The news that the recently elected federal Liberal government plans to legalize marijuana may leave Canadians happy, sad, or just very, very mellow. However you feel about it, the changing landscape is bound to create unintended dilemmas for condo corporations.
Take the case of Metropolitan Toronto Condominium Corporation No. 659 v. Truman.
Shortly after Mr. Truman purchased his unit in August 2011, the corporation noticed a significant increase in water consumption. After learning that Mr. Truman was operating a legal marijuana grow-op, the corporation installed a water meter to measure the unit’s consumption. Sure enough, the meter confirmed that Mr. Truman’s consumption was far greater than his proportionate contribution to the common expenses. It demanded that Mr. Truman pay for the excess. Mr. Truman refused and the matter ended up in court.
Because the condo corporation’s declaration included unit water consumption as a common expense, the first issue the court had to deal with is whether, even if his consumption was found to be excessive, the corporation had any right to seek compensation from him for the excess. After all, each unit’s contribution to the common expenses is determined by the declaration, and owners who use, say, the elevators, or gym, more than others, are not charged more.
The declaration, however, provided an exception in the case of water used for “commercial and industrial purposes”. The case then turned on the meaning of “commercial” and “industrial” use. The owner claimed that his use was neither. Although he admitted the marijuana he grew was not all for his own personal use (he did provide some to others), he denied receiving any sort of compensation for it. Indeed, the owner’s personal use production licence, granted by the federal Ministry of Health, would not allow him to sell marijuana, and there was no evidence that Mr. Truman was operating in violation of the terms of his licence.
The court agreed with the condo corporation’s position that the “personal use” of marijuana contemplated by the licence is not the same personal use of water contemplated by the condo’s declaration.
Although the condo was successful on the “commercial” use argument, it appears that it would have been successful even if the declaration did not explicitly exclude water consumed for a commercial purpose.
That’s because a 1993 Court of Appeal decision, York Region Condominium Corp. 771 v. Year Full Investment (Canada) Inc., which the court in the Truman case cited, held that a declaration should be interpreted in a fair and equitable manner. The 1993 decision also held that the intent of a declaration is to apportion common expenses among unit owners in percentages as close as possible to the percentage of use made and enjoyment received by each unit owner. Excessive usage by one owner should not be included in the common expenses but should be the responsibility of the owner.
The lesson from the Truman and YRCC 771 decisions is that the courts are willing to be flexible to ensure an equitable result.
In YRCC 771, for example, the court looked beyond the plain wording of the declaration. It considered the first-year budget submitted by the developer and noted, first, that the unit owner’s consumption was more than the amount budgeted for the entire corporation and, second, that the budget stated that “excessive consumption” by an owner would result in a back-charge to that owner.
In Truman, the court, in effect, endorsed an approach that allowed for two different definitions of “commercial” depending on the context. While the owner’s activities may not have constituted a “commercial” use for the purpose of his licence, they did offend the condo corporation’s legitimate interest in ensuring that all owners pay their fair share of the “common” expenses and that one owner’s activities not be subsidized by all the other owners.
Beyond the water context, the cases may have application in a number of other situations where owners are using their units in a manner not contemplated by the declaration. Condo corporations often struggle to prove that the use is “commercial” in the traditional sense of receiving compensation. These cases show they do not necessarily have to: it’s the increased strain on the condo corporation’s resources that matters.
It would also have been interesting to see how the Truman case would have played out had the building been a residential condominium rather than a commercial one. (Though the unit may be commercial in the sense that it is used to run a business, the pooling of water costs is done on the basis that water use is only incidental to the business and not a core part its operation.) Presumably, the court’s finding that the activity was commercial would mean that it would offend the “residential purposes” definition found in most residential condominium declarations.
But the question may be a matter of degree. What would happen, for example, if a residential owner grows a smaller amount of marijuana, dedicated only for his/her personal (or family) use? Are there other considerations besides water consumption that a condo corporation may be concerned about? Only time will tell.
In the meantime, I’m feeling a bit peckish — anybody seen my Cheezies?
John De Vellis is a partner and a member of the condominium law group at Shibley Righton LLP. He acts for condo corporations throughout south and southwestern Ontario on all aspects of condominium law including compliance and governance issues, general litigation, employment and human rights disputes, construction deficiency issues, shared facilities disputes, and commercial matters such as contract review and drafting, and advice on loan agreements and re-financing.