A recent Court of Appeal decision, Orr v. MTCC 1056, highlights the need for condominium corporations to provide accurate status certificates to prospective condo unit purchasers.
In 1997, the purchaser, Ms. Rainville, agreed to purchase a re-sale townhouse condo unit. What she saw was a three-story townhouse and that’s what she thought that she was buying. Unfortunately, after closing her purchase transaction, she discovered that the third storey was not part of the unit, as it had been built by the previous owner without a building permit into the common element attic space. The description that formed part of the declaration and the condominium plans clearly indicated that the unit was a two-storey unit.
An estoppel certificate (now called a status certificate under the current Condominium Act) prepared by the condominium corporation’s property manager had been provided to the purchaser prior to closing, which incorrectly indicated that there were “no continuing violations of the declaration, by-laws and /or rules of the Corporation.”
Prior to moving into the unit, the purchaser began renovations, at which point a number of construction defects were revealed, including a leaking roof. As the roof was clearly part of the common elements, the purchaser notified the condo corporation about this. The condo corporation responded by telling her to “stop all work in the unit until further notice.” However, the purchaser continued with the work as she was eager to complete the renovations and move in.
The condo corporation then retained an engineering firm to advise on what work would be needed to fix the roof leaks. At that point the condominium corporation became aware that the third storey was not part of the unit and it notified the purchaser about this, who continued with her renovations nonetheless.
The purchaser then sued her lawyer, the condominium corporation, several past and present board members, the management company and a couple of its employees. The purchaser’s lawsuit included an application for a court order to amend the declaration to include the third floor as being part of the unit. Initially the condominium corporation offered to pay for the roof repairs and offered the purchaser a lease of the third floor common elements, but it subsequently withdrew that offer and demanded the purchaser stop “using, altering, repairing, occupying or entering the third floor.” Multiple cross claims and counterclaims ensued.
The trial judge refused to make an order to amend the declaration, but awarded the purchaser damages of over $400,000 plus $300,000 in costs. (The trial lasted 43 days over three months.)
Ms. Rainville and all of the parties appealed.
The Court of Appeal made a number of findings:
- Although the certificate was prepared by the property manager, the condominium corporation was ultimately responsible to the purchaser for its content, as the property manager was acting as agent for the condominium corporation.
- The condominium corporation was obligated to “take reasonable steps to ensure the information in the certificate was correct, even if the information was not statutorily mandated.”
- The purchaser relied on the estoppel certificate to her detriment.
- The purchaser’s lawyer fell below the required standard of care as the lawyer had not shown the purchaser all of the plans that would have indicated that the unit was only two-storeys.
- The purchaser was entitled to compensation from the condominium corporation for the costs of the repairs she undertook to the common element roof as the condominium corporation had the statutory duty to maintain and repair the common elements.
- The purchaser’s lawyer and the condominium corporation were liable to the purchaser for the difference between the value of a renovated three-storey unit and a two-storey unit.
- The management company was required to indemnify the condominium corporation for its error in completing the estoppel certificate.
- The trial judge’s refusal to make an order to amend the declaration to include the third storey in the unit was correct. However, the Court of Appeal determined that the purchaser was not required to close up the third floor and had no obligation to pay any occupation rent for the use of the common elements space.
This case provides a wake-up call to property managers and condominium corporations: it is crucial that the information contained in the status certificate is accurate, as purchasers are entitled to rely on them.
