In a recent case, Noguera v. Muskoka Condominium Corporation No. 22, a unit owner, Mr. Noguera, sued the condominium corporation, claiming that it had acted in a manner that was oppressive and unfairly prejudicial to him.
Mr. Noguera was planning to buy an adjacent unit, but before committing to buy it, he asked the condominium board to grant permission to open up the interior demising wall between the 2 units. As this opening would constitute a change to the condominium common elements, such work could not be done without the board’s approval as required by section 98 of the Condominium Act, 1998 (the “Act”).
At the time that approval from the board was requested, both Mr. Noguera and the owner of the adjacent unit were board members on a board comprised of 4 directors. At the meeting the owner of the adjacent unit declared a conflict of interest and left the meeting during the discussion and vote. Mr. Noguera remained in the room for the discussion and vote, but did not vote.
The minutes of the board meeting indicated that the proposed alterations were minor alterations and approval was granted subject to the following:
- that the unit owner pays all costs;
- that the alteration does not affect the use and enjoyment of adjacent unit owners;
- that the alteration does not affect the symmetry of the building;
- that the alteration does not affect the corporation’s budget;
- that all necessary engineering and Town approvals be given before the work starts;
- that the wall was to be returned to its prior state at no cost to the corporation if the owner sold one of the units; and
- the two units could never be sold as one unit.
The corporation provided a letter to the Town of Huntsville confirming that it had approved the changes and that all conditions had been approved to the board’s satisfaction. After the plans were approved by the Town and a building permit was issued, Mr. Noguera purchased the adjacent unit and proceeded with the work. In addition to making openings on both the first and second floor levels, Mr. Noguera made significant changes to the two units to create one liveable space, including the removal of the kitchen from one unit. Mr. Noguera spent approximately $230,000 on these changes.
Mr. Noguera did not enter into a section 98 agreement with the corporation as required by the Act. Section 98 agreements set out the duties and responsibilities of the unit owner and the corporation relating to changes made to the common elements by an owner. These agreements are required to be registered on title to the unit, with the effect that the obligations relating to the changes are binding on subsequent owners of the unit. Apparently, many other owners had previously made changes to the common elements, but it was not the practice of the corporation to enter into section 98 agreements.
After a new condominium president was elected, concerns were raised because Mr. Noguera had not entered into a section 98 agreement. The board determined that Mr. Noguera and all other owners who had previously made changes to the common elements would be required to sign section 98 agreements. A letter (described by the Court as a heavy-handed threatening letter) was then sent to Mr. Noguera by the corporation’s solicitor demanding that all work stop. However, all of the work was completed in accordance with the plans submitted to the Town and the corporation.
A form of section 98 agreement was sent to all owners who had made changes to the common elements. However, the form of agreement sent to Mr. Noguera contained an additional clause that specified that if the unit was sold the unit would be restored to the condition it was in before the work was done, including the reinstallation of the demising wall and any other related changes (which included all changes made to the interior of the two units to create one living space).
Mr. Noguera then commenced an application claiming that the corporation had acted in a manner that was oppressive and unfairly prejudicial to him on the basis that the corporation was attempting to retract its permission to make the changes that were previously approved and that the form of the section 98 agreement presented to him was much more onerous than the agreements presented to other owners.
The corporation took the position that no permission was granted because Mr. Noguera had a conflict of interest and as a result, no quorum was present at the meeting when the board considered Mr. Noguera’s proposed changes. The Court concluded that there was no conflict of interest and that the corporation did grant permission to make the changes at the meeting. The Court determined that while the proposed changes were material to Mr. Noguera, he did disclose his interest and the changes (which were described as minor alterations in the minutes) were not material to the corporation as there was no financial or other impact to the corporation.
The court further determined that the condominium corporation had treated Mr. Noguera more harshly than the other unit owners who had made changes to the common elements without having entered into a section 98 agreement and that the corporation was oppressive and unfairly prejudicial in its treatment of Mr. Noguera.
“I further find that the Condominium, by purporting to require a term in the section 98 agreement that goes beyond both its own approval and what it required of other unit owners was abusive and unfair and prejudicial to the applicants. The additional term in the Condominium’s form of agreement would mean that they would have to undo changes for which no approval was needed in the first place. The requirements of the oppression remedy under section 135 have therefore been met.”
The corporation was also ordered to pay Mr. Noguera $10,000 in damages arising from the Condominium’s oppressive and unfair conduct.( Mr. Noguera had requested damages of $25,000). The Court also ordered the parties to enter into a section 98 agreement that provides that if either of the units is sold the demising wall must be reinstalled.
The Court noted that the corporation was primarily responsible for the circumstances that led to the dispute with Mr. Noguera as a result of its practice of not requiring owners to enter into section 98 agreements.
This case should emphasize to all condominium corporations the importance of having section 98 agreements executed and registered on title before permitting any owner to make any additions, alterations or improvements to the common elements.
