A CONDOMINIUM OWNER S GUIDE To DISPUTE RESOLUTION IN ONTARIO A Dispute Occurs Informal Level (1) Property Manager (2) Board member(s) Mediation Arbitration Register Award Superior Court of Justice Superior Court of Justice Appeal Division By M. Jack Springer Arbitrator Condominium, Construction and Commercial Disputes Phone: (613) 258-6512 Fax: (613) 258-0816 E-mail: arbitration@jackspringer.ca Website: www.jackspringer.ca 1 P a g e
INTRODUCTION It goes without saying that when we purchase a Condo we are hopeful that we will enjoy everything about our chosen lifestyle and have a quiet, happy experience. Unfortunately there are 50+ court cases in Ontario each year that show that this doesn t always happen. As a past condo owner (twice) I am acutely aware that most condominium owner s (hereafter just referred to as Owner s) seldom have an understanding of the procedures required should they end up having a dispute with the Developer, Board of Directors or the Management Company of their Condominium Corporation (hereafter called CC or CCs). This is quite understandable as you have little reason or interest to know or understand the Ontario Condominium Act 1998. I might be generalizing a fair amount, but when and if a dispute becomes contentious it is usually the human factor that leads to discussions and disagreements. As you will see, the initial contacts, which I call the informal dispute resolution level, often result in some very hard feelings and difficulty in getting any sort of agreement whatsoever. Is this your situation? If so, then it is likely that what you, the Owner, really wants is an outside independent person, with the appropriate authority level, to listen to your position and make a decision (hopefully favoring your position) that is binding on all parties to the dispute. The aim of this paper is to provide a quick introduction into the procedures required so that you, the Owner, become more knowledgeable and can make informed choices. SOME RELEVANT PRINCIPLES OF LAW 2 P a g e BEFORE BEGINNING THE FIGHT We are a society that believes (generally) in the rule of law. Our court systems (except in Quebec) are based on the use of prior decisions by learned judges to shape the decisions of the future. The adjudicators of cases (judges or arbitrators) will look for similar issues decided by the courts by looking for a precedent (a previous decision that outlines the principles used in determining the decision). There is also a guiding principle in civil law that the party that is correct in its position should be compensated for its costs (in whole or in part). The good news about this is that if the adjudicator finds that your claim or response is valid that the other party would likely have to pay for all or part of the costs of your action. The bad news is that if you were incorrect you may have to pay all or part of the costs of your opponent. A third principle is that you have the right to have legal counsel or to self-represent should you choose. Given the first principle, the knowledge of the law is very important and will
be instrumental in the adjudicator s decision. Should it be your decision to self-represent, I would strongly recommend that you seek legal advicel to at least determine whether your position has any chance of winning. THE BOARD OF DIRECTORS/PROPERTY MANAGEMENT It is also important to discuss the roles of both the Board of Directors and the Property Management Company that is engaged to provide day to day management support. The Board of Directors is a group of owners elected by vote of all owners to manage the affairs of the CC. The Board usually has a Chairperson and other positions as are defined in a by-law of the CC. Larger CCs usually have a management company under contract to provide day to day management services to the CC and advise the Board of Directors. There are a few key points you as an Owner should be aware of concerning the Board and property management company: (1) The Board is responsible for all functions assigned to it in the Condominium Act. Failure to comply with the Condo Act is an offence (Ontario Condominium Act 1998 Section 137 (1) and (2)). (2) A Property manager employed by the CC comes under the same offence as Section 137 (1) if he/she knowingly contravenes specific sections of the Condo Act. (3) The declaration, by-laws and rules that are properly passed are there to ensure the wellbeing of all of the owners as a group (and specifically not every individual owner). How do we determine what is in the best interest of the group as a whole? The answer is two-fold: (1) by a vote of the majority of the owners for the by-laws; and (2) by the election of the individuals for the Board of Directors. All of this is leading to a major point. The Property Managers and the Board of Directors have a responsibility to enforce the declaration, by-laws and rules of the CC on behalf of all owners. If they do not, they can face very large fines should another Owner claim that they have failed to enforce the declaration, by-laws or rules. Please keep this in mind when entering early discussions about a potential dispute. They may seem unreasonable and not willing to look the other way, but they have no choice. That doesn t mean that actions of the Property Managers or Board of Directors are always the correct ones. Often they can interpret something one way when the courts interpret it another. This can happen especially with new members of a Board or particularly domineering individuals get elected to Boards. 3 P a g e
