Condo disputes: Keeping the lawyers out

Condos have a lot going for them: they’re cheaper than detached houses because they share infrastructure, making them ideal for first-time buyers. But condo law hasn’t kept pace with the explosive growth of the market — and with thousands of Canadians entering that market every year, the need for robust dispute settlement provisions has never been more urgent.

A homeowner in the average subdivision would call bylaw enforcement, or maybe a city councillor, if a neighbour was raising chickens illegally or holding raucous all-night parties. But condo owners are understood to have committed to a lifestyle that tries (as far as possible) to solve conflicts without the involvement of politicians and lawyers — and the expense and headaches that often come with it.

“I always tell clients, ‘If you don’t like people and you don’t like rules, you ought not to live in a condo,’” says Roberto Noce, Q.C., a partner at Miller Thomson LLP in Edmonton and a specialist in condo law.

A condo is a hybrid of private and communal property. Condos are sometimes referred to as Canada’s “fourth level of government” because they’re designed by law to be self-administering: they elect boards, levy fees, pass bylaws and settle disputes. But most jurisdictions in Canada are still tinkering with dispute settlement. The experience of the three major provincial condo markets — B.C., Alberta and Ontario — shows how difficult it can be to balance competing interests.

All jurisdictions in Canada offer mediation and arbitration as the primary means to settle disputes between condo owners, and between owners and condo corporations. While the idea is to keep disputes out of the courts and keep costs down, it hasn’t always worked out that way.

“A lot of parties have no interest in mediation,” says Armand Conant, a partner at Shibley Righton LLP in Toronto and head of the firm’s condominium law department. “Arbitration is faster — it costs more up front, while civil court costs less up front but can cost a lot more at the end of the day. People get forced into mediation and get bogged down in arbitration — it’s expensive and sometimes the parties play games.”

Most complaints about condo dispute settlement mechanisms centre on owner-corporation disputes. “The board has deeper pockets — it can access condo money to fight the fight,” says Conant. “It’s an unequal contest.”

In Ontario, the provincial government tapped the think-tank Public Policy Forum to convene roundtables and propose amendments to its 1998 Condominium Act. On the assumption that most disputes can be solved with better information, it recommended the establishment of an arm’s-length Condo Office that would, for starters, be a clearinghouse for information on the rights and obligations of condo owners, corporations and tenants.

The office would house something called a “quick decision-maker” — basically an official empowered to deliver swift rulings on minor board-owner conflicts over such things as the availability of corporation records and proxy votes at owners’ meetings. The office also would incorporate a Dispute Resolution Office to deliver non-binding, expert opinions on more weighty matters — like violations of condo bylaws. If the parties accept the verdict of the DRO, great — if not, the process moves through mediation, then arbitration, then into the courts.

“The idea is to discourage lawyers from getting involved in the early stages of a dispute,” says Conant. “Ontario is toying with the idea of prohibiting lawyers on small matters entirely.”

B.C. is ahead of Ontario on that front: its Civil Resolution Tribunal (CRT), expected to be up and running in about a year’s time, is designed to settle small-scale disputes in condo communities (called “strata” communities in B.C.) in record time — about 60 days, according to the province, compared to a year or more in Small Claims. The CRT bans lawyers almost entirely — no party to a CRT claim can be represented by a lawyer without the permission of the other party (the law makes an exception for parties who are minors, or whose mental capacity is impaired).

The idea is to keep costs down, but the backlash from the strata corporations and the legal community has started already.

“The problem from the strata corporations’ point of view is that here you have this group of volunteers being dragged into a dispute-resolution process without a whole lot of legal knowledge,” says Veronica Franco, a partner at Clark Wilson LLP in Vancouver and a strata law specialist.

Technically, CRT panel hearings are voluntary — unless a strata member insists on one, in which case the corporation has to take part.

Critics of the CRT and Ontario’s proposed Condo Office share a fear that such agencies will only impose a new level of bureaucracy on the system — slowing it down instead of speeding it up.

“If it gets abused by owners and corporations alike, it’ll get backed up,” says Josh Milgrom, an associate in Heenan Blaikie’s condominium practice group.

Ironically, Alberta — the first Canadian province to adopt a condo law, way back in the 1960s — is coming from behind on establishing a working dispute resolution process. “We don’t really have one,” says Noce. “Arbitration is only available if the parties agree — that seldom happens and usually the dispute ends up in court. That’s expensive and time-consuming.”

Earlier this month, Service Alberta Minister Manmeet Bhullar vowed to bring in a tribunal system by spring 2014 to divert condo disputes out of the courts. Details are fuzzy so far, but Noce says he thinks the province is looking at something like its Residential Tenancy Dispute Resolution Service — a body not unlike Ontario’s proposed “quick decision-maker,” authorized to make binding decisions on claims up to $25,000.

“It could end up being a tribunal, or some form of mandatory pre-court mediation system,” says Noce.

The stakes are high. Canada’s housing market came out of its recession swoon this fall, driven in part by robust condo sales. As the population ages, and as traditional houses become less affordable for first-time buyers, condos will make up a larger and larger share of new housing. The laws being written now will decide, in part, how a great many of us will live our lives in the future.

“The sky won’t fall if this doesn’t work — the market will keep growing,” says Noce. “But it’ll make day-to-day living in condominiums a lot more challenging. These are quality-of-life issues.”