Court File and Parties

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Pratap Kapoor, Aman Kapoor, Nishi Kapoor, Anita Khoja and North American Private Accommodations Inc., Applicants AND: Toronto Standard Condominium Corporation No. 2450 and Toronto Standard Condominium Corporation No. 2477, Respondents

BEFORE: S.M. O’Brien, J

COUNSEL: D. Elmaleh and J. Salmon, Counsel for the Applicants T. Duggan, Counsel for the Respondents

HEARD: May 21, 2019

Endorsement

[1] The issue between the parties on this Application is whether new rules passed by the Respondent condominium corporations are inconsistent with their registered declarations. The new rules limit condominium units from being occupied for transient or hotel-like purposes. The Applicants submit that these rules are inconsistent with the provisions in the Respondents’ registered declarations, which provide that there is no restriction on the minimum length of lease of a unit. The Respondents submit that the new rules are not inconsistent with the minimum length of lease provisions, but are consistent with provisions in the declarations that require the units to be used as private, single-family residences.

[2] The Applicants seek a declaration that the new rules are invalid and unenforceable. The individual Applicants are owners of units within the Respondent condominium corporations. The corporate Applicant, North American Private Accommodations Inc. (“NAPA”) operates executive short-term rental accommodations, using the units owned by the individual Applicants for this purpose. The Applicant, Pratap Kapoor is the President and a Director of NAPA. I will refer to the Applicants collectively as the “Unit Owners” and the Respondents as the “Condominium Corporations.”

[3] There are two Applications before me, as the Condominium Corporations also bring a separate Application to address the Unit Owners’ ongoing operation of their business since the passing of the new rules. I will refer to the Application by the Unit Owners as the “first Application” and the Application by the Condominium Corporations as the “second Application.” There is no dispute that the Unit Owners have continued to operate their business. Therefore, pursuant to the second Application, the Condominium Corporations seek an order requiring the Unit Owners to comply with the new rules. Although the Condominium Corporations also raised an issue regarding insurance requirements, the materials for that issue were not in the court file, nor specifically addressed in the Condominium Corporations’ Notice of Application. The Condominium Corporations offered to withdraw that issue for the purpose of the hearing before me and the matter was not argued.

[4] As further set out below, I find that the Condominium Corporations’ interpretation of their declarations was not unreasonable. That is, it was not unreasonable for the Condominium Corporations to conclude that the new rules were not inconsistent with the declarations. The rules were focused on the nature of the use of the units, rather than on the length of any lease of the units. On this view, if the use complies with the requirement of a private, single-family residence, there is no restriction on the length of the lease. However, transient or hotel-like uses are not consistent with the private, single-family residence requirement. I consider the Condominium Corporations’ determination to be reasonable and the new rules therefore are not invalid.

[5] In addition, I find that it was not unreasonable for the Condominium Corporations to commence the second Application to ensure the Unit Owners would comply with the Act, the declarations and the new rules.

Background Facts

[6] Pursuant to the Condominium Act, 1998, S.O. 1998, c. 19 (the “Act”), each condominium corporation is governed by its own declaration, by-laws and rules (in addition to being governed by the Act). Each condominium corporation is required to register its declaration with the relevant land registry office: Act, s. 3. The declaration of the Respondent, Toronto Standard Condominium Corporation 2450 (“TSCC 2450”) was registered on May 14, 2015. The declaration of the Respondent, Toronto Standard Condominium Corporation 2477 (“TSCC 2477”) was registered on August 21, 2015. The individual Unit Owners purchased units in the Condominium Corporations at various times from June 2015 to June 2018.

[7] The declarations of both Condominium Corporations included a provision addressing the length of any lease of the unit. They provided:

Section 5.4 – Lease Term

There are no restrictions on the minimum or maximum length of lease of a residential unit.

[8] The disclosure statement provided to prospective purchasers of the units also contained an identical clause stating that there would be no minimum or maximum length for leases. Prior to purchasing their units, the individual Unit Owners reviewed the provisions in the declaration or disclosure statement, as applicable. They relied on these provisions to confirm that they would be able to use the units for executive rentals.

[9] Since the individual Unit Owners purchased their units, NAPA has rented out the units as executive rentals for a minimum of seven days to members of a single-family. NAPA’s website advertises its services as including hotel apartments, as well as short term and extended stay apartments. It reads that NAPA “provides fully furnished Hotel apartments to the travelling or vacationing public in Mississauga and Toronto and fully furnished short term apartments, extended stay suites and services apartments for business and leisure travelers worldwide at affordable rates.” NAPA provides guests with check-in and check-out times and requires that guests pay a security deposit. Guests are able to make reservations through NAPA’s website and other reservation sites, such as Expedia.com and Booking.com.

[10] Starting in or about early 2018, unit owners at the Condominium Corporations began expressing concern about short-term rental activity in the buildings. The concerns that were raised did not pertain to the Unit Owners’ units. However, in response to the concerns raised, the boards of directors of the Condominium Corporations each decided to pass new rules regulating transient tenancies and hotel-like activities in their units. In June and July 2018, respectively, TSCC 2477 and TSCC 2450 passed amendments to their rules that prohibited the units from being occupied for transient or hotel-like purposes (the “new rules”).