THE DISPUTE RESOLUTION FRAMEWORK So let s take the next step and consider what should happen when, and if, a dispute arises. The first point to be aware of is that the Ontario Condominium Act 1998 (hereafter called the Condo Act) is the authority for matters related to condominiums in Ontario. Throughout this Act there are a numbers of mandated requirements and procedures which are not always as clear as they may seem (as you will see below). I will attempt to use layman s language as much as possible in describing the requirements. However, I cannot get through this without referring to some of the sections of the Act. The best way that I have found to describe what the dispute resolution requirements are is to use a drawing, which I call the Dispute Resolution Framework for Condominium Disputes in Ontario. A Dispute Occurs Informal Level (1) Property Manager (2) Board member(s) Mediation Arbitration Register Award Superior Court of Justice Superior Court of Justice Appeal Division Figure 1: Dispute Resolution Framework for Condominium Disputes in Ontario. The diagram in Figure 1 seems simple enough, doesn t it? When a dispute occurs, the first level, the informal level, will try and resolve the dispute. If the informal level is unsuccessful the dispute passes into the formal level and either goes to mediation and/or arbitration or to the Ontario Superior Court of Justice. The Condo Act outlines fairly well which types of disputes are to be processed by each of the two routes. One note the mediation/arbitration route is considered equivalent to the first level of the Superior Court of Justice for those matters that are directed to go to the mediation and arbitration route. By registering an Arbitration Award with the Ontario Superior Court of Justice it becomes enforceable under the Ontario Arbitration Act 1991. Then, should one or more parties to the 4 P a g e
dispute find that they are unsatisfied with either the Arbitration Award or Superior Court of Justice Decision they may choose to appeal the decision to the Ontario Superior Court of Justice Appeals Division. Each of these will be discussed in more detail below. DOES YOUR CC HAVE A DISPUTE RESOLUTION BY-LAW? While the Condo Act outlines the what in dispute resolution, it is difficult to figure the how. The most appropriate way to do this is for the CC to enact a Dispute Resolution By-law. By doing so this will put in place the direction for how the dispute will be dealt with. In a separate article called The Need for a Dispute Resolution By-Law (which you may download free of charge at www.jackspringer.ca and which has been submitted to the Canadian Condominium Institute Ottawa Chapter for insertion in the Summer 2013 newsletter) I outline for the Boards of Directors and property management companies the need for such a by-law and recommend the information needed in each of four sections. As an Owner, I recommend that you consider asking whether your CC has such a by-law and if not, recommend that they develop one. THE INFORMAL LEVEL Once a dispute has arisen, the first level to attempt to rectify the problem is called the informal level. The informal level deals with and resolves in excess of 99% of all disputes or potential disputes. As one would guess, the first stage of this level involves those people that first become aware of the issue and who attempt to immediately resolve it to everyone s satisfaction. In a CC, the first interface will generally be the Property Manager or his/her staff, who is at the site the most often and either sees or is made aware of the problem resulting in the dispute. In most cases the Property Manager attempts to deal with the issue and resolve it if possible. The second tier in the informal level is usually one or more members of the Board of Directors. When the Property Manager cannot resolve the issue, it is reported to the Board and one or more Board Members then would attempt to get the issue resolved. Often this step will include one or both parties engaging their legal counsel concerning the issue and perhaps completing administrative steps, such as sending letters and notices, to record the issue and notify the other party to the dispute of the position being taken. I would like to digress for a moment and state that the informal level of dispute resolution is very important as it either resolves the issue or may entrench the positions of the parties for a long time. In most cases where disputes arise the people involved are reasonable 5 P a g e
and once the by-laws, rules or regulations are explained there is an agreement reached and the dispute is settled. While one or both sides may not be happy with the outcome, they reach an agreed action that resolves the dispute. At a recent Arbitrators Forum one of the presenters commented about a situation in a CC in which a potential dispute between an owner and some of the cleaning staff had arisen. A very elderly gentleman owner, who was in the initial stages of dementia, would flash the cleaning staff as they cleaned the hallways on his floor. No-one considered the gentleman a threat at his advanced age, but the Property Manager and Board had a responsibility to resolve the issue before it would become a criminal or labour dispute. They contacted the gentleman s relatives and together the family and the gentleman reached the decision to sell the Condo unit and place him in a full time care facility. The resolution of this dispute impressed me as an example of the informal level of dispute resolution acting with consideration, care and dignity in resolving the issue. Unfortunately not all potential disputes are handled in this manner by one or both sides (the legal term is parties) to the dispute. Determination, egos and stubbornness being what they are, disagreements can become entrenched to the point where one or both sides may be unwilling to change their positions. When this state is reached the dispute passes into the formal dispute resolution processes, where impartial outsiders, with the appropriate levels of authority, become involved in resolving the dispute. THE BASIS FOR RESOLUTION OF DISPUTES AT THE FORMAL LEVEL The Condo Act provides the basis for resolution of disputes. This is a bit complicated in that the Act states that disagreements between parties concerning the declaration, by-laws or rules will be submitted