Condo Owners Beware: Failure to Remit Condo Fees Could Result in Extra Legal Fees

The Condominium Property Act, 1993 (Saskatchewan) (the “Act”)places a statutory obligation on an owner to remit condo fees (ie. common expenses and reserve fund fees), and specifies that an owner is not exempt from that obligation even if the owner is in litigation with the condominium corporation.   This means an owner cannot use a refusal to pay condo fees as leverage against the condominium corporation when a dispute arises, or in protest of a decision of the condominium corporation. 

Our Court’s recent decision in Hallmark Place Condominium Corporation v. McKenzie, 2015 SKQB 260 [“McKenzie”] underscores the importance of this statutory duty. The McKenzie decision recognizes that in a cooperative ownership structure, like a condominium, one owner’s default of its statutory duty and/or duty pursuant to the condominium bylaws directly and unfairly prejudices the rights of the compliant owners.

The owner in the McKenzie decision resided in a condo on the top floor of the building.  He experienced water seepage into his unit that originated from the roof, and alleged that this seepage endured periodically over a seven year period.

A dispute arose between Hallmark Place Condominium Corporation (“Hallmark Place”) and the owner regarding the handling of the issue and the extent of Hallmark Place’s obligation to repair the water damaged unit.  To signify his protest, the owner ceased making his monthly condominium fee remittances.

Hallmark Place then filed a lien, as permitted under the Act, against his unitand after attempts to resolve the dispute proved fruitless, it subsequently commenced legal action to collect the outstanding condominium fees. 

The property manager made various attempts, and invested a considerable amount of time, to resolve the dispute prior to commencing legal action.  Further attempts were undertaken by Hallmark Place to resolve the dispute as part of the litigation process; however, success proved elusive.  Meanwhile the condo fee arrears continued to accumulate and Hallmark Place was deprived of the owner’s monthly remittances, thereby increasing the burden on the other owners to pay the operating expenses.

Hallmark Place ultimately applied to the court for judgment for the arrears, and sought an order from the Court that the owner pay all legal fees incurred by Hallmark Place.

The Court granted judgment in favour of Hallmark Place for the outstanding condo fees, but adjourned the issue of costs to permit the parties a further opportunity to resolve the issue by agreement.  Agreement proved not to be possible and the issue of costs was returned to the Court for a decision. 

The Court found that the owner “stuck obstinately” to his “meritless position” and went on to order that the owner was responsible for 80% of the legal fees of Hallmark Place.
The Court distinguished the indemnification of a condominium corporation by an owner for solicitor - client costs from the usual legal test employed by our courts. In so doing, the Court noted that the default of one owner prejudices all other owners who are complying with their obligations and the bylaws.

The question that now presents itself, is how far courts will extend this principle in other types of disputes between an owner and a condominium corporation when the condominium corporation is forced to incur legal, or other, fees.  Should the co-owners be forced to pay legal fees from the common expense fund to hire a lawyer to enforce a no pet bylaw, or to deal with a continually obnoxious tenant?

Regardless of how such matters are decided, it is clear that the McKenzie decision can be a powerful tool for condominium corporations when dealing with non-compliant owners. 

Lawyers at McDougall Gauley LLP are routinely retained by condominium owners, property managers, and condominium corporations to advise them on their respective rights under statute law and the respective bylaws so that costs incurred and assessed from unnecessary litigation (as in McKenzie) can be avoided.