In a recent case, Patterson v. YCC No. 70, a condominium unit owner sued the condominium corporation and one member of the board of directors alleging that the corporation and the board had failed to perform their obligations under the Condominium Act, 1998 to manage the corporation’s affairs and assets. The owner asked the court for the following orders:
- an order for the corporation to raise the common expenses by a minimum of 14%;
- an order compelling the corporation to immediately take steps to fully fund the corporation’s reserve fund;
- an order that the corporation take immediate steps to repair the underground parking garage and replace the leaking roofs of the townhouse units;
- an order that the director be removed from the corporation’s board and the office of treasurer; and
- an order to appoint an administrator for the corporation.
The unit owner was a previous member of the corporation’s board. She felt immediate action was needed to “secure financial well-being of the corporation, protect the physical integrity of the condominium property and to comply with the Act”, as the board did not act in good faith and with due diligence.
While the owner was a board member, experts hired by the board had made a number of recommendations “to alleviate the financial difficulties the corporation was encountering”, which included an increase in the maintenance fees. However, the subsequent board did not continue with the maintenance fees increase that had been adopted by the prior board during the previous year.
The subsequent board had hired a new property manager with experience working with troubled older condominiums. The new manager worked with the board to update the budget. The board concluded that notwithstanding the recommendations made to the prior board, there was no need to increase maintenance fees. Repair work to the common elements was already in progress and there was no financial crisis.
The owner’s application was dismissed entirely. The Judge concluded that there was no evidence that the board had not acted “fairly and reasonably, in good faith, exercising the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances”, being the standard of care required under section 37 of the Condominium Act, 1998 (the ”Act”). The Judge noted that the business judgment rule applies to condominium corporations – as long as the board is meeting the standard of care required by law, the court “should not substitute its own judgment for those of the board, which has been elected by the unit owners.”
In politics, new governments often change course from the direction of the previous government and even take steps to reverse decisions made by the prior government. Just as in politics, a newly elected condominium board of directors can also change course. In this case the prior board member had difficulty accepting the decisions of the new board that did not jive with those taken by the previous board of which she was a member. However, this did not necessarily mean that the new board members had failed to meet the obligations imposed on them under the Act.
