Can owners refuse to pay condo fees when they have a claim against the condo?
In this blog post, we explore whether condo owners can hold back their common expenses when they have a claim against the corporation? In our shortest post ever, the answer is: “no”. The end.
We could have stop the post there but we figured you may want to know a little more about a recent case dealing with this question.
Facts of the case
In this case, the owner of a commercial unit refused to pay their common expenses since 2019. This refusal was based on a couple of reasons, the two most relevant ones being that the owner claimed that the corporation had failed to repair and maintain common elements and that there was an error in the water charges calculations.
The owner took the position that their claim against the corporation exempted them from having to pay their share of the common expenses. A lien was registered in 2019 (for $20,526). The Plaintiff continued to refuse to pay. A notice of sale was issued in 2022. At that point, the common expenses, interest and legal fees exceeded $473,000. [At the time of the hearing, the lien amount stood in excess of $975,000].
Of interest, the owner commenced a claim against the corporation seeking (amongst other reliefs) an order discharging the lien and a declaration essentially exempting they from having to pay the arrears on the basis of the claim they had against the corporation with respect to the water expense and the alleged failure to maintain common elements.
Judge’s analysis
The complete answer to this case is found at section 84(3)(b) of the Condo Act:
No avoidance
84 (3) An owner is not exempt from the obligation to contribute to the common expenses even if,
….
(b) the owner is making a claim against the corporation
The language of this provision of the Condo Act is (for once) “simple, direct and unqualified”.
Essentially, owners do not have the right to set-off any amounts they claim against the corporation. This provision of the Act is there to ensure that corporations receive the proportionate shares of common expenses from all owners in order to allow the corporation to pay its expenses. Condos basically operate as nonprofit corporations and they rely and depend on common expenses being paid by all owners.
The judge goes on to explain the rational behind this provision:
There are good public policy reasons for a simple, direct, and unqualified application of the provision. If it were otherwise, it would be far too easy for unitholders to avoid common expense payments by taking the position that the corporation was somehow in default of or fell short of some obligation to the unitholder. That would unnecessarily complicate the efficient management of condominium corporations.
If an owner is of the view that the corporation owes them money or even that the corporation is not meeting its own obligations (for instance, its obligation to repair and maintain common elements), the owner’s recourse is not to resort to unilateral self-help by holding back the common expenses. The recourse is to engage witħ the corporation and, if required, commence a legal proceeding.
Stay tuned
This decision was rendered in the context of a motion for summary judgement. The judge basically struck a potion of the claim (the part where the owner was seeking an exemption from paying common expenses) but the balance of the case is expected to continue. I have a feeling we’ll blog some more about this case later.
Lessons learned
Pay your common expenses when they are due.
… even if you have a claim against the condo
… even if the corporation is not properly maintaining the condominium
… in fact, even if you don’t use some of the common elements like the gym or the elevator
Pay first and fight later.
This is still one of our shortest blog post.