The Ontario Court of Appeal recently overturned a decision of the Superior Court, in which the Judge found a Board had acted oppressively by refusing a unit owner’s request (made under section 98 of the Condominium Act) to modify the common elements of the condominium.
The July 2016 decision of 3716724 Canada Inc. v. Carleton Condominium Corporation No. 375 concerns a mixed-use condominium located in the Byward Market area of Ottawa, Ontario. The unit owner is the owner of commercial parking units within the condominium’s garage. Those parking units were being used for monthly parking. The unit owner requested the Board’s consent to make certain common element modifications in order to convert the garage from monthly use to a 24/7 “pay and display” parking operation. The Board advised the unit owner that it was only prepared to consent on the condition that the unit owner hire a full-time security guard. The unit owner refused, and instead brought an Application in Ontario Superior Court seeking a Court Order allowing the requested common element modifications.
The Application Judge granted the requested relief, on the basis that the Board had acted oppressively by requiring the security guard, which the Court said would be “prohibitively expensive”.
In reversing the Application Judge’s decision, the Ontario Court of Appeal confirmed that the “business judgment” rule is applicable in the condominium context. Put simply, elected boards of directors are in the best position to make certain decisions affecting their condominiums. In this case, having found that the Board acted reasonably, honestly, and in good faith, the Ontario Court of Appeal said that the Board’s decision in relation to the unit owner’s request to modify the common elements was entitled to deference.
The Ontario Court of Appeal also provides some helpful commentary that offers guidance on the circumstances under which it is appropriate for a court to interfere with the decision of a condominium board. Here’s the relevant extract from the Ontario Court of Appeal’s decision:
Therefore, to summarize, the first question for a court reviewing a condominium board’s decision is whether the directors acted honestly and in good faith and exercised the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. If they did, then the board’s balancing of the interests of a complainant under s. 135 of the Act against competing concerns should be accorded deference. The question in such circumstances is not whether a reviewing court would have reached the same decision as the board. Rather, it is whether the board reached a decision that was within a range of reasonable choices. If it did, then it cannot be said to have unfairly disregarded the interests of a complainant.
If you have a question about the modification of common elements in your condominium, or governance issues, contact either our Condominium Law Group or our Business Law Group.