Uncommon Common Expenses
It is hardly news to a board of directors or a condominium manager that condominium corporations require contributions from owners, in the way of common expenses, to be able to function. Common expenses are, in the words of Justice Lane in York Condominium Corporation #482 v. Christiansen, “the life blood of the [condominium] corporation.”
Most common expenses are payable – and paid – in respect of what are often referred to as maintenance fees; that is, the regular monthly payments which each owner must pay to the corporation, and which allow the corporation to pay staff, operate and maintain common elements and shared facilities, and so on. However, from time to time other expenses arise which are also considered to be common expenses. These might include special assessments, or costs to repair damage caused by an owner, resident or guest of a unit.
At some point, though, a disagreement may arise between an owner and a condominium corporation as to what can properly be considered a common expense. Occasionally, these disagreements go as far as to result in a court action between the owner and the corporation. While most would not view the need to resort to litigation as a positive, one good thing that does come out of these cases is some additional clarification of the grey areas around the edges of what can be considered common expenses.
In Mancuso v. York Condominium Corp. #216 , a 2008 case, the plaintiff was a unit owner who had owned her unit since 1985 and who had rented her unit out for most or all of that period. In 1996 , the corporation entered into an agreement with Rogers Cable for the supply of bulk cable television services to the corporation. The total cost of the services was divided by the number of units, and the fees payable by each individual unit were then added to each unit’s common expenses in the same manner as utility fees. From 1996 to 2003 , Mancuso apparently paid these fees without question, and she stated that it was not until one of her tenants asked her about reducing the cable portion of the common expenses that she realized that the cable television fees were being included in her common expenses.
Mancuso subsequently investigated the matter and came to the conclusion, apparently on her own, that the corporation did not have the authority to charge cable fees to the owners in the manner of common expenses. Accordingly, she decided to stop paying that portion of her common expenses. The corporation took the position that the amounts were owed regardless of Mancuso’s opinion on the matter, and, after she continued to refuse to pay, eventually registered a certificate of lien on Mancuso’s unit. Mancuso and the corporation were unable to reach any sort of agreement with respect to a proper amount owing, resulting in this action.
The court first looked at the definition of “common expenses,” which is defined in the Condominium Act as “expenses related to the performance of the objects and duties of the Corporation and all expenses specified as common expenses in [the] Act or in a declaration.” In total, there are ten sections in the Act that specify common expenses. As neither the Act nor the corporation’s declaration contained a provision specifying cable television charges as common expenses, the court then examined whether the expense was related to the performance of the objects and duties of the corporation. Subsection 56(1) (n) of the Act states that a condominium corporation may make bylaws to specify the duties of the corporation. In the course of this examination, it found that one of the duties of the corporation, as set out in one of the corporation’s bylaws, was to arrange for the supply of utilities to the common elements and to the units. The court held that cable television was sufficiently similar to a “utility” that the duties of the corporation under this bylaw could reasonably include the provision of cable television.
The court based this conclusion on, among other considerations, the fact that it was – and is – common practice for condominium corporations to enter into agreements of this type, and corporations generally can negotiate more favourable terms for unit owners by doing so. One may note that the court also acknowledged that the definition of “common expenses,” as set forth in the Act, is inherently flexible and is contributed to by the declaration and bylaws of a corporation, particularly with respect to the duties of the corporation.
In Italiano v. Toronto Standard Condominium Corp. #1507 , which was decided a few months after the Mancuso case, the unit owner had purchased his unit in late 2006 and had been given permission by the condominium corporation to install laminate flooring in his unit. After this flooring was installed, the corporation received noise complaints from the units underneath and beside Italiano’s unit. Further to these noise complaints, the corporation wrote a number of letters to Italiano, but these letters did not remedy the complained-of behaviour. Italiano subsequently requested a sound transmission test to determine the sufficiency of the sound transmission material in the walls and floors, which request the corporation refused, and the matter was referred to mediation. On the advice of counsel, Italiano did not attend the mediation, and the matter was subsequently referred to arbitration.
During the arbitration hearing, which was completed in parts over a number of months, the arbitrator ordered a report from an acoustical sound engineer. This report concluded that the sound transmission material in the building’s walls and floors did comply with building code minimum standards, albeit barely. At the conclusion of the hearing, the arbitrator ruled that Italiano’s unit had been the source of frequent disruptive noise, and that the corporation and management had made all reasonable efforts to bring the issue to Italiano’s attention and suggest prospective solutions to the issue. Accordingly, he ordered Italiano to pay the full costs of the arbitration and the corporation’s costs on a substantial indemnity basis, and he ordered these costs to be added to the common expenses payable in respect of Italiano’s unit, which had the effect of making them enforceable by way of registration of a lien.
Italiano applied to the Superior Court of Justice for leave to appeal this decision. His application was made on numerous grounds, most of which were dismissed. One that was not dismissed, and which the court examined in some detail, was the question of whether the arbitrator had the authority to order the costs payable by Italiano to be added to his unit’s common expenses. Italiano argued that section 134(5) of the Condominium Act, which states that costs incurred by a corporation in obtaining a compliance order shall be added to the common expenses for a unit, did not apply to the arbitrator’s cost award. The court agreed, stating that costs associated with compliance orders granted by courts are distinguishable from costs associated with compliance orders granted by arbitral tribunals.
However, the condominium corporation’s declaration stated that, in the event that the corporation needed to take steps to abate noise in an owner’s unit, that owner would be liable for all costs incurred by the corporation in taking such steps and this liability would be deemed to be additional contributions to the common expenses and recoverable as such. The court held that this provision allowed the corporation to collect its costs of the arbitration, totalling $77,762.57 , to add those costs to the common expenses payable in respect of Italiano’s unit, and to enforce that collection by way of registration of a lien.
This case underlines the importance of a condominium corporation’s declaration giving the corporation the ability to recover these kinds of costs. The definition of “common expenses” in the Act includes expenses defined as such in the declaration, and the court in Italiano recognized that this gives corporations the ability to designate what common expenses it can charge to unit owners. As the court stated, “it seems to me that a corporation can collect an arbitral costs award in the same manner as common expenses if they are so specified in the declaration. This would allow it to register a lien, pursuant to s. 85(1) , for unpaid common expenses.”
It is clear from these and other cases that there is much more to the idea of common expenses than meets the eye. A corporation’s board and manager should examine the corporation’s condominium documents carefully to determine whether certain expenses are chargeable as common expenses to the unit of the owner who causes the corporation to spend the money.
Brian Horlick, BA, LLB is a senior partner in the law firm Horlick Levitt and practices extensively in the area of condominium law. He is a director of the Canadian Condominium Institute, Chair of the CCI Legal & Governmental Affairs Committee, Chair of the ACMO Associates Executive Communications Committee and is a regular lecturer on condominium law to property managers seeking to obtain their RCM designation.