to mediation and, if necessary, arbitration (Section 132 (1)) but has numerous other statements throughout the Act that include the statement the Ontario Superior Court of Justice may. What this means is that unless there is a statement elsewhere directing the decision to the Superior Court of Justice virtually all disputes are to use the mediation/arbitration route. To which types of disputes does this apply? Section 132(1) states that any agreements as per 132(2) see below - are deemed to contain a clause with a provision that disagreements between parties be submitted to mediation and, if not successful, to arbitration. Section 132 (1) (b)(ii) provides some minimum timelines for arbitration after mediation has been tried (30 days when mediator indicates no resolution or 60 days when no mediator is appointed). To whom does it apply?. There are two sub-sections in 132 (2) and (4) that define to whom these provisions apply. 6 P a g e
Section 132 (2) outlines that the mediation and arbitration provisions apply to the following: (1) a declarant and a corporation, (2) an agreement between two or more corporations; (3) an agreement described in clause 98 (1) (b) between a corporation and an owner this relates to changes made by an owner to common areas not contrary to the declaration; and (4) an agreement between a corporation and a person from the management of the property. Section 132 (4) Disagreements between corporations and owners every declaration shall be deemed to contain a provision that the corporation and the owners agree to submit a disagreement between parties with respect to the declaration, by-laws and rules to mediation and arbitration in accordance with 132(1) and (2). I note that while this section does not state those issues within the declaration, by-laws and rules that are exempt from the requirement to proceed through mediation and arbitration. However, there are other sections in the Condo Act that state that certain issues can go directly to the Ontario Superior Court of Justice (Specific sections include 43 (8), 55(10), 74 (5), 74(8), 78 (2), 79 (3), 109(1), 130 (1), 131(1), 133 (2), 134 (1), and 135 (1)). As you can see Section 132(4) specifically directs disputes between corporations and owners to mediation/arbitration. That is of course unless one of the other provisions applies. I would venture that 90% or more of the future formal disputes will be using the mediation/arbitration route. To the Superior Court of Justice. As already mentioned, there are a number of issues that are clearly in the jurisdiction of the Ontario Superior Court of Justice. These tend to be the most serious issues imagined within the Condo Act. The types of disputes that are mandated by the Condo Act to go to the Superior Court of Justice include the following: (1) Safety and Security. This refers to the immanent safety and security of the people and/or the infrastructure of the CC (this is obvious if you need an emergency decision then the Superior Court of Justice is to handle this). Your legal counsel should provide you with the procedural requirements; (2) Issues related to the declarant failing to comply in the turnover to the first board of directors Section 43 (9) of those items from Section 43 (4), 43 (5) and 43 (7). Most 7 P a g e
8 P a g e CCs will have already effectively completed this so unless your dispute is with the developer (declarant) this may not apply to you. (3) Appointing an auditor - Section 60 (3).This relates to when an auditor is not appointed, a unit owner may apply to the Superior Court of Justice to have a qualified auditor appointed by the court. (4) Material changes in a disclosure statement - Section 74 (5) and (8). This again relates to a declarant making a material change to the disclosure statements once a person has signed a contract of purchase and sale. Sub-section (5) allows the purchaser and sub-section (8) the declarant to ask the Superior Court of Justice for a ruling on whether the change is a material change (and if so allowing the purchaser the right to rescind the deal). Again, this would only apply to you if you have bought a unit before the declarant has passed control to a Board of directors.. (5) Duty to register declaration and description - Section 79 (3). This section allows a purchaser to ask the Superior Court of Justice to terminate the agreements of purchase and sale if a declaration and description have not been registered as required by Section 79 (1). (6) Amendments to the declaration and description Section 109 (1) The corporation or an owner may make application to the Superior Court of Justice for an order to amend the declaration or description. (7) Mutual use agreements Section 113 (1) and (3). This section deals with agreements for mutual use, provision or maintenance or the cost-sharing of facilities and services before the owners elect a new board and the right to apply within 12 months of the election for the Superior Court of Justice to amend or terminate the agreement. Note that this refers to Section 43 (1) being the handover from the declarant to an Owner s Board of Directors. As an Owner, this will unlikely to involve you. (8) Expropriation: Termination the government of the property under the Condo Act Section 128 (1) and (2). This section outlines that a corporation, owner or person holding an encumbrance against a unit may make application to the superior Court of Justice for an order terminating the government of the property. (9) Appointment of Inspector (Section 130) or an Administrator (section 131). These sections allow an application to the Superior Court of Justice for appointment of either an Inspector or an Administrator when required based on specific provisions within these sections. (10) False misleading statements - Section 133 (2). This section allows CCs or owners to apply to the Superior Court of Justice for damages from a declarant that has made false or misleading statements.
