Part 1: To Chargeback or Not to Chargeback? That is the Question
Even if you are not a fan of Shakespeare, we all know the famous line spoken by Hamlet; “To be or not to be, that is the question: Whether ‘tis nobler in the mind to suffer the slings and arrows of outrageous fortune, or to take arms against a sea of troubles.” While this line may not appear to apply to the world of condominiums, on a second reading it rings true
when thinking about chargebacks. Recent caselaw, such as Peel Standard C.C. No. 779 v. Rahman, 2023 ONSC 3758 and Amlani v. York C.C. No. 473, 2020 ONSC 5090, seem to stand for the proposition that certain chargebacks may not be valid. This has left lawyers, property managers, and boards asking, “to chargeback or not to chargeback”. Will a chargeback lead to fortune (or more appropriately – indemnification) or lead to what Hamlet spoke of, “… a sea of troubles”?
The issue of chargebacks (or in other words, claims for indemnification by a condominium from a particular unit owner) arise on a daily basis in condominium living. Most often the issue arises when an owner or occupant of a unit damages the common elements, or breaches the declaration, by-laws, or rules and the condominium is required to expend funds
rectifying the damage or enforcing its governing documents. As condominiums do not have revenue, like a business corporation may have, the funds expended by a condominium in addressing these issues come in the form of common expenses from all owners – even those who had nothing to do with the damage caused or the rules broken. This may seem
unfair. Why should all the other innocent owners be required to foot the bill for the issues caused by one? This leads to the question Hamlet may have posed if he had lived in a condominium, “to chargeback or not to chargeback?”
In this article, we will break down chargebacks into three categories, being:
- Chargebacks outlined in the Condominium Act, 1998
- Chargebacks outlined in a condominium’s governing documents
- Enforcement costs chargebacks
i. The Condominium Act, 1998
The Condominium Act, 1998, S.O. 1998, c. 19 (the “Act”) is the overarching legislation that governs all condominiums in Ontario. Sections 84 through 88 of the Act set out the obligations and responsibilities for all owners to contribute to the common expenses and addresses situations where an owner fails to contribute. Section 84(3) of the Act requires all owners to contribute, regardless of whether that owner has waived their rights to use the common elements or is making a claim against the condominium. Where an owner fails to contribute, section 85 of the Act provides that the condominium has a super-priority lien against the defaulting owner’s unit which can be enforced the same way as a mortgage. This is a powerful tool which recognizes that it is unfair for innocent unit owners to have to make up for one owner’s failure to contribute.
What then when an owner causes issues the condominium is required to expend funds to rectify and that may not be included in the monthly common element payments? The Act provides that in certain circumstances a condominium can charge back additional costs to owners and collect those costs as if they were monthly common element payments. For
example, section 92 of the Act addresses situations whereby an owner fails to undertake their maintenance or repair responsibilities. Under section 92 of the Act, where an owner has an obligation to maintain or repair their unit or portions of the common elements and fails to do so, a condominium may undertake repairs or maintenance on behalf of the owner. Section 92(4) of the Act then provides that the costs incurred by the condominium in this scenario can be added to the common expenses payable for the owner’s unit.
In the next part of this series, we’ll dive into the other two categories of chargebacks: those
outlined in the condominium’s governing documents and chargebacks for enforcement
costs. We’ll also discuss recent caselaw and how to approach these situations in practice.
Stay tuned!
*The content of this article is intended to provide a general guide to the subject matter and is
not legal advice. Specialized legal advice should be sought regarding your specific
circumstance.