Valuable Lessons from Amlani et a v. York Condo. Corp. No. 473

SimpsonWigle Law LLP Condominium Practice Group

Valuable Lessons from Amlani et al v. York Condo. Corp. No. 473

Condominium corporations, owners, property managers and legal counsel should take note of the recent Ontario Superior Court of Justice decision, Amlani et al v. York Condominium Corporation No. 473. This is a case that supports our Condominium Practice Group’s understanding of the ability of a corporation to charge back legal fees for seeking compliance with a corporation’s constating documents, specifically, that a corporation cannot charge back its legal fees unless an indemnification provision, that is contained in the corporation’s declaration, clearly authorizes the charge back.

Summary of the Facts

In this case, Mr. Amlani had been a smoker for 56 years. Prior to purchasing his unit in 2013, he verified through his lawyer that there were no condominium rules that prohibited him from smoking in his unit.

In 2015, the Corporation received complaints from other residents within the Corporation about smoke filtering into their units and creating a nuisance which interfered with their use or

enjoyment of the property. The Corporation hired a contractor to seal certain openings in the unit to prevent the smell from escaping. Despite the work, in March of 2017, the Corporation received further complaints from unit owners about smoke filtering into their units from Mr. Amlani’s unit.

The Corporation sent a compliance letter to Mr. Amlani requesting that he cease smoking in the unit. In response, Mr. Amlani restricted his smoking to what he believed to be a sealed sunroom wherein he installed an air filter. Despite his efforts, the next correspondence he received was from the Corporation’s lawyers, stating that he must cease and desist from smoking in the unit, and further warning that he will be liable for the Corporation’s legal costs for enforcing compliance.

Consequently, on September 7, 2017, Mr. Amlani temporarily moved out of his unit and leased it out to a tenant until this matter was resolved. Prior to moving out, Mr. Amlani hired a company to propose inexpensive solutions to remedy the issue.

However, on September 22, 2017, the Corporation’s lawyer sent Mr. Amlani another compliance letter insisting that he cease smoking. Mr. Amlani had already moved out of his unit by this time and requested a mediation to resolve the dispute. The mediation failed when the lawyer for the Corporation and the board member who appeared for the mediation, walked out after a brief attempt at a negotiated settlement. The Corporation sought to impose the entire mediation cost on Mr. Amlani even though the Corporation’s by-laws provided that the mediation costs should be shared.

In March of 2018, the Corporation served the Amlanis with a Notice of Intention to Enforce Security. The Notice stated that the Amlanis owed the Corporation $25,108.77, and a lien had been placed on the unit, which the Corporation would enforce by selling the Amlani’s unit. The debt claimed by the Corporation was comprised entirely of legal costs incurred by the Corporation to cause Mr. Almani to stop smoking in his unit. “ … it can be safely concluded that before charging back compliance costs to an owner’s common expenses, a corporation should first carefully review with its legal counsel the corporation’s declaration to ensure that the declaration authorizes such charge backs in the circumstances.

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The Court’s Decision

The Court approached the enforceability of the lien by considering sections 85 and 134 of the Condominium Act, 1998 (the “Act”). Section 85 of the Act states that if an owner defaults in the obligation to contribute to the common expenses payable for the owner’s unit, the corporation has a lien against the owner’s unit for the unpaid amount with interests and reasonable legal costs and reasonable expenses. Section 134 of the Act on the other hand, allows the corporation to apply to the Superior Court of Justice for an order enforcing compliance with any provision of the Act, the corporation’s declaration, by-laws or rules and recover the costs of doing so.

The Corporation’s position was that the lien amounts fell within section 85 of the Act and were automatically enforceable. The Corporation also argued that the indemnity provision within its declaration allowed the Corporation to charge

back the legal costs incurred for obtaining compliance.

However, the Court took the view that the Corporation’s interpretation of its indemnity provision was unreasonable. The Court interpreted the Corporation’s indemnity provision to only apply with respect to costs the corporation incurs arising out of “…the acts by owners to or with respect to the common elements and/or all other units…”. The Court found that there was no act of Mr. Amlani that related to or concerned the common elements or to all other units. The Court then considered whether the lien amounts were recoverable under section 134. In looking at the amounts charged back, the Court did not consider the amounts charged back to be traditionally in the nature of common expenses. Instead, the Court characterized the amounts charged back as the costs of seeking the owner’s compliance. Under section 134(5), these costs can be charged back to a unit owner’s common expenses, but only where authorized by a court order for compliance. In this case, the Corporation had never obtained a court order for compliance before charging the costs to the owner’s common expenses.

The court also held that the Corporation acted oppressively in the circumstances towards Mr. Amlani in refusing to discuss and negotiate the issue in good faith with a view to resolve the matter. As a result of the foregoing findings, the Court ordered that lien be discharged immediately and sale proceedings be stayed. Furthermore, all legal costs and expenses of the Corporation claimed through the lien were ordered to be not directly or indirectly payable by Mr. Amlani except to the extent that the same may become part of expenses of the Corporation and are paid via the collection of common expenses in their proportionate share by Mr. Amlani. Mr. Amlani was allowed to continue to smoke in his unit subject to taking such steps required to

Valuable Lessons from the Case While there is an active debate among condominium lawyers about the limits of the case where it concerns charge backs for compliance matters, it appears that it can be safely concluded that before charging back compliance costs to an owner’s common expenses, a corporation should first carefully review with its legal counsel the corporation’s declaration to ensure that the declaration authorizes such charge backs in the circumstances.

A corporation should also carefully review with its legal counsel the factual background and ensure that reasonable, bona fide efforts are made to resolve the compliance dispute with the owner and his or her legal counsel.

If a corporation can demonstrate to a reviewing court that the language of the declaration clearly authorizes the charge back and that the corporation has failed to obtain the owner’s compliance despite reasonable, good faith efforts on the part of the corporation, the Court will likely support the charge backs and validate any lien registered to secure payment by the owner (even in the absence of previous a court order authorizing the charge backs).

This article was written by the SimpsonWigle LAW LLP Condominium Practice Group, which is comprised of lawyers that provide condominium services to developers, condominium corporations, property management firms and unit owners. SimpsonWigle LAW LLP proudly acts for over 650 condominium corporations in Ontario and has over thirty years experience in advising clients on condominium related issues. Our firm’s depth of knowledge and high-end service is highly regarded throughout the condominium community. For more information please visit our website at https://www.simpsonwigle.com/.

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