Terminating Mutual Use Agreements by way of Court Application

April 2, 2019 | Jason Rivait

Section 113 of the Condominium Act, 1998 (Ontario) (the “Act”) authorizes a condominium corporation to apply for a court order to amend or terminate a mutual use agreement within twelve months of the turnover meeting, provided that: (i) the disclosure statement did not “clearly and adequately” disclose the provisions of the agreement; and (ii) the agreement, or any of its provisions, produces a result that is “oppressive or unconscionably  prejudicial.”

The Ontario Superior Court of Justice clarified the meaning of clear and adequate disclosure in Toronto Standard Condominium Corporation No. 2130 v York Bremner Developments Limited  (“York Bremner). A declarant can impose an unfair or one-sided mutual use agreement if the declarant brings those provisions to the attention of the buyers and explains the risks of oppressive/unconscionably prejudicial results in the disclosure statement. It is not sufficient for a declarant to simply include the mutual use agreement in the disclosure statement. Instead, a declarant must provide sufficient information for “a buyer to see (clearly) and understand (adequately) the provisions that may result in oppression or unconscionable prejudice.” That said, a declarant is not required to disclose every possible oppressive consequence, whether anticipated or not,  but rather only those that are reasonably foreseeable or known at the time of disclosure.

Clear disclosure can be objectively assessed, and means a transparent explanation of the important terms of the agreement.

Adequate disclosure is a more subjective assessment and takes into consideration the consumer protection purposes of the Act. This is a fact-specific determination and requires a balancing of commercial certainty to the declarant and consumer protection to the owners.

A declarant would have made an adequate disclosure of potentially oppressive or unconscionably prejudicial terms in a mutual use agreement if the disclosure statement included information pertaining to what was known or reasonably foreseeable at the time of disclosure, so as to put the purchaser on notice of the foreseeable risks being undertaken. The Court in York Bremner set out the following instances of adequate disclosure:

  • If there was no known or reasonably foreseeable risk of an oppressive result, then clear disclosure of those terms is adequate;
  • If there was a known or reasonably foreseeable risk of an oppressive result, then the declarant must clearly notify the purchasers of the risk of that outcome;
  • If the mutual use agreement permits the declarant to act in an oppressive manner, then the declarant must clearly notify the purchasers of the risk of that outcome; and
  • If the declarant has the power to impose a harsh outcome (i.e. have sole control of the shared facilities manager) and that outcome is reasonably foreseeable, then the declarant must clearly notify the purchaser of its power to impose such an outcome.

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