Court Not Keen on Second-Guessing Condo Board Decision

In the recent Alberta case of  Dykun v. Cravenbrook Condominium Corporation No. 032 1893, the court of Queens Bench  demonstrated its willingness in deferring to the ultimate decision making power of a Condominium Corporation’s board of directors.

In this case, the Condominium Corporation in question had been irresponsibly managed in the past. The reserve fund, which is required by law to maintain funds necessary to pay for repair and replacement costs was greatly diminished when $31,000 dollars was siphoned off to pay for operating expenses unrelated to repairs or replacement. This was also in direct contravention to the Condo Corporation’s by-laws.

When a new management team was put in place, they realized the dire financial situation that the Condo Corporation was in. Only $238.00 remained available to pay for operating expenses and $32, 000 dollars worth of expenses was owed. Moreover, the reserve fund was $31,000 short as a result of the previous management team’s misappropriations.

The board of directors was now in a position that required a serious decision to be made. After consulting with its legal adviser and accountants, the board decided that it would be in the best interest of the Condominium Corporation to levy a special assessment on all unit owners in the amount of $80,000 dollars which all owners would pay proportionately based on their condo unit share. According to the board of directors, this fee was necessary to bring the Corporation’s funds back to a reasonable level required by law.

This decision by the board triggered rage amongst many unit owners, and one owner challenged the decision in court. Although the unit owner acknowledged that the board of directors had the legal authority to levy such a fee based on the Condominium Corporation’s by-laws, he argued that this fee was the wrong approach by the board, and that there were better courses of action. All of the proposed courses of action were considered by the board of directors, but rejected in the end.

At the end of the day, the court held that the board of directors acted in good faith by consulting with its legal advisers and accountants prior to making its decision. In addition, the fact that the board of directors had been properly elected by a majority of condo owners to oversee the Condo Corporation’s affairs lends credence to its decision despite some unit owners not agreeing. Those unit owners who disagree with the board could feel free to run for a board position in the future.  Lastly, the board was within its legal authority to levy the fee in question pursuant to the condo corporation by-laws.

This decision seems to suggest that decisions made by Condominium Boards ought to stand despite the disagreement of unit owners, as long as it can be showen that prudent measures were taken by the board to act in good faith and in the interest of the condo corporation.

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