Double Taxation of Condo Owners: Relegating Condo Disputes to the CAT

Recent headlines have highlighted that owners of condos are taxed more than owners of single detached houses, but there is an even further layer of tax imbalance for condominium owners. The public court system – funded by everyone’s tax dollars – has effectively shut out condo disputes, and consigned them to other more private forums instead.  Condo homeowners pay for the public court system through taxes, and pay for the Condominium Authority Tribunal through annual fees to the Condominium Authority of Ontario, but it appears that condo enforcement disputes are being pushed out from the public courts.

Forums for Condo Enforcement Disputes

For condominium enforcement matters in Ontario, there are basically 3 forums that the dispute can be heard in:

1. the Ontario Superior Court of Justice (the “SCJ”), which is funded by public tax dollars;
2. the Condominium Authority Tribunal (the “CAT”), which is funded by annual fees collected from condo homeowners; or
3. private Mediation/Arbitration (“ADR”), which is privately funded by the litigants themselves.

Even prior to the COVID-19 pandemic, overworked judges of the Ontario Superior Court of Justice had already expressed a general reluctance to hear condominium disputes, because such cases were often seen as merely internal squabbles between neighbours.  In comparison to the other matters on their busy dockets – such as serious criminal charges, child custody battles, or multimillion-dollar Bay Street lawsuits – SCJ judges often saw condominium disputes as relatively minor or unimportant.  One SCJ judge even ruled that internal condo disputes do not attract the public’s interest.

The COVID-19 pandemic and its consequent shutdown of the court system for months – then society’s gradually reopening and the courts having to adapt to our new reality – greatly exacerbated the existing backlog of cases in the SCJ.

Even though condo homeowners pay for the public court system through taxes just like any other homeowner in Ontario (and often the property tax burden is even higher for dense housing like condos), the courts – whether through individual judges who do not want to hear condo disputes or the institutional backlog exacerbated by the pandemic – have effectively closed their doors to condominium disputes.

Unfair Taxation of Condo Homeowners

Owners of condominiums in Ontario already face an unfair tax burden, when compared to owners of single detached houses.  For example, condo homeowners pay for private waste disposal through their common element fees, and pay for municipal waste programs through their property taxes – yet a single detached house down the street has their garbage, recycling, and green bins picked up by the municipality for free (through those taxes).

Condo owners, through their collective bodies of condominium corporations, should be entitled to access the same courts as the public.  After all, condominiums are no lesser form of housing than single detached houses.  Both are homes where parents raise families, build communities, and invest their hard-earned paycheques towards maintaining.

But on top of the taxes which pay for the public court system, condo homeowners in Ontario also have to pay annual fees to the Condominium Authority of Ontario (the “CAO”), which runs the CAT.  Condo corporations throughout Ontario now have a line item in their annual budgets to collect these CAO fees annually from unit owners, for remittance to the CAO.

Unlike the Human Rights Tribunal or the Landlord & Tenant Board, both of which are funded by the government, condo homeowners are forced to shoulder this extra burden of an administrative Tribunal that single detached homeowners do not.

Since the establishment and proliferation of the CAT into various areas of jurisdiction, we have heard judges from various courthouses throughout the province remark that, finally, a specialized Tribunal exists in Ontario that condominium disputes can be punted to instead.

Unfortunately, as I’ve written about previously (here and here), the CAT has a default presumption against awarding any party with their legal costs, even if that party was successful on the merits of the case.  This default no-costs presumption puts condo corporations into a bind, and discourages condos from actually enforcing their communal rules against violators.  Consequently, many condo corporations are trying to avoid the CAT altogether; because even if they win, the CAT is not likely to order that the violator must pay for the condo’s legal fees.

Some condo corporations in Ontario pay more than $10,000 annually to the CAO, which funds the CAO and the CAT.  But because of the CAT’s default no-costs presumption, the condo corporation is stuck paying annually for an administrative Tribunal that is too cost-prohibitive for the condo to actually use.

Alternatively, a condo corporation or a unit owner could try using private Mediation/Arbitration to resolve their dispute instead.  This is not a new feature of the condominium framework in Ontario; such alternative dispute resolution for condos has existed for decades (ever since the 1998 version of the Condominium Act was proclaimed into force in 2001).  But this “parallel” system of private justice is cost-prohibitive as well – even more so than the CAT, and certainly more so than the publicly-funded SCJ.

