Part published on 01/01/70
Condo loan approved
Prior to the turnover meeting, the condominium corporation borrowed $1.7 million for the purpose of acquiring “equipment” to be part of the common elements.
Following turnover, the new board alleged that,
(a) the loan was ultra vires. (i.e. the condominium corporation did not have proper authority to borrow the money.)
(b) the loan and the equipment purchases were not properly disclosed to purchasers; or alternatively, the loan monies were not applied in the manner disclosed.
The new board accordingly asserted that the interests of the lender should rank below the interests of the condominium owners, and that the loan therefore should not have to be repaid.
The Court said that condominium corporations are creatures of statute. So, condominium corporations do not have the powers of a natural person. They can act only in accordance with the authority afforded by the Condominium Act and the corporation’s governing documents. However, the Court said that in this case, the loan agreement was properly approved by the board and by a by-law of the condominium corporation. Therefore, the loan was properly arranged within the statutory authority of the corporation.
The Court also said that any weakness in the disclosure and any misapplication of the loan monies was not within the control of the lender. The Court therefore found that the lender was entitled to recover the loan monies from the condominium corporation.
[Editor’s Note: As I read this decision, I found myself asking the following questions:
– Was there any change to the common elements?
– Were the requirements of Section 97 of the Condominium Act all satisfied?]