Saskatchewan courts tackle cost sharing in condominiums
April 6, 2017
BY Kevin Zakreski
Late last month, Saskatchewan’s Court of Queen’s Bench issued two judgments examining cost sharing in a condominium property. Cost sharing has been front and centre in recent work in BCLI’s Strata Property Law Project, culminating in the publication of the Consultation Paper on Complex Stratas (PDF). The consultation paper examined how British Columbia’s legislation and regulations enabling sections and types can take the pressure off apportioning common expenses in a strata property strictly by reference to strata lots’ unit entitlements. The Saskatchewan cases took on issues arising from two condominium properties’ (the Saskatchewan equivalent of a strata property) attempts to vary this basic rule of sharing expenses.
BC’s Strata Property Act generally requires a strata corporation to determine “a strata lot’s share of the contribution to the operating fund and contingency reserve fund” by applying the following formula: unit entitlement of strata lot/total unit entitlement of all strata lots x total contribution. Section 100 allows the eligible voters of a strata corporation to “agree to use one or more different formulas,” but only so long as their agreement is evidenced by a resolution passed by a unanimous vote.
Saskatchewan’s Condominium Property Act, 1993 (PDF), and Condominium Property Regulations, 2001 (PDF), also call for cost sharing to be determined by default “in proportion to the unit factors of [the owners’] respective units.” (Unit factors is Saskatchewan’s equivalent to BC’s unit entitlement.) Also like British Columbia, Saskatchewan allows a condominium corporation to adopt a different cost-sharing formula. Unlike BC, Saskatchewan doesn’t require unanimous consent to this change. Instead, section 48 (2) of its regulation provides “[a] corporation shall not amend its bylaws to include a scheme of apportionment unless written consent to that scheme has been obtained from at least 75% of the owners.” If this level of consent is attained, then dissenting owners have a 30-day window to apply to court to “object” to the new scheme of apportionment.
The two recent cases look at two aspects of this procedure: (1) how to count the votes needed to reach the 75-percent threshold; and (2) how to deal with a dissenting owner’s objection.
Albony Place: Counting the votes
Ehman v Albony Place Condominium Corporation, 2017 SKQB 82, concerned an 11-unit condominium property located in Regina. Throughout most of its history, the condominium property shared its common expenses by reference to the default formula. At its 2016 annual general meeting “a resolution was presented for the amendment of Albony’s bylaws, to change the scheme to one in which certain common expenses would be apportioned equally to each unit and others would continue to be apportioned on the basis of unit factor.”To understand the dispute in this case, it’s important to recognize that Saskatchewan’s legislation uses unit factors to apportion voting rights in a condominium property, in addition to apportioning common expenses. (Section 41 (1) provides “. . . each owner has a number of votes that bears the same proportion to the total number of votes as the owner’s unit factor bears to the total of the unit factors.”) There is nothing inherently unusual about this; other jurisdictions in the English-speaking world use the concept in this expanded way. But it does set Saskatchewan apart from both British Columbia and Ontario, which by default allocate one vote per strata lot or condominium unit as the basic voting principle in their legislation.
In the court’s view, “the sole issue to be determined is whether the vote for the bylaw amendment was to be conducted by unit factor or on the basis of one vote per owner.” Essentially, this issue came down to whether the act’s general provision setting out the default standard of voting by unit factors prevailed over the regulation’s specific language providing that “[a] corporation shall not amend its bylaws to include a scheme of apportionment unless written consent to that scheme has been obtained from at least 75% of the owners.” The court noted that passage of the bylaw at issue turned on the method applied:
Based on unit factor, the amendment was supported by more than 75% of the total unit factors. Based on individual units, however, the amendment was supported by only 63.63% of the owners.
Prior to the vote, the condominium corporation obtained an opinion from a government official (the Office of the Public Registry Administration), who advised the condominium corporation that the legislative provision prevailed, requiring votes on the resolution to be counted in accordance with unit factors. This opinion formed the basis of the condominium corporation’s argument before the court. But the court rejected this argument, coming to the following conclusion:
In my view, and contrary to that expressed by OPRA, the application of s. 48 of the Regulations is not to be read in combination with the voting rights provisions in s. 41 of the Act. The process set out in s. 48 of the Regulations is completely different, and does not engage voting rights, per se. Indeed, it does not even contemplate a meeting. Rather, it simply “raises the bar” by requiring written consent from at least 75% of the owners. In this context, it is not reasonable to equate such consent to the voting contemplated in s. 41. In my view the wording of s. 41 neither assists nor informs the interpretation of s. 48 of the Regulations.
In the absence of a requirement that the consent of the owners is to be calculated by unit factor, I am satisfied that s. 48 of the Regulations requires the consent of the 75% of the registered owners, without regard to unit factor. In this instance, the court was not provided with evidence of written consent by anyone. Rather, Albony’s position was premised on the view that the minutes of the meeting, which recorded the vote of more than 75% of the total unit factors, was sufficient. Aside from my conclusion that Albony wrongly relied on the unit factor calculation, I do not accept that the relied upon form of written consent is adequate.
