that “there was nothing to talk about”;
3. The Corporation refused to meet with the owner who was the subject of the compliance matter to explore, in good faith, possible solutions;
4. The Corporation considered a request to mediate as a “threat” as opposed to a common-sense solution (and requirement under its constating documents);
5. Once a mediation was held (at a date the Corporation imposed before a mediator it unilaterally selected), the Corporation’s counsel and representatives left the mediation part way through indicating that they had another appointment.

This Corporation racked up over $25,000 in legal bills, sending compliance demand notices to the owner, even after the owner had moved out of the unit entirely! The Court found this behaviour to be unreasonable and oppressive, and not worthy of deference under the Business Judgment Rule (which grants deference to reasonable board decisions taken in good faith).

By refusing to negotiate, or to even consider alternate arrangements or accommodations (especially when practical solutions had worked in the not so distant past), the Corporation did not try to achieve “the greatest good for the greatest number.”

Be Reasonable…It’s the Law

So what should we learn from this decision?

Acting reasonably is not only common-sense, but is very often mandated by the Declaration and By-laws of a Corporation, and is most certainly required by law under the Condominium Act. A unit owner has a “reasonable expectation” that the Corporation will explore, in good faith, whether practical solutions exist to a compliance matter.

When faced with a compliance matter, the Board must be willing to consider a range of possible options, alternatives or accommodations, and be willing to discuss them, openly and in good faith, with the owner with whom they are addressing the problem.

Having said this, this decision is “not intended to tie the hands of condominium boards when faced with recalcitrant unitholders. It is simply to say that where a unitholder is willing to discuss a practical solution and practical solutions appear evident, boards have an obligation to explore those solutions in good faith”.

Approaching your legal counsel is often a prudent decision, if only to review the possible avenues that could reasonably  exist. But turning a compliance matter solely into a legal matter, and firing off threatening legal letters, while refusing to meet, discuss, or even consider a single alternative, is not a recipe for success. At every stage of a compliance dispute (or potential dispute), Boards and their counsel should take a step back and ask the simple question: “Is what we’re doing here reasonable?” Failure to ask that question can be costly and embarrassing. Failure to do so may also result in a Corporation being liable for damages under the Oppression Remedy (and legal costs for both parties), as compensation for a breach of an owner’s reasonable expectations to be treated reasonably and in good faith