Strata Owners Duties to Strata Corporation and to Prospective Purchasers #236
By Gerry Neely
The Supreme Court of British Columbia is widening the remedies available to purchasers of condominiums against the former owner or the developer, for the recovery of the cost of repairs of damage caused by a lack of maintenance and repair, or for the repair of dangerous defects.
A mortgage lender took title through foreclosure of the strata lots in a strata corporation and then resold them in 1983 to an investor. The units were rented until 1989 when they were resold by the investor over a period of six months to third parties on an "as-is" basis.
When the strata council was formed it became apparent from the complaints of members that there were extensive problems with leakage of water through decks, fireplaces, glassed areas, the parkade and flooding of the ground floor units.
An engineer's report indicated that the problems arose in part from the poorly designed and poorly constructed buildings, and in part from the lack of necessary maintenance required during the period the investor was the sole owner. The approximate cost of the steps recommended by the engineers to remedy the problems was $66,000.
In the trial that followed the investor's refusal to pay this sum, the investor tried to argue that only the owner/developer had the obligation to maintain and repair the common property. The judge rejected this argument, saying that the provisions of the Condominium Act meant that the investor, as the sole member of the strata corporation, had all of the duties and responsibilities a strata council would have had. The judge held that each member of a strata corporation has a duty to the strata corporation to take reasonable steps to see that it complies with the obligations a strata corporation has under the provisions of the Condominium Act, and a fiduciary duty to ensure that the common property belonging to the strata corporation is maintained and repaired.
The investor also argued that it should not be responsible for the cost of repairing structural defects. This argument too was rejected, the judge stating that structural defects arising from an original design flaw, only meant a greater cost of the ongoing maintenance for which the investor was responsible. Damages were awarded for the amount claimed by the strata corporation.
In reaching this decision the judge referred to an Ontario case which stated that a developer has a fiduciary duty to protect the interests of all owners, present and future, as well as the interests of the strata corporation when it came into existence. In the B.C. case the judge extended that fiduciary duty to all members of a strata corporation and went on to say that the duty remains with them at all times, whether they are owner/developers or simply owners.
This decision places what appears to be an onerous burden on strata owners, one not found among the shareholders of a limited company, for example. This decision may place upon strata owners intending to sell their units, an obligation to disclose conditions of disrepair of which they are aware, that may result in costs to the strata corporation and therefore to its members. How long may this duty continue? If the next case is any indication the obligation may continue for years.1
In a Manitoba case, that is still ongoing, a general contractor constructed in 1972 a 15-storey, 94-unit apartment building which in 1978 was converted to condos. Four inch thick slabs of stone, 20 feet in length, covered the building. One fell from the ninth floor, and as a result of the recommendations made by engineers who inspected the remaining stone blocks, they were all repaired at a cost of $1,500,000. Both the general contractor and the masonry subcontractor who installed the stone blocks were sued.
The general contractor tried to have itself removed from the proceedings by saying that while it may have had a duty to the owner, with which it contracted to construct the building, it owed no duty to subsequent purchasers. The Supreme Court of Canada rejected this argument, saying that if work is done so negligently as to be injuriously defective, then the subsequent purchaser should be entitled to recover the cost of repairing the defect if it poses a real and substantial danger to the occupants of the building.2
|1.||The Owners, Strata Plan 1229 v. Trivantor Investments International Limited, S.C.B.C., Victoria Registry #912714, Reasons for Judgment, March 14th, 1995.|
|2.||Winnipeg Condominium Corp. #36 v. Bird Construction, , 3 W.W.R, p. 85.|
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