Part 20 published on 01/11/07
Removal of commercial unit owners from the Board “unfairly prejudicial”
The condominium contains 60 residential units and 30 commercial units. The owners of the commercial units are required to contribute to the common expenses at a higher level. The commercial owners complained that they were paying an unfair proportion of the common expenses. They also complained that they were effectively “ousted” from the condominium’s Board, with the result that they had no right to participate in the decision-making processes of the condominium.
The commercial owners made application for oppression remedies under Section 135 of the Condominium Act, 1998.
The Court declined to grant any relief with respect to the common expense contributions. The Court said that, even if the contributions were unfair, there was no oppressive or prejudicial conduct in regard to the common expense contributions which are set out in the Declaration.
The Court was, however, prepared to grant relief in relation to the removal of the commercial owners from the Board.
The original by-laws of the corporation stated that two of the directors were to be elected by the residential unit owners, two of the directors were to be elected by the commercial unit owners, and one director was to be elected by all unit owners. The by-laws also stated that “the vote of each member or mortgagee shall be equal to four votes per residential unit and seven votes for commercial unit”. The purpose of these provisions was to ensure that the commercial owners had an equal say in the management of the corporation.
However, the Condominium Act clearly limits all voting to “one vote per unit”. In reliance upon this and using the majority position of the residential unit owners, the residential unit owners took steps to remove the two commercial unit owners from the Board. The Court said that this conduct was unfairly prejudicial to, and unfairly disregarded, the interests of the commercial unit owners.
The Court said that the best way to balance the interests of the commercial and residential unit owners in terms of representation on the Board was to enforce the following provisions of the original by-law:
- Two directors would be elected by the residential unit owners;
- Two directors would be elected by the commercial unit owners;
- A fifth director would be elected by all unit owners.
The Court said that “the enforcement of this by-law would likely restore the commercial owners’ participation on the Board and thereby remove the oppression they have suffered. In my view, this is the least intrusive and most appropriate remedy in the circumstances of this case.”
[Editorial note: I agree that representation on the Board can be guaranteed to a minority ownership group, either in the by-laws or in the declaration. However, I also ask the following questions: Is it logical to assume that the interests of the residential unit owners are necessarily divergent from the interests of the commercial unit owners? Does it necessarily follow that the residential unit owners, by pursuing their interests, will cause harm or oppression to the commercial unit owners? Isn’t it true that many condominiums contain different sub-sets of owners?]