Part 19 published on 01/09/07
In Ontario, any borrowing requires a by-law
An Administrator had been appointed under Section 131 of the Condominium Act, 1998, to manage certain matters on behalf of the condominium corporation. This included arranging for certain required repairs. The Administrator wished to raise the necessary funds for the repairs by way of borrowing. However, a by-law to authorize the borrowing had not been confirmed by the owners. The administrator sought a declaration that no by-law was required. The Court held that the condominium corporation did not have the power to borrow in the absence of a borrowing by-law. The Court listed the following principles:
1. Any borrowing requires authorization in the form of a borrowing by-law.
2. Condominium corporations may borrow the amount necessary to fund expenditures included in the current year’s budget provided this has been authorized by a general borrowing by-law.
3. A specific by-law is required if the purpose of the proposed loan is to fund expenditures not included in the current year’s budget.
This was the Court’s interpretation of Sections 56(1)(e) and 56(3) of the Condominium of Act, 1998.
The Administrator had also argued that the Court had the power under Sub-section 131(4) of the Act to dispense with any such requirements for a by-law. The Court said: “I am sceptical that this provision provides the Court with such authority ….to direct a condominium corporation to take an act that it does not otherwise have the power to take”. The Court went on to say that, even if the Court did have this power under Sub-section 131(4), the Court would not be prepared to exercise such discretion in this case. The Court said that borrowing clearly requires a by-law, approved by the unit owners, and “there is no basis for the Administrator’s position that the scheme of the Act contemplates that the financial health of a condominium corporation is paramount and, where necessary, therefore, democracy shall succumb to professional administration”.