Consequences of skipping mandatory mediation or arbitration

Condo disputes often end up in court — but should they? Under section 132 of the Condominium Act, disagreements between owners and corporations over governing documents must first go to mediation and arbitration, not straight to a judge.

So what happens if those steps are skipped? Can a case get tossed at the last minute? The Ontario Superior Court tackled these questions in PCC 96 v. Leuzzi, finding that an owner who actively joins in litigation can lose the right to later insist on mediation or arbitration.

Facts of this case

PCC No. 96 is a large condominium made up of two 100-unit condo towers. A unit owner, Mr. Leuzzi, raised a complaint about second-hand smoke from a neighbour’s balcony. Though the corporation ultimately acknowledged the violation, the dispute escalated dramatically.

Mr. Leuzzi submitted frequent emails, filed complaints with police and regulators, and made allegations of financial impropriety. PCC 96 responded with a court application under section 134 seeking a compliance order to get Mr. Leuzzi’s abusive harassment under control. Mr. Leuzzi brought a cross-application under section 135 alleging oppression. [We may cover this drama in another blog post.]

Part-way through the litigation, Mr. Leuzzi suddenly argued that the matter should have gone to mediation and arbitration under section 132(4) rather than go to court.

Waiver of Mediation/Arbitration Rights

As noted above, section 132(4) of the Condominium Act mandates that disagreements regarding the declaration, by-laws, or rules be submitted to mediation and arbitration.

However, while this is the case, and while mediation is almost always the preferable route, the Court ruled that Mr. Leuzzi had waived this right by actively participating in litigation (filing affidavits, conducting cross-examinations); failing to raise the issue early; and consenting to a joint hearing of both applications;

The Court declined to stop the proceeding, emphasising that it would be unfair and impractical at such a late stage.

Why This Case Matters

This decision reinforces that:

• Mediation and arbitration remain the default for many condo disputes under s. 132(4).
• But parties can waive that right, especially by conduct inconsistent with it (e.g., fully engaging in court proceedings).
• Courts will hold litigants accountable for delay or gamesmanship in raising the issue.

It goes to show that Courts do not appreciate, and will not reward, a party to litigation for (some times strategically) late  attempts to undermine the process with “loopholes”.

Best Practices for Boards and Owners

Clarify early whether a dispute falls under s. 132(4). If it does, raise mediation/arbitration issues at the outset—not after evidence is exchanged. Typically by this point a lawyer would be involved, but it is always best to seek legal advice sooner rather than later to avoid procedural missteps.

The Leuzzi case covered far more than just this issue, but we wanted to highlight it as mediation and arbitration seems to be an often-overlooked (but mandatory) process. To review the case, you can check it out here!