In ADR, not only does the condo corporation pay for its own legal fees if it is represented by counsel, but the condo corporation also pays for a portion of the private Mediator’s fees, and a portion of the private Arbitrator’s fees if Mediation is not able to obtain a settlement between the litigants.  There is no public funding or CAO funding for ADR.  Such Mediator’s fees and Arbitrator’s fees can amount to several thousands of dollars.

Although it is possible for the litigants to agree at a Mediation that the unit owner will reimburse the condo corporation for its legal fees and/or its share of the private Mediator’s fees, we do not usually see private Mediators pushing the parties very hard on re-allocating the typical 50/50 split of the Mediator’s fees and the parties bearing their own legal fees.  It is more likely that a private Arbitrator will award at least some of the successful litigant’s legal costs at the end of an Arbitration, but it is far from guaranteed.

Which brings us back around to the 1 forum that has inherent jurisdiction in Ontario to hear all types of disputes: the Ontario Superior Court of Justice.  In some form or the other, the Court has existed since the 1790s as the public venue in which parties in Ontario could bring their disputes to be adjudicated by fair-minded judges.

But a recent case from the Divisional Court of Ontario makes it clear that the SCJ is no longer willing to hear these condo community “dramas” anymore.

Divisional Court Does Not Want to Hear CAT Appeals

The Condominium Act, when it introduced the CAT back in 2017, stipulates that you cannot appeal from a CAT Decision unless there was an “error of law”.  In doing so, the Ontario legislature already signalled that CAT Decisions are meant to be, by and large, final and not subject to appeal.

However, that does not mean that such appeals to the Divisional Court of Ontario are impossible – just few and far between, and limited in possible scope.  Similar to the Divisional Court’s general reluctance to hear appeals or judicial review challenges to the decisions made by the Landlord & Tenant Board (the “LTB”), the Court would prefer to let condo disputes remain in the CAT instead of clogging up the public court system.

The key difference is that the LTB is taxpayer-funded, unlike the CAT which is condo-funded.  LTB adjudicators are appointed by the provincial government, whereas CAT Members are appointed by the CAO (which is not the provincial government but rather a not-for-profit designated administrative authority).  The LTB, in some form or another, has existed since at least 1998 in Ontario; so, the LTB has a more developed body of case law, and has been able to tweak its own processes over several decades (though even now, the current LTB is not without its problems and its own perceived biases).

The CAT is the first wholly-online Tribunal in Ontario, and for the majority of its existence so far, only handled relatively straightforward disputes about condominium records.  With the Ontario government rapidly shovelling more types of contentious disputes into the CAT’s jurisdiction in recent years (with more likely to come), the CAT is bound to make some mistakes along the way.  That is not unexpected of a relatively new, nascent Tribunal with CAT Members who are not all expertly-trained condominium law specialists from the get-go.

Usually, those “kinks” of a new administrative Tribunal are worked out through litigants appealing the Tribunal’s decisions to a higher court, and that higher court laying down the law.

Unfortunately, sometimes the law takes a back seat to more practical, institutional considerations – especially with the COVID-19 case backlog still at the forefront of judicial minds.

In Peel Standard Condominium Corp. No. 779 v. Rahman, 2023 ONSC 3758 (“Rahman”), a 3-member panel of the Divisional Court of Ontario dismissed the condo corporation’s appeal of a CAT Decision, regarding a unit owner’s parking of his pickup truck in an aboveground accessible parking space instead of in his 2 parking units in the underground garage.  This was one of the very first parking disputes that the CAT heard regarding accessibility parking back in 2020/2021, and the CAT ultimately sided with the unit owner.  The condo corporation appealed to the Divisional Court of Ontario, arguing, in part, that the CAT did not have the jurisdiction to hear the parking dispute because of the Section 117(1) carve-out from the CAT’s jurisdiction.  The three SCJ judges sitting as the Divisional Court held, at paragraph 9:

“This sort of minor parking dispute is precisely the sort of issue that is reserved for the Tribunal to decide, and the interests of all parties and the administration of justice are best served by a fast and inexpensive process before the Tribunal rather than proceedings before the Superior Court of Justice.”

