Condo ordered to pay $75K for oppressive fraudulent Status Certificate
In this blog post, we explore the Gonzales decision which brings important lessons for condo corporations about the importance of accuracy and honesty when issuing status certificates. This case dealt with two distinct issues:
- The accuracy of the Status Certificate – the court found that it was accurate;
- A fraudulent second status certificate issued by the Corporation – this is what we discuss in this blog post.
The first status certificate
In 2021, a young couple was looking to purchase a condo unit. While searching for the perfect home, they fell in love with a unit that had an attached solarium, which added significant living space and light. They obtained a status certificate. On the issue of the solarium, the certificate contained no reference to the solarium being a modification to the common elements (essentially, a prior owner had enclosed the balcony, turning it into a solarium). The purchasers relied on the status certificate and bought the unit.
Some 16 months later, the Corporation advised that the solarium was an unauthorised modification to the common elements and that it needed to be permanently removed to reinstate the exterior wall of the unit. This was required to work on the balconies above. The Corporation advised the owners that the cost to remove the solarium and the cost to reinstate the exterior wall would be charged to them (roughly $25,000). A few months later, it advised all owners that it was required to raise 2 special assessments totalling $6.4M to fix the balconies. The unit’s share of this special assessment was roughly $42,000.
The second status certificate
When the Corporation wrote to these owners to advise them that the solarium had to be removed, they indicated that the 2021 status certificate expressly confirmed that the solarium was a modification and that any removal of would be at the owner’s cost. The owners were totally surprised by this as they did not recall the certificate stating this. As they did not have a copy of the original certificate, they asked the Corporation to provide them with a copy of it. Rather than provide a copy of the original certificate, the Corporation issued a different certificate with an entire new section on the solarium. It backdated this certificate to 2021 and inserted the original signature of the past manager.
Shortly after this, the owners discovered a copy of the original certificate and saw that the second one had been altered. For months, they asked for an explanation but the Corporation refused to provide one. The Corporation eventually removed the solarium and imposed the cost on the owners (roughly $11,000). They also added the first instalment of the special assessment on the unit’s ledger ($21,900) and placed a lien on the unit.
The Court’s conclusions
The court concluded that this second sates certificate had been altered, falsified, and was fraudulent and that this conduct was oppressive. On this, the judge wrote:
[74] The condominium corporation and its agents engaged in a shocking abuse of trust and power. The alteration and back-dating of a status certificate is among the most serious breaches that a corporation or its agents could commit. A unit owner is entitled to expect that the corporation and its agents will communicate truthfully and not alter documents to mislead owners regarding their rights and obligations.
[75] […] In my view, the corporation engaged in oppressive conduct. Knowingly falsifying a status certificate, attempting to rely on that falsified certificate to compel a unit owner to accept the cost of demolishing the solarium, and then continuing to lie and mislead the owner is a paradigmatic example of acting in bad faith. I declare that the corporation’s conduct is oppressive, contrary to s. 135 of the Act.
Decision and remedies
The judge ordered the Corporation to:
- Pay to the owners $75,000 in damage;
- Pay the cost of removing the solarium;
- Remove the lien from the unit and to make best efforts to allow the applicants to participate in the loan program for the special assessment (this dealt with the other issue of whether the original Certificate was accurate).
The judge explained the steep monetary award as follows:
a. It is to denounce, in the strongest possible terms, the oppressive conduct of the Corporation. The court will not tolerate the alteration and falsification of a status certificate.
b. It is to deter this Corporation from ever repeating such misconduct. This award is to send a strong message to the corporation that it must always deal with its owners in good faith. Whatever failures led to this situation, be they at the board level or with its property management company or both, must be rectified so that this corporation never again circulates altered and falsified documents to gain an upper hand in discussions with unit owners. This type of misconduct can never be repeated.
c. It is to send a message of general deterrence to all other condominium corporations: the court will not tolerate oppressive and abusive conduct of this sort.
d. It is to recognise the stress the corporation caused the applicants by its oppressive conduct.
As indicated in the introduction, this case also dealt with whether the first certificate was accurate. The Corporation was successful on that point and the owners were not exempt from having to pay the special assessment for the work on the balconies.