Can condo corporations charge back for legal fees?

June 3, 2021 | Justin McLarty

The Condominium Authority Tribunal’s (“CAT” or the “Tribunal”) recent decision in Peel Condominium Corporation No. 96 v. Psofimis (“Psofimis”) should bring relief to condominium corporations across Ontario. In Psofimis, CAT awarded the corporation the legal fees it incurred pursuing enforcement action against an owner.

In Psofimis, the unit owner had a history of violating the corporation’s pet weight restrictions. This included an incident with a previous dog whereby the corporation agreed to “grandfather” the animal if the owner signed an agreement that they would not again contravene the weight restrictions if the dog passed away. Despite signing the agreement, the owner purchased a new dog which grew to contravene the weight restrictions.

The corporation took the traditional approach to enforcement. First, letters and correspondence were sent by property management, at no cost to the owner. When management’s efforts were ignored, the corporation’s legal counsel were involved, at the cost of the owner. Finally, when the owner continued to refuse to remove the dog, the corporation commenced the CAT case.

CAT ultimately ordered the owner to remove the dog from the property, and to pay to the corporation the $200 in filing fees, the costs of the enforcement letter that was sent to the owner, as well as the legal fees it incurred in the CAT case.

The Tribunal’s reasoning for awarding the corporation its compliance costs is important to consider, given Rule 46.1 of CAT’s Rules of Practice (the “Rules”), which provides that legal costs will only be awarded in exceptional circumstances.

The Tribunal found that the costs of a compliance letter could not be ordered as a cost before CAT, but did find that the costs of a compliance letter can properly be characterized as compensation for damages incurred as a result of non-compliance. This reasoning makes sense, given that a compliance letter will have been sent before a CAT case is commenced, and is in line with previous court decisions that have found that other condo owners should not be financially penalized by paying for the costs of enforcement against an offending owner.

One such case is Chan v. Toronto Standard Condominium Corporation No. 1834, which the Tribunal relied on to find that the owner should pay for the costs of the compliance letter. In that case, CAT held that the owner should be required to pay the costs as a form of damages to ensure that the other owners would not bear the cost of the owner’s “wilfully defiant conduct.”

In terms of legal costs incurred during the Psofimis case, the Tribunal found that exceptional reasons did exist to award costs against the owner. This finding, again, was firmly based on the owner’s deliberate and repeated refusals to comply with the corporation’s pet weight rules.

Psofimis is an encouraging decision for condominium corporations, as it establishes a basis to recover not only legal fees incurred during a CAT case itself, but legal fees incurred by a corporation prior to the case being commenced. With that said, there are a few things to keep in mind:

  1. Taking a progressive series of enforcement measures is important in almost all cases. In finding that the necessary exceptional circumstances to award legal costs existed in Psofimis, CAT appears to have placed considerable emphasis on the fact that the owner repeatedly failed to comply with the corporation’s efforts to obtain compliance.
  2. The costs of enforcement, whether incurred before or during a CAT case, may not always be recoverable in situations where it is not a clear-cut matter as to whether the owner’s conduct contravenes the corporation’s governing documents. In Psofimis the Tribunal found that there was a clear violation.
  3. The reasoning for the award of legal costs in Psofimis likely will not be easily transferrable to records disputes before CAT. The award of damages and legal costs seems to have been heavily driven by the owner’s clear and blatant disregard for the corporation’s rules.

With those caveats in mind, Psofimis should bring some much needed clarity on the ability of corporations to recover compliance costs in matters that now fall under CAT’s jurisdiction.

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