In the result, the court quashed the new bylaw.
Park Manor: Objecting to new cost-sharing formula
Harvard Developments Inc v Park Manor Condominium Corporation, 2017 SKQB 83, involved a condominium corporation that had, from its earliest days, relied on a custom cost-sharing formula. Instead of apportioning common expenses strictly by reference to unit factors, the condominium corporation “used a formula for condo fee apportionment that took into account not only the square footage of each individual unit, but also purported to account for usage of the ‘common elements’ that could be attributed to each unit.”
In 2014, responding to concerns about this formula, the condominium corporation proposed a “new scheme of apportionment that would be based only on the square footage of each individual unit.” This new scheme was approved at “a properly constituted special general meeting of Park Manor’s unit owners.”
Two unit owners objected to the new scheme and exercised their right to apply to court. Under section 49 of Saskatchewan’s regulation “[w]ithin 30 days of being served, a person on whom a copy of the amending instrument and notice is required to be served pursuant to subsection 48(3): (a) may apply to the court to object to the scheme of apportionment included in the amending instrument” and “the court may: (a) accept any evidence that the court considers appropriate; and (b) make any order that the court considers appropriate, including an order amending the scheme of apportionment included in the amendment to the bylaws.”
As the court in this case noted, this language “appears to grant broad discretion.” The applicants proposed that the court exercise this discretion on the basis that “the proposed scheme of apportionment is the result of oppressive or unfairly prejudicial conduct by Park Manor, and that it unfairly disregards the interests” of the applicants.
Saskatchewan’s legislation—like most condominium legislation—has a provision setting out an oppression remedy. (British Columbia has an equivalent provision in section 164 of the Strata Property Act.) The court noted that, apparently, Saskatchewan’s provision has never been interpreted by its courts. For guidance, the court turned to case law applying Ontario substantially similar provision, in particular Ryan v York Condominium Corporation No 340, 2016 ONSC 2470. Applying the considerations set out in this case, the court came to the following conclusions:
Harvard and Western bear the onus of demonstrating that Park Manor’s conduct was oppressive, unfairly prejudicial, or that it unfairly disregarded their interests. In my view, the evidence adduced on this application falls short of demonstrating anything of the sort. It is clear, from the decisions that have analyzed the analogous sections of Ontario’s legislation, that demonstrating oppression, unfairly prejudicial conduct or unfair disregard of interest requires much more than merely demonstrating that one party did something that the other did not like, or did something which produced a result that was unfavourable to the other party’s interests.
While the evidence in the affidavits of Paul Hill, Adam Niesner and Ross Keith set out reasons why the unit factors for Park Manor were initially determined as they were, I cannot conclude it would be reasonable for them to expect that the unit factors, or apportionment of condo fees, would never change. The Act and Regulations set out methods for amending unit factors, and for condominium corporations to amend their bylaws to implement new schemes of apportionment, just as Park Manor did in this case. If unit factors were meant to be set in stone once they were established, there would be no need for such legislation. I find myself in agreement with Park Manor’s submission that a reasonable expectation, for parties in the position of Harvard and Western, would be that the allocation of common expenses would only change if the condominium corporation made those changes in a way that complied with the Act, the Regulations, and the condominium corporation’s bylaws. And in this case, the process Park Manor followed in amending the bylaws did just that. Accordingly, the applicants have not met the first branch of the test to establish oppression, and the application must fail.
Furthermore, I cannot conclude, based on the evidence, that Park Manor’s actions in this case were unfairly prejudicial, or that they unfairly disregarded the interests of Harvard and Western. Park Manor began its inquiry into the apportionment of common expenses based on a question raised by one unit owner. The matter was subsequently explored, investigated, debated, and canvassed at a duly constituted special meeting of the owners. Each of the unit owners had the opportunity to attend the meeting and participate in the discussion. Each of the unit owners had the opportunity to “vote”, by either consenting or not consenting to the proposed amendment. The scheme of apportionment was approved through a form of democratic process, specifically provided for in the relevant legislation.
Furthermore, the scheme of apportionment that Park Manor has chosen is not arbitrary, and there is nothing inherently unfair about it. It is based on the size of each unit. It is concrete, ascertainable, and attached to a characteristic of each unit that makes sense in the context of real estate.
In the end, the scheme of apportionment chosen by the Board of Park Manor may turn out to be better for some unit owners, and worse for others than the “hybrid” unit factors formula was. It may or may not amount to a more just and equitable overall distribution of common expenses. That is not for me to say at this stage, nor is it the determining factor on this application. The Board’s decision to amend the bylaws to implement a new scheme of apportionment will have an adverse effect on Harvard, but I am unable to conclude that this adverse effect was the result of unfair or inequitable treatment, or that Harvard or Western’s interests were unfairly ignored or treated as being of no importance.
In the result, the court dismissed the application, allowing the bylaw amendment to go ahead.
