Reliable and timely advice for all of your condominium legal needs in Ontario.

Be the First to Know

Search by Topic

Who pays for shared expenses when there is no shared facilities agreement?

Usually, condo corporations sharing assets or equipment have in place cost sharing agreements. But in many cases, there aren’t such agreements or those in place are inadequate. The question in today’s post: who pays for shared expenses in these cases? The Court of Appeal has recently ruled on this in one of our cases.

Facts of the case

Unbeknownst to them, three condos were connected to the same electric switch gear (ESG), which is basically a piece of equipment that received, processed and redistributed the electricity received from the public provider. The ESG was located on the property of one of the 3 condos, but all three were connected to, and benefited from, it.

There was no shared cost agreement betweent these corporations.

When the ESG reached the end of its useful life, 2 of the 3 corporations agreed to share the cost of refurbishing the ESG but one of them refused, basically expecting to receive this service for free, for ever.

Arguments

The Corporation owning the ESG argued that, since all corporations benefited from it, all ought to pay their share of the cost to repair and maintain it. They brought a court application alleging that the others would be ‘unjustly enriched’ if allowed to be connected to it for free.

The main two arguments of the corporation who refused to pay were that:

  • A condo corporation could not off load to another one the cost of maintaining their common elements (arguing that the ESG was such a common element);
  • And that, in the absence of a cost sharing agreement, a condo corporation could not impose on another the cost of a shared asset.

The Court of Appeal did not agree with this.

Decision

Both the Superior court of justice and the Court of appeal concluded that, in the absence of a cost sharing agreement providing otherwise, it would be unfair to impose on one condo the cost of maintaining the ESG that benefited all of them.  To allow one to get the service for free would result in an “unjust enrichment”.

What is unjust enrichment?

An unjust enrichment exists when:

  • There is an enrichment (ie, the condos were receiving electricity through the ESG);
  • There is a corresponding deprivation (ie, the other condo was paying for the cost to repair and maintain the ESG);
  • There is no juristic reason for this enrichment (ie, there is no reason or explanation for the enrichment that makes it fair and just).

A cost sharing agreement imposing on one or the other certain costs obligations could constitute a “juristic reason” explaining the enrichment.  But without such an agreement in place, it would be unfair to allow one to keep a free benefit at the detriment of the other.

Takeaways

This is a very important case for all condo corporations who happen to share an asset without having in place a cost sharing agreement setting out the parties’ respective duties and responsibilities – including on cost sharing. This decision will also be very useful in the countless cases where an existing cost sharing agreement is inadequate or when dealing with a specific situation that was not contemplated by such an agreement.

If you find youself in a situation where your condo appears to be paying for a service or equipment benefiting another condo, ask yoursef these questions:

  • Who owns the equipment or asset?
  • Is there a cost sharing agreement in place setting out duties and responsibilities vis a vis the equipment or asset?
  • Is there an easement on title allowing the other to benefit from it (for instance, do they have an easement allowing them to use you garage entrance or parking ramp to get to their own garage. Such easement may be the juristic reason allowing them to continue to do so)?
  • Are there obligations in your declaration imposing the obligation to provide the service to the other?

There are no free picnics in life. A condo corporation cannot expect to receive a free benefit from their neighbours simply because the developer did not bother to put in place a cost sharing agreement.

Of interest, the Condominium Act has in place a “new” provision which will mandate condo corporations to enter into joint use agreements when they share the provision, use, maintenance, repair, insurance, operation or administration of any shared facilities or services. This provision was adopted as part of the 2015 sweeping changes to the Condominium Act, but has not been enacted yet.

April Webinar
EV Stations in condos
Wed. April 3 at 5pm
CPE credits: 1.0
This is default text for notification bar