Emergency fund works with special contribution: The Court confirmed that a vote from the co-owners is not required

Published on by Me Kevin J. Lebeau

Topic(s): Condo

Emergency fund works with special contribution: The Court confirmed that a vote from the co-owners is not required

In a recent judgement of the Court of Quebec, Small Claims Division, which rendered a simultaneous decision on seven separate requests from co-owners against their co-ownership syndicate and its insurance company 1, the Court reaffirmed the principle by which decisions of the syndicate on major work from the contingency funds and the issuance of a special contribution levied, should not be adopted by a majority vote of the assembly of co-owners.

The claims of the parties according to the Court

The seven co-owners of divided condominium units in a building of 72 units challenge the decision of the Board of Directors of the Syndicate of the co-owners to impose a special contribution for work relating to the conservation and maintenance of the building and seek reimbursement of it. They also take legal action against the syndicate and its insurer.

The co-owners argue that the contribution is illegal because, according to the co-owners, it has not been approved or adopted in the budget by the general assembly of the co-owners, as required by the declaration of co-ownership and the Civil Code of Quebec (C.c.Q.).

The Syndicate argues that the work performed is urgent and falls under the jurisdiction and powers of the Board of Directors, and not of the assembly of co-owners.

It should be noted that the co-owners have agreed to withdraw their respective claims against the insurer of the syndicate, each party is paying its own expenses.

Issues in litigation according to the Court

According to the Court it had to be determined whether the special levy notified to the applicants must be subject to approval and prior adoption by the general assembly of the co-owners. If so, it must also determine whether the fact that the majority of co-owners have paid this fee prevents the seven co-owners of claim reimbursement.

The facts according to the Court

The dwelling was built in 1981, and in 2007 the syndicate undertakes major work to preserve the roof and the exterior walls of the building.

The Board of Directors of the Syndicate decided to proceed in two phases. The second phase of the work and its special contribution is challenged by another co-owner against whom the syndicate is demanding payment by a request to the Court of Quebec. The Court ruled in favour of the syndicate against this co-owner in the first instance, a decision which was subsequently upheld by the Court of Appeal. 2

In this case, seven co-owners affected by the first phase of the work (reconstruction of some walls and the replacement of part of the roof) pay under protest to the Syndicate the special levy on the work and claim reimbursement of the payment made.

The Court understands that, prior to the execution of the works of this phase, the co-owners do not vote for the awarding of the contracts or for the approval and adoption of a budget thereto, but the Board of Directors of the Syndicate held a preliminary information meeting at which was held a show of hands, which was favourable to the work and the special contribution. There was also a second briefing shortly after.

Analysis

The Court finds that the special contribution is meant to defray the costs of major conservation works and maintenance of the building, and that therefore this is not work for the alteration, enlargement or improvement of the common portions.

The Court notes that the co-owners claim that a section of the declaration of co-ownership specifies that the assembly of co-owners must adopt the budget submitted by the directors by means of a majority vote of the assembly of the co-owners.

However, the Court also notes that another article of the declaration stipulates that in case of conflict between the provisions of the Act and the declaration of co-ownership or of its regulations made under it, that then the provisions of the Act prevail.

The Court reminds the parties that the relevant provision of the Act currently in force is Section 1072 of the Civil Code of Quebec, of which the first paragraph reads as follows:

1072. Each year, the Board of Directors, after consultation with the general meeting of the co-owners, fixes their contribution for common expenses, after determining the sums required to meet the expenses arising from the co-ownership and the operation of the immovable, and the amounts to be paid into the contingency fund. ...

The Court agreed with the trial judge in the case aiming at phase two to the effect that section 1072 of the C.c.Q. does not require as a condition of the form to have a vote during the consultation of the assembly of the co-owners on the budget.

Therefore, the Court is of the opinion that it is the directors who have the responsibility, the authority and the power to determine the contribution of the co-owners for the common expenses. According to the Court, in section 1072 of the C.c.Q., the words “after consultation with the assembly of co-owners” can only mean “after a vote of the assembly of co-owners.”

According to the Court, the assembly of the co-owners is called to exercise its power of approval on other subjects, including those described in sections 1097 and 1098 of the C.c.Q., but it is not called to vote on the work of the contingency fund and a special contribution related.
This being so, the Court confirms that the Syndicate’s Board of Directors has the power to contract in order to carry out the work, and make a special contribution if necessary, after consulting the co- owners of the work on the budget, which the syndicate did twice.

Also according to the Court, section 1072 of the C.c.Q. prevails over any conflicting provision of the declaration of co-ownership, and the Syndicate’s Board of Directors has the necessary authority to decide on the implementation of the work of conservation, repair and maintenance of the building and shall set the contribution of the co-owners to the expenses that result from it.

The Court also believes that the fact that the vast majority of the co-owners have paid the special contribution that the applicants challenge is, in law, a confirmation of the actions of the Board of Directors of the Syndicate. Consequently, it states that the applicants are estopped to question the validity or legality of contracts awarded and the special contribution that results from it.

For these reasons the Court dismissed therefore the requests of the co-owners. It used at the same time its discretion and did not condemn the co-owners to pay the legal costs of the case.

For any questions on the subject, or on real-estate law, do not hesitate to contact our team of legal experts in the field.

1. 2014 QCCQ 12169
2. 2011QCCQ 2828 (Court of Quebec) and 2012 QCCA 2195 (Court of Appeal)

0 Response(s) to “Emergency fund works with special contribution: The Court confirmed that a vote from the co-owners is not required”

Leave a reply