Chargebacks have long been an essential mechanism for condominium corporations to recover costs that arise from the action, or inaction, of unit owners. This mechanism ensures that the community is not burdened with the costs caused by one unit, and it forms an important part of maintaining fairness and financial stability within a condominium corporation. Historically, chargebacks could only be applied if they were permitted by the Condominium Act, 1998 (the “Act”) or by the condominium corporation’s governing documents. However, with the recent expansion of the Condominium Authority Tribunal (the “Tribunal”) and the shift in caselaw, the enforceability of certain chargebacks has become much narrower. 

The Act allows for several circumstances where a condominium corporation can chargeback costs to a unit owner. For instance, under Section 92(4), a condominium corporation may perform maintenance or repair work on behalf of an owner and recover the associated costs, and, under Section 105, a condominium corporation can chargeback its insurance deductible to a unit under certain circumstances. Outside of the Act, the declaration of a condominium corporation often provides grounds for enforcement-based chargebacks. These chargebacks relate to costs incurred by a condominium corporation when it attempts to enforce its governing documents. Enforcement-related chargebacks are often the most utilized costs being charged back, and typically consist of expenses incurred in sending legal letters to offending unit owners to obtain compliance with the governing documents. 

If a unit owner fails to pay amounts that have been properly charged back to their unit, pursuant to Section 85, the condominium corporation has the right to lien the unit owner’s property. For many years, this framework provided sufficient authority for condominium corporations to recover a broad range of expenses, including legal fees incurred in enforcing compliance. However, recent jurisprudence—most notably the decision in Amlani v. York Condominium Corporation No. 473 (“Amlani”)—has potentially narrowed this authority considerably. 

In Amlani, the condominium corporation incurred significant legal fees to enforce its bylaws against a unit owner over alleged breaches of the same. The condominium corporation added the legal and enforcement costs it incurred against the unit owner’s common expenses, and when these charges went unpaid, the condominium corporation registered a lien for the unpaid amounts. To support its position, the condominium corporation relied upon the indemnity provisions within its declaration, however, the Court determined that this was an improper process and violated the Act. The Court found that Section 134(5) of the Act governs the recovery of enforcement and compliance-related costs, and that those costs may only be added to a unit owner’s common expenses if they have been awarded by the court. In other words, even if a declaration contains broad indemnity language, it cannot override the Act, and the condominium corporation must obtain a court order to that effect. This interpretation of the Act was further affirmed by the Court of Appeal when the condominium corporation attempted to appeal this decision.

Around the same time as the decision of Amlani, the Tribunal’s jurisdiction was also expanded, by virtue of O.Reg 179 /17 of the Act, to include certain chargeback related disputes. As a result, several Tribunal matters now involve disputes relating to chargebacks. However, the decisions stemming from the Tribunal largely take the same position as Amlani. For example, in Rahman v. Peel Standard Condominium Corporation No. 779, the Tribunal held that enforcement costs could not be charged back without a court order. 

Prior to Amlani and the expansion of the Tribunal, condominium corporations relied on broad indemnification clauses in their declarations to recover enforcement-based costs directly from a unit owner. The assumption was that, if the declaration said the unit owner must reimburse the condominium corporation for “any loss, damage or legal expense” caused by unit owner’s conduct, the condominium corporation had the requisite authority to add those costs to the unit owner’s common expenses. 

Following Amlani and the expansion of the Tribunal, as it relates to enforcement-based chargebacks, condominium corporations are not allowed to unilaterally chargeback for these amounts without first obtaining a court order to that effect. Therefore, and by virtue, condominium corporations are unable to register liens against an owner’s unit without first obtaining a court order. The ruling in Amlani creates a problematic position for condominium corporations, as the condominium corporations can only attempt to recover costs it incurred in enforcing its governing documents by incurring additional costs to obtain a court order to that effect. As a result, should a condominium corporation be interested in recovering costs, along with seeking compliance with its governing documents, it generally should not chargeback those costs until it brings a Tribunal application and receive an order for compliance and an order to issue the chargeback. 

The evolving landscape of chargebacks in condominium law underscores the tension between protecting condominium interests and ensuring procedural fairness for unit owners. Chargebacks have long allowed corporations to recover costs arising from an owner’s conduct, but recent legal changes have significantly narrowed their scope. Enforcement-related costs can no longer be automatically added to common expenses or secured by lien without a court order, regardless of indemnity provisions in the declaration. This shift adds procedural hurdles and financial burdens, requiring corporations to incur additional legal costs to recover enforcement expenses. As a result, they must proceed carefully, ensuring chargebacks have proper legal authority and that enforcement strategies remain compliant with the Act and fair to the community—which is sometimes clear as mud.

Maria Durdan is the Managing Partner at SimpsonWigle LAW LLP and the Chair of the Condominium Practice Group. Maria specializes in condominium law, development, and administration supporting over 650 of the firm’s residential and commercial condominium clients throughout Ontario. Maria has obtained her Associate of Canadian Condominium Institute (ACCI) designation in law, which recognizes that she has achieved a high level of knowledge and skill of condominium law, she also frequently presents at condominium and real estate related associations. Maria is a Past President of the Canadian Condominium Institute – Golden Horseshoe Chapter and currently a Co-Chair of the Education Committee. Maria’s practice includes advising boards of directors, property managers and developers on all areas of condominium law. 

Aarij Ahmed is an Associate at SimpsonWigle LAW LLP and a member of the firm’s Condominium, Land Development, and Real Estate Law Groups. Aarij’s practice focuses on condominium law, including governance, compliance, development, and dispute resolution. He advises condominium corporations, boards of directors, and property managers across Ontario on a wide range of legal and operational matters. Aarij also represents condominium corporations before the Condominium Authority Tribunal and supports them in navigating the complex legal challenges that arise in Tribunal proceedings.
www.simpsonwigle.com
 

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