TSCC 2450’s new rule provided in part:

9(h) No Residential Unit shall be occupied under a lease, sub-lease, contract, licence or any other type of arrangement for transient, hotel-like, time-share, commercial, corporate, lodging, lodging-house, boarding, rooming house, or hosting purposes or any other similar type purpose as determined by the board of directors in its sole and unfettered discretion.

TSCC 2477’s new rule provided in part:

3. No transient use: No Residential Unit shall be occupied under a lease, sub-lease, contract, licence or any other type of arrangement for transient, hotel-like, time-share, commercial, corporate, lodging, lodging-house, boarding, rooming house, or hosting purposes or any other similar type purpose as determined by the board of directors in its sole and unfettered discretion.

[11] The Unit Owners submit that these new rules are inconsistent with section 5.4 in the declarations, set out above. However, the Condominium Corporations submit that the new rules are consistent with the provision in the declarations restricting the use of the units to private, single-family residences. Subsection 4.1(a) of each declaration provides in part:

4.1(a) Each residential unit shall be occupied and used as a private, single-family residence and for no other purpose….

Is the Condominium Corporations’ interpretation of their declarations unreasonable?

[12] I conclude that the Condominium Corporations’ interpretation of their declarations, that is, that they permit rules against transient and hotel-like uses is not unreasonable.

[13] Under s. 58 of the Act, boards of condominium corporations are entitled to make rules. The relevant restriction on making rules, for the purposes of this case, is that they must be consistent with the corporation’s declaration. The relevant parts of s. 58 provide:

58(1) The board may make, amend or repeal rules under this section respecting the use of the units, the common elements or the assets, if any, of the corporation to,

(a) Promote the safety, security or welfare of the owners and of the property and the assets, if any, of the corporation; or

(b) Prevent unreasonable interference with the use and enjoyment of the units, the common elements or the assets, if any, of the corporation.

(2) The rules shall be reasonable and consistent with this Act, the declaration and the by-laws.

[14] In reviewing the Condominium Corporations’ interpretation of their declarations, the standard of review is one of reasonableness. Although the Unit Owners argued that deference is not owed on the question of whether rules are inconsistent with a condominium corporation’s declaration, the Court of Appeal has stated directly that a reasonableness standard applies. Specifically, in London Condominium Corp. No. 13 v. Awaraji, 2007 ONCA 154, 221 O.A.C. 240, the Court of Appeal stated at para. 6:

Moreover, we consider that it is for the Condominium Corporation to interpret its Declaration and By-laws and that so long as its interpretation is not unreasonable, the court should not interfere.

[15] Here, the Condominium Corporations’ interpretation of their declarations, which focuses on the nature of the use, is reasonable. As the Condominium Corporations argued, a number of decisions of this Court interpret the meaning of a “private, single-family residence” provision in a manner consistent with their interpretation. Those cases focus on the use of the condominium unit and, in particular, understand “private, single-family residence” to be inconsistent with hotel-like operations, like those of NAPA.

[16] For example, in Ottawa-Carleton Standard Condominium Corporation No. 961 v. Menzies, 2016 ONSC 7699, 78 R.P.R. (5th) 318, the condominium corporation’s declaration restricted the use of units to “single-family dwellings.” The Respondents leased their unit on a repeated short-term basis in a hotel-like operation. The Court found that the Respondents’ use violated the declaration, describing “single-family use” as follows at para. 51:

“Single family use” cannot be interpreted to include one’s operation of a hotel-like business, with units being offered to complete strangers on the internet, on a repeated basis, for durations as short as a single night. Single family use is incompatible with the concepts of “check in” and “check out” times, “cancellation policies”, “security deposits”, “cleaning fees”, instructions on what to do with dirty towels/sheets and it does not operate on credit card payments.

[17] Similarly, Metropolitan Toronto Condominium Corporation No. 850 v. Oikle (1994), 44 R.P.R. (2d) 55 (Ont. Gen. Div.), considered a business called Executive Suites Ltd., which leased units to “persons who would otherwise stay in hotels.” As in this case, when the unit was occupied, it was occupied by a single family. The condominium corporation’s declaration included a provision almost identical to the provisions in the declarations here, stating that “each unit shall be occupied and used only as a private, single family residential dwelling and for no other purpose….” The Court found that the use of the units by Executive Suites Ltd. was contrary to the use contemplated by the declaration.

[18] The Unit Owners submit that those cases are distinguishable in that in none of those cases does the condominium corporation’s declaration also include a provision stating that there are no restrictions on the minimum length of the lease (the “no minimum lease provision”). The Unit Owners submit that, in the context of a no minimum lease provision, the term related to single-family use needs to be read differently. Specifically, given that the Unit Owners are leasing to members of a single family, to prohibit the use the Unit Owners are making of the units would be to ignore the no minimum lease provisions.

