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Unfair shared facilities agreement ruling a victory for condos

A recent decision that allowed a condo corporation to unilaterally amend an oppressive shared facilities agreement is an important win for the condo community, Toronto condominium lawyers Armand Conant, Deborah Howden and John De Vellis write in Condo Voice magazine.

In its August ruling in TSCC No. 2130 v. York Bremner Developments Limited, the Ontario Superior Court upheld the condo corporation’s decision to amend a shared facilities agreement under s. 113 of the Condominium Act, 1998, write Conant, partner and head of the condominium law group at Shibley Righton LLP, and Howden and De Vellis, partners with the firm.

“Under s. 113 of the Act, the court may make such an order if the application is filed within one year of turn-over and the court is satisfied that the disclosure statement did not clearly and adequately disclose the provisions of the agreement and the agreement produces a result that is oppressive or unconscionably prejudicial to the corporation,” they write in the article.

As is increasingly common in new condo developments, write Conant, Howden and De Vellis, the shared facilities were part of a large, complex development involving other commercial owners, including the developer.

“The court found that the disclosure statement failed to adequately disclose important features of the shared facilities agreement that gave the declarant, or its agent, complete control over the management, repairs and budget of the shared facilities, with no input whatsoever by the condo corporation.”

Ultimately, they explain, the court found that the shared facilities agreement was oppressive toward the condo corporation’s rights as, among other things, “it allowed for a powerful, non-arm’s length shared facilities manager who was heavily biased in favour of the developer and commercial owners.”

Although a one-sided agreement was not illegal, “the corporation had a reasonable expectation that the shared facilities manager would treat the corporation fairly under the terms of the agreement.” Instead, they write, the manager unfairly disregarded the corporation’s legitimate interests.

Rather than terminating the agreement, the court amended it to allow TSCC 2130 to terminate the shared facilities manager, write Conant, Howden and De Vellis.

This decision, they explain, “opens the door for other new condominium corporations, which have been saddled with unfair and oppressive shared facilities agreements, to look to the courts for a remedy.”

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