LEAKY CONDO LAW SUITS IN JEOPARDY by Shawn M. Smith

Owners of leaky condos were dealt a potentially serious blow last week with the decision of the British Columbia Supreme Court in The Owners, Strata Plan LMS888 v. The City of Coquitlam et al. The decision is already sending shock waves through the condominium community, and if left unchallenged, it may stop hundreds of leaky condo law suits dead in their tracks.

The decision rendered by Mr. Justice Cohen focuses on the procedural requirements of section 171 and 172 of the Strata Property Act. Section 171 allows the strata corporation to sue "as representative of all owners" and section 172 allows the strata corporation to sue "on behalf of one or more owners". Both sections require that before bringing the action it must be authorized by a ¾ vote at a general meeting. (In the case of section 172, those owners on behalf of whom the strata corporation is suing must have authorized the action in writing).

The facts of the case (as they pertain to this decision) are quite simple. On October 10, 2000 the strata corporation commenced an action against a number of defendants. The action centered around construction deficiencies which resulted in water ingress into the building. The action was subsequently approved by way of a ¾ vote on September 6, 2001. It was reaffirmed by another ¾ vote on January 8, 2003.

The question before the court was whether or not the action was duly authorized at the time it was commenced in October 2000. Three of the defendants argued that it wasn't and therefore the action was invalid. Their argument focused on the fact that the action was commenced in October 2000 but not authorized by ¾ vote until September 2001. They brought to the court's attention the wording of sections 171 and 172; in particular the use of the word "before". They argued that these sections are quite clear in their requirement that any action brought must be authorized by ¾ vote prior to its being commenced. If not, it is invalid.

The strata corporation's counsel argued that the issue of approval pursuant to sections 171 and 172 was really just an internal governance matter and that it was open to the strata corporation to subsequently authorize any action commenced. (This was the way the courts applied the provisions of the Condominium Act which dealt with the commencement of court actions).

The court did not agree with the strata corporation's argument because of the use of the word "before" in sections 171 and 172. Its existence cannot be ignored. Those sections clearly require that court actions by a strata corporation be authorized by a ¾ vote prior to their being commenced. If not, they are not validly commenced and cannot be saved by subsequent approval. The action is to be struck by the court.

The result of this decision is that numerous actions similar to this one may be in jeopardy. If those actions were commenced after July 1, 2000 and not authorized by ¾ vote before they were brought, they will likely be struck by the court. (Actions commenced before July 1, 2000 will be governed by the Condominium Act and are subject to different rules). There are serious consequences which result from this decision. First, if an action must be recommenced, it may now be past the limitation date to sue certain parties. Second, the defendants in the wrongly brought action will likely be entitled to costs against the strata corporation. Lastly, the action must be started from the beginning again and numerous steps may have to be repeated, resulting in additional costs to the strata corporation.

Strata corporations who have commenced such actions should consult their lawyer (or even obtain an independent legal opinion) about their options in light of this decision.

Shawn M. Smith is an associate lawyer with the law firm of Cleveland & Doan in White Rock. He can be reached at (604)536-5002. This article is for information purposes only and nothing contained it should be considered to be the provision of legal advice.