[19] I agree with the Unit Owners that the cases relied on by the Condominium Corporations as interpreting single-family use provisions do not have a similar no minimum lease provision. I also note that cases addressing single-family use provisions often include reference to the length of the leases as a relevant factor. So, for example, in the extract from Menzies, reproduced above, the Court referenced concerns about leasing “for durations as short as a single night.” Similarly, in Oikle, the Court raised a concern at para. 32 about the unit owners’ expectation that they were buying units that would be “owner-occupied or long-term lessee-occupied, rather than buying in a building where many of the residences would be rented and occupancies short-term in nature.” (emphasis added)

[20] While the no minimum lease provisions make this case more difficult, I conclude that the Condominium Corporations’ interpretation of their declarations was reasonable. While I do not need to decide whether it was the only interpretation available, I find that it was reasonable for the Condominium Corporations to read the no minimum lease provisions and the single-family use provisions together in a manner that did not prioritize the no minimum lease provisions. Particularly, given the case law in this area, it was open to the Condominium Corporations to read the single-family use provisions as focusing on the nature of the use. It was reasonable to conclude that the provisions did not permit a hotel-like operation, which is advertised on the internet, and which includes check-in times, check-out times and security deposits.

[21] This reading does not read out the no minimum lease provision altogether. As submitted by the Condominium Corporations, as long as a unit is being used as an ordinary residence (and not as a hotel), the lease can be for any period of time. Needless to say, as a practical matter, this will mean in most cases that a lease would be for longer than a week. If, however, a lessee had no other permanent residence, and intended to stay in the unit while waiting for a new permanent residence to become available (after the purchase of a new home, for example), the lease could be for a few days without running afoul of the provision. I conclude that this manner of reading the two provisions in the declarations was available to the Respondents and is reasonable. I conclude, therefore, that the new rules are not invalid.

Was the Respondents’ Application necessary?

[22] The only remaining issue in dispute between the parties is whether it was necessary for the Condominium Corporations to bring their second Application. The Condominium Corporations submit that it was necessary to bring the second Application, as at the time they were responding to the first Application, the Unit Owners were continuing to operate their business, contrary to the new rules. They also say the Unit Owners were not complying with s. 83 of the Act, nor s. 5.1 of the declarations. Section 83 requires owners to notify corporations of a new lessee’s name. It also requires owners to provide lessees with a copy of the declaration, by-laws and rules and to notify the corporation within 10 days of the termination of a lease. Section 5.1 has some of the same requirements, but also requires that the owner provide the corporation with a copy of the lease or a renewal of it (or a summary of it in the form prescribed in regulations to the Act).

[23] At the time of the hearing before me, there was no dispute between the parties that the Unit Owners now are complying with s. 83 of the Act and s. 5.1 of the declarations. However, the evidence suggests that the Unit Owners had not been complying consistently at the time the Condominium Corporations brought their Application. For example, the Applicant, Pratap Kapoor admitted on cross-examination that NAPA was not providing guests with copies of the declaration, by-laws and rules when the NAPA representative met the guests at the building. In their Responding Record, the Unit Owners indicate that they leave copies of these documents in each unit. If this was occurring before the second Application was initiated, this information was not offered at Mr. Kapoor’s cross-examination when he was questioned on the topic.

[24] In addition, prior to the second Application, the Unit Owners did not substantiate their assertion that they were collecting identification from guests to ensure they were from a single family. Although Mr. Kapoor stated on cross-examination that this was occurring, the Unit Owners failed to comply with a request to provide the related documentation that would have proved it.

[25] Further, prior to commencing the second Application, the Condominium Corporations repeatedly requested copies of the Unit Owners’ leases for their guests. The issues between the parties with respect to the leases were not resolved quickly and the correspondence continued until at least approximately two weeks prior to the date scheduled for the hearing of the first Application.

[26] Finally, there is no dispute that the Unit Owners were continuing to operate their business pending the hearing and determination of the first Application. Although this does not necessarily mean they would not comply with a court order against them, it also was not unreasonable for the Condominium Corporations, in all of the circumstances, to seek an order ensuring compliance should they be successful on the first Application.

Disposition

[27] Therefore, the first Application is dismissed. The second Application is allowed. The Unit Owners are not in compliance with the Act, the declarations and the new rules. Pursuant to s. 134 of the Act, I order the Unit Owners to comply with the provisions of the Act, declarations and rules, as set out in paragraph 1(b) of the Notice of Application on the second Application.

Costs

[28] If the parties are not able to reach agreement with respect to the appropriate costs, they may provide me with written costs submissions. The Condominium Corporations will have 30 days from the date of this decision to provide their submissions, which should be no more than four pages, not including the costs outline and other attachments. The Unit Owners then will have 15 days to provide responding submissions with the same restrictions. Costs submissions may be emailed to my judicial assistant, Anna Maria Tiberio, at annamaria.tiberio@ontario.ca.

O’Brien, J. Date: June 4, 2019