(11) Compliance Order Section 134. This section allows an owner, an occupier of a proposed unit, a corporation, a declarant, a lessor of a leasehold condominium corporation or a mortgagee to an application to enforce compliance with provisions of the Condo Act. Note that Section 134(2) - Precondition for Application, states that if mediation and arbitration are available a person is not entitled to apply for a compliance order until the mediation and arbitration have failed. (12) Oppression Remedy - Section 135. This section allows the Superior Court of Justice to make any order it deems necessary if the court determines that the conduct of an owner, a corporation, a declarant, or a mortgagee of a units threatens to be oppressive or unfairly prejudicial to the applicant. Note: Common Elements Condominium Corporations have a few additional references that are not included in this list, as this is beyond the scope of the recommendations of this article. As you can see from the list above, there are a number of issues that, should they arise, would need to go directly to the Ontario Superior Court of Justice for resolution. THE MEDIATION AND ARBITRATION ROUTE Once the dispute has been evaluated and is not one of the issues that should proceed to the Superior Court of Justice, it would be assigned to go through mediation and, if necessary, arbitration. I ll introduce both the mediation process and the arbitration process below. Mediation. Mediation is the use of a qualified, impartial person to conduct discussions with both parties, together and separately, with the aim of assisting the parties in reaching an agreed solution. The ADR Institute of Ontario (known as ADRIO at www.adrontario.ca ) is mandated to maintain qualification of mediators in Ontario. Mediators need to be totally impartial and to become qualified have a number of areas of study including The Code of Conduct. 9 P a g e Some of the other questions you may have about mediation include: a. How do we find a mediator? The ADRIO maintains a list of mediators that can help. Also organizations like CCI could have the various chapters develop rosters of mediators in your area with experience in Condominium disputes. The by-law we discussed above should indicate how a mediator is to be selected. b. What will it cost for the services of a mediator? Mediators rates can be determined by contacting ADRIO at www.adrontario.ca and getting a few names of mediators in your area. The daily rates vary depending on the qualifications of the individuals.
c. How long will mediation take? A mediator should know fairly quickly whether there is likely to be movement from the initial position of the parties and whether agreement seems possible. Depending upon the complexity of the issues, a mediation could last hours, days or weeks. d. Where will the mediation occur? The mediator will likely require that the place for the mediation have, as a minimum, a central area where all parties can meet and at least one additional break-out area so that discussions can be held separately with the parties involved. Should the parties agree, you might choose an appropriate area within your condo, either in common elements or in offices. Should this not be possible the mediator can arrange an appropriate conference room at a nearby hotel. Unfortunately this will also entail additional costs to the parties. e. Who pays for the mediation services? Generally, the mediation services are paid equally by the parties. As an administrative expedient the CC could consider having the CC pay for this automatically and then having the half added to the owner s fees. Your bylaw could outline which option you would like to implement. f. What If the mediator is successful? If the mediator helps the parties reach an agreement, there should be a Settlement Agreement made and signed by all parties. g. What if the mediation is unsuccessful? The mediator should provide a letter to the parties indicating that the mediation is deemed unsuccessful and that a mediated agreement is not possible. The parties then should move to arbitration. The hopes of the parties entering the mediation should be to find the compromise that will permit all sides to reach an agreement. Can mediation be successful? Of course! A highly reported example where mediation was recently successful was in the 2012 NHL lock-out, where the initial positions of two very determined sides was mediated (finally) to reach a solution that allowed hockey to start again, albeit with a shortened season. Arbitration.. Is the use of one or more independent and impartial adjudicator(s) who is/are empowered to make a binding determination concerning the dispute at issue. Arbitrations in Ontario are governed by the Ontario Arbitration Act 1991 (hereafter the Arbitration Act) that sets out the responsibilities and procedures for arbitrations. Some of the key considerations to be aware of are as follows: a. Number of arbitrators on a panel. As it relates to disputes concerning the Condo Act the over-riding factor of costs usually will mean that there would be one arbitrator selected by agreement of the parties. In extreme cases there could be more than one, such as the example of three arbitrators on a panel, one selected by each party and a Chairperson selected by the first two arbitrators. 10 P a g e
