The Court of Appeal recently considered whether a Condominium had the authority to charge owners who rented their units an administrative fee of about $120 each time the unit was rented. In answering yes, the court considered the specific wording of the Condominium by-law and the lower court’s finding that the Condominium found its actions to be reasonable.
Cottage resort units for rent
The respondent, Prince Edward Vacant Land Condominium Corporation No. 10, is a 237-unit cottage resort built near the Sandbanks in Prince Edward County, Ontario. The units are individually owned. The property is a summer resort and is not open in the winter. The units cannot be used as primary residences.
The owners of individual units were permitted to rent out their units on a short-term basis when they were not using them. At the time of the application, over half of the unit owners rented out their units on a short-term basis. Renters had access to the common amenities on the property, including pools, sports courts and a fitness centre.
The appellant, Cottage Advisors of Canada Inc. (CAC), was the developer and declarant of the Condominium from the beginning. It has also owned multiple units in the Condominium from its inception.
When the Condominium resort opened in 2011, the CAC, through a sister company (“SSVRM”), provided management services for the Condominium and onsite rental services for those unit owners who wished to rent their units. SSVRM charged fees for those services. A by-law passed in July 2011 directed that renters would be subject to a “rental amenity fee charged by the Corporation from time to time”. SSVRM collected the amenity fee. None of the unit owners, including CAC, ever challenged the fee.
The Condominium has been operating under a Board of Directors since 2016. However, the relationship between the Board and SSVRM has deteriorated over the years. The Condominium and SSVRM have litigated over SSVRM’s voting rights. The Condominium Board also terminated SSVRM’s management agreement. CAC takes the position that the Board is controlled by owners who do not rent and favours the interests of that group over the owners who do rent. CAC is an owner/renter.
The Board decided it would take over the oversight, control, and management of the rental activities at the Condominium. In furtherance of that goal, the Board introduced By-Law No. 7 in November 2020 addressing various aspects of the rental activities. The By-Law passed by an overwhelming vote. CAC challenged the vires and reasonableness of several components of the By-Law. The application judge struck down parts of the By-Law and upheld other parts. CAC appealed the application judge’s refusal to strike down two specific components of By-Law No. 7.
It was the CAC position that the application judge erred in holding the Condominium had the authority to charge owners who rented their units an administrative fee of about $120 each time the unit was rented. According to the By-Law, the fee was intended to cover costs associated with the renting process, e.g., registering renters, providing parking passes, and controlling access to the property.
The CAC further argued that the application judge was wrong in upholding the Condominium’s power to impose an amenity fee of $310 per week. The fee was payable by any owner who rented his unit and was intended to compensate for additional wear and tear on facilities and additional staffing costs said to relate to short-term renting.
The CAC’s secondary argument was that those parts of the By-Law were oppressive pursuant to the Condominium Act, 1998.
Court dismisses appeal
The Court of Appeal dismissed the CAC’s appeal.
Condominium corporations are creatures of statute. By-Laws passed by a condominium must be consistent with the declaration establishing the condominium and authorized under the terms of the Condominium Act, 1998. A by-law that is either inconsistent with the condominium’s declaration or not authorized by the Condominium Act will be deemed ultra vires.
In reviewing the specific wording of the Condominium Declaration, the court found that it was explicit in providing that the Condominium consists of units owned by owners who do not rent and owners who do rent their units. It was also equally explicit that those who choose to rent their units will be governed in part by “Rules and Regulations with respect to the rental of Cottage Units approved by the Board”.
Is the By-Law, to the extent that it sets an administrative fee and an amenity fee in respect of rented units, a “Rule or Regulation with respect to the rental of Cottage Units”?
In answering this question, the court gave due deference to the application judge’s factual findings and the to the Board’s own interpretation of the powers granted to it under the Declaration.
In considering the finding of the application judge, the judge was satisfied that the fees offset costs attributable to the renting activities of some of the owners. That finding was available on the evidence adduced on the application. That is, the manner in which fees attributable to renting have historically been treated by the Condominium provides strong support for that conclusion. Amenity fees attributable to costs relating to renting units have been part of the operation of the Condominium from the outset when CAC was in control of the operation.
As the application judge stated:
The By-law reflects a reasonable balancing which is confirmed by the overwhelming vote of the owners in favour of it.
Given the above evidence, the court found that the Board’s interpretation of its powers under s. 22 of the Declaration was not unreasonable, nor was it inconsistent with any provisions in the Condominium Act, 1998.
The court held that the By-Law was not oppressive within the meaning of the Condominium Act, 1998. Oppressive conduct connotes conduct that runs contrary to the reasonable expectations of those said to be oppressed. The history of charging these kinds of administrative fees and amenities fees throughout the life and operation of the Condominium belies any claim that the owners who rented did not anticipate and agree to such fees.
Oakville Lawyers Helping Clients with Commercial Real Estate Disputes
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