And the Bill Just Keeps Getting Higher: Condo Fees and Legal Costs in SK

SKRealEstateBlog Condominium Blog FI

 

When doing work for condominium corporations, one big obstacle in their decision making process is the legal costs associated with enforcing bylaws or collecting fees.  A big legal bill could result in an increase condominium fees, and a report to the other owners on why their bills are going up to deal with a problem that was created by one of the other owners.  Many other jurisdictions have come out in support of full legal fees being paid by breaching owners, but we have not seen a clear decision on this topic here in Saskatchewan — until now.
As a good news decision for condominium corporations in Saskatchewan, the court in Hallmark Place Condominium Corporation v McKenzie, 2015 SKQB 260 (CanLII), http://canlii.ca/t/glf79has come out in support full indemnification of legal fees, when the underlying facts support it. 
In short, the owner of the condo unit was refusing to pay condominium fees.  From the decision, the owner was upset over the failure to have improvements within its unit insured by the corporation, and from the failure to adequately repair some aspect of the common property in a timely and adequate fashion, causing losses to increase.  The unit owner decided that it would hold back condominium fees to set off for its losses caused by these failures.   As the court noted, attempting to set off this amount in this fashion is contrary to section 54(3)(b) of the Condominium Property Act.  The owner was advised of that statutory breach as well.
The court originally decided an application where the lawyer for the condominium corporation was seeking summary judgment for the fees that were owed, and the condominium corporation was successful.  The court delayed the enforcement and gave the parties some time to come to an agreement on costs.  When they were unable, the court provided the above noted decision. 
The court begins its analysis in looking at the test for awarding solicitor/client costs in civil litigation, namely dealing with conduct that is “scandalous, outrageous or reprehensible”.  In this case, the court noted that the defendants ‘stuck obstinately to their meritless position”, but they did not have conduct that met this test. 
However, the court identifies that condominium are a different creature entirely. Noting the unfairness of having other owners pay for the breach of one, the court indicates that the usual test is not applicable for condominiums.  At paragraph 36, the court notes:
“In my view, in the face of an owner defaulting on a CPAstatutory duty or a bylaw obligation in a condominium corporation context, the condominium corporation should, prima facie, be entitled to a complete indemnity. Of course, that is a rebuttable presumption which will turn on the facts in each case.”
Also, as a cautionary note, the court does review the proportionality of the fees (around $25,000) to the amount to be collected (around $38,000). Also, some of the legal fees were related to their defence of a claim by the unit owner.  Those fees were removed from the award.  The court reduced the fees to just over $20,000, and that award was to include the fees in the costs application. 
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