At the outset of the Divisional Court’s hearing of this appeal in Rahman, the lead judge of the panel verbally remarked that if the Court were to rule in the condo’s favour (i.e. to find that the CAT did not have the jurisdiction to hear the parking dispute and instead, the dispute had to be adjudicated in the SCJ), his colleagues on the bench would be quite unhappy with him, because the SCJ would then be inundated with condominium disputes.  In His Honour’s view – and as more formally echoed in the Court’s written ruling that he authored – such condo disputes should remain in the online CAT, and not take up valuable resources in the public court system.

During COVID-19, with the courts both shut down and then extraordinarily busy handling the new and surprising realms of disputes brought about by the pandemic, other SCJ judges similarly echoed these sentiments in their written rulings as well.  One SCJ judge in Toronto held, in TSCC 1630 v. Vallik, 2021 ONSC 5570, that:

“It is the law and public policy of the Province of Ontario that regular disputes about compliance issues between condominium owners and the condominium corporation be resolved out of court.”

Another SCJ judge in Newmarket wrote, in an unreported ruling dated February 1^st 2021 regarding a unit owner’s Application to appoint an Inspector to audit the condo corporation:

“The civil justice system needs to focus its limited resources on cases with the highest priority such as those involving serious personal injuries, medical malpractice and significant financial disputes. This is not one of those cases. This application, while it may be important to the parties, should not be a high priority case in an overburdened civil justice system.”

With the Divisional Court’s ruling in Rahman, the SCJ’s reluctance to hear condominium disputes, which was exacerbated during the COVID-19 pandemic, has been given even further fuel.  The message from the courts is now clear.  Condo disputes should remain in condo-land, with the CAT or in private ADR.

There’s Room for Improvement, but CAT is Here to Stay

Because private ADR can be quite expensive, whereas the CAT only requires a $25 filing fee to begin and contains a Stage 1 Negotiation and Stage 2 Mediation already built into its online process, condo corporations and unit owners alike are starting to look towards the CAT as the more preferable forum to resolve enforcement disputes, out of the difficult and limited forum options available.

This author has cautioned against the CAT’s encroachment into condominium disputes in previous writings, prior to the COVID-19 pandemic (some of those writings may have been published during the pandemic, but were submitted for publication prior to the pandemic).  However, just as the unprecedented global health crisis has shifted everyone’s thinking across many different areas of life and society, the utility of an online Tribunal for condominium disputes has proven to be quite useful – especially with people cooped-up inside their condo buildings, whether due to the pandemic or simply continuing the work-from-home trend.

Moreover, some of the CAT’s Members are now starting to stay on with the Tribunal, instead of the first couple waves of CAO appointees who served briefly as CAT Members and then left.  Accordingly, the CAT’s adjudicators are now starting to develop and maintain the necessary subject-matter expertise over the years.  The CAT’s default presumption against awarding legal costs is still a significant problem which is causing some condo communities to descend into enforcement paralysis, but at least for the condos that can afford to pay a lawyer or paralegal to pursue enforcement against a violator, the online CAT is a relatively quick and efficient venue for such enforcement to be pursued.

The CAT is here to stay (and hopefully, so are the more seasoned CAT Members).  The courts have made it clear that they do not want to hear condo disputes, and the jurisdiction of the CAT is likely to expand further in the coming years.  As long as the CAT follows the legal principles laid out in condominium law over the last half-century that condos have existed in Ontario, and the CAT substantially softens its default no-costs presumption, the CAT should be an effective and meaningful dispute resolution venue.  In this era of rising costs and inflation though, with every non-profit condo corporation in Ontario taking a hard look at their finances this year, some difficult questions about how the CAT is unfairly financed by condo homeowners (instead of the public at large) should be asked.

If you have any specific inquiries, please feel free to contact our office or the author of this article at vyee@elia.org or 1-866-446-0811.

All of the information contained in this article is of a general nature for informational purposes only and is not intended to represent the definitive opinion of the firm of Elia Associates on any particular matter. Although every effort is made to ensure that the information contained in this article is accurate and up-to-date, the reader should not act upon it without obtaining appropriate professional advice and assistance.