11 P a g e b. Qualifications. Arbitrator qualifications are managed through the ADR Institute of Ontario (www.adrontario.ca). c. Impartiality. An arbitrator must be impartial and as such is not permitted to have discussions concerning the issues without all parties (or their legal representatives) participating. An arbitrator may be contacted to determine if he is available to conduct the arbitration by one of the parties (usually with the concurrence of the other parties). But all discussions thereafter are to include all parties. An arbitrator is also legally bound to disclose any circumstance that may give rise to a reasonable apprehension of bias (Arbitration Act Section 11 (2) and (3)). h. How do you find an arbitrator? The ADRIO maintains a list of arbitrators that can help. Also organizations like CCI could have the various chapters develop rosters of arbitrators in your area with experience in condominium disputes. The bylaw should indicate how an arbitrator is to be selected, such as each party selecting one or two names from a roster (first ensuring the availability of their selected arbitrator, of course) and the arbitrator selected highest by both sides will be the one selected. The by-law should also contemplate how an arbitrator would be appointed should one side not want to participate (such as having the next arbitrator on a CCI Roster being appointed). d. What will it cost to have the dispute arbitrated? This is always a touchy question. The answer usually depends on how the parties choose to proceed through the arbitration. Simply put, most arbitrators work on an hourly rate, similar to legal counsel (in fact most arbitrators are lawyers), although arbitrators may also agree to a fixed-fee structure as part of the arbitration agreement. There are other decisions that influence the overall costs, such as the selection of the location, requirement for recorded testimony or translation services, etc. An arbitral hearing is similar to a court case in that testimony is received by the arbitrator from presentation of documents and testimony from witnesses and each party is allowed to present its case in full. The arbitrator will then provide a written award, usually with reasons for the decision, within 30 days. In general, the Arbitration Agreement signed between the parties and the arbitrator (s) will outline the expected cost structure and the shares to be paid by the parties. Arbitrators are likely to ask each party to contribute its share of the costs to the arbitrator(s) in advance. e. Can an arbitrator s award include a decision regarding costs. Yes. The award may include assignment of costs, including the parties legal expenses, the fees and expenses of the arbitral tribunal and any other expenses related to the arbitration (Arbitration Act Section 54). f. Is the arbitrator s decision enforceable. The award binds the parties, unless it is set aside or varied (Arbitration Act 1991 Section 37). The arbitration award can be
registered with the Ontario Superior Court of Justice and it becomes enforceable by the courts (Arbitration Act Section 25 (7)). g. What about mandatory arbitration? The Arbitration Act Section 26 and 27 outlines the procedures for an arbitration where one party has the right to commence an arbitration and it or the other party (ies) does not submit a statement or fails to appear or produce evidence. If a CC has a bylaw requiring arbitration then either party could initiate the arbitration process and the arbitration would continue even if the other party chose not to participate. In doing so, someone outside of the CC should appoint the arbitrator a function that the roster of arbitrators with the CCI Chapter could resolve. THE APPEAL STAGE. The final stage in the dispute resolution framework is the appeal stage. Should any party to either a court case or arbitration award believe that there are justifiable reasons of law why the decisions were unfair to them, there is the right to appeal to the Ontario Superior Court of Justice - Appeals Division. CONCLUSION This has been an introduction to the Dispute Resolution Process for Condo Owners in Ontario. I hope you can see that the process is not clearly outlined in the Condo Act and therefore much confusion can exist. In my view, the best way forward is for the CCs to develop a Dispute Resolution By-law that allows management (Boards and Property Managers) as well as owners to understand the processes that will be followed should a dispute occur. Then should you, the Owner of a unit, have a dispute you will be fully informed on what the next steps towards resolution of the dispute. Again, I repeat, I believe that when the disputes do occur it is generally the informal level activities that have led the two or more parties to disagree. Then what is really needed is for a neutral, outside party with the appropriate level of authority to hear the cases presented by the parties and make a decision that is binding on the parties. The Condo Act provides two routes for this the Ontario Superior Court of Justice for those issues identified in various sections of the Condo Act and mediation/arbitration for all other issues related to the declaration, by-laws or rules of a CC. Thank you for taking the time to read this. I hope I have been helpful in increasing your knowledge about Dispute Resolution provisions in the Condo Act. 12 P a g e