Many condominium corporations share facilities with other condominiums and/or retail or commercial properties. The costs of running and servicing the shared facilities are most often set out in a shared services agreement entered into by the developer before the condominium is created and then registered on title.
In a recent case, TSCC No. 1487 v. Market Lofts Inc. (“Market Lofts”), a residential condominium corporation successfully sued Market Lofts, the other party to the Shared Services Agreement, for shared expenses going back eight years. The Shared Services Agreement set out the allocation of shared costs between the parties. The Shared Services Agreement also provided that to secure payment of monies owing under the Agreement plus interest and costs, in the event of any default in payment, the creditor party would have a lien on the property of the defaulting party, which would be enforceable in the same manner as a mortgage in default.
Due to inadvertence by the board of directors of the condominium corporation and a prior property manager, Market Lofts was never billed for its share of the shared costs. This was brought to the attention of the board of directors upon a new property manager being hired. Thereafter, the corporation billed Market Lofts $162,497.60 for shared costs, plus interest, going back eight years. Market Lofts refused to pay, claiming that there was an understanding between the parties that the Shared Services Agreement would not be adhered to and that each party would take care of their own expenses. Market Lofts also took the position that the condominium corporation’s claim was barred by the two-year limitation period set out in the Statute of Limitations.
The Judge determined that there was no evidence to support any understanding by the parties that the agreement would be ignored. “The allocation of shared expenses is precisely the purpose of the Shared Services Agreement and there is no ad hoc arrangement between the parties.”
The Court also rejected Market Lofts’ position that the claim was barred by the Statute of Limitations on the basis that this legislation was not applicable to the corporation’s claim. As the payment of unpaid amounts under the Shared Services Agreement was secured by a lien enforceable in the same manner as a mortgage in default, the condominium corporation’s claim fell under the Real Property Limitations Act, which has “a ten-year limitation period for an action to recover out of any land any sum of money secured by a lien or otherwise charged upon or payable out of the land.”
The first board elected by the unit owners after turnover by the developer should be carefully reviewing the corporation’s declaration and any cost sharing agreements with other condominiums or property owners (or instructing the corporation’s legal counsel to carry out the review) in order to determine the corporation’s rights and responsibilities. Failure to do so could result in a failure to collect shared expenses to which the corporation is entitled, as in this case, or alternatively could put the corporation in the position where it has to catch up to pay several years of past shared expenses. We have also seen situations where title to parking units and recreational facilities should have been transferred to the condominium corporation but never transferred due to inadvertence.
This case is the third case that we have recently blogged about, where one party has taken the position that the other party’s claim is barred because legal proceedings were commenced after expiry of the two-year limitation period set out in the Statute of Limitations. Any party that has a claim should be consulting with legal counsel sooner rather than later to ensure that claims are made before the expiry of the applicable limitation period. The determination as to when the limitation period starts running is often not a simple matter.
Having a claim barred because of expiry of the limitation period will prevent a party from having a court determine the outcome of a case based on merit.
