Toronto Condo Team

Everything To Lookout For When Involved With A Condo Facing Litigation

Saturday May 30th, 2020


The dreamy Toronto condos can seem to be no-brainers at first glance. You have spent an eternity trying to find the ideal condo, and now that it is in front of your eyes, you feel hesitant. The status certificate sets a frown on your forehead as you realize that the condo's board is facing litigation. In this sticky situation, is it right to go ahead with an offer, or should you take to your heels?

There are so many aspects to consider before you decide to buy a condo that has a risk factor attached to it. Here is everything that you should know if you are thinking of purchasing luxury condos Toronto that has a lawsuit with it.

Are condos prone to lawsuits?

In the Toronto condos world, lawsuits can be frequent. Anything from denial to repair the roof to pet disputes can be the reason behind pending lawsuits against condo boards. It goes without saying that it’s not an easy task to construct a condo. There are several things in this process, many of which may go haywire, resulting in litigation.

Secondly, owners or residents are not ready for the task of ‘turning over’ the condo from developers to the holders of the condo board. So many of these lawsuits are a result of inexpertise of residents and the board of directors of the recently formed condominiums.

Lastly, running a condominium corporation is back-breaking work. Besides taking care of the physical building itself, you have to manage a huge staff every single day. With issues election disputes, breaches of the rules and regulations, and discrimination, it's challenging to keep lawsuits at bay. Construction errors, complaints about noise, problems with tenants regarding payment, accident injuries are some other common issues.

Recently, a lawsuit in Toronto is seeking about $50 million in damages against the corporation. It is filed by an old official with a condominium developer claiming that the corporation made "significant misrepresentations to its lenders" amidst a “cash crisis," leading to her unjustified brush-off. In response, a countersuit has been filed claiming defamation and breach of contract, amongst other things. Such situations can turn out to be drawn-out and expensive.

How hard is it to deal with these lawsuits?

Buying beautiful waterfront condos can seem to be all fun and games, but it is so much more than that. Nearly all associations will be in a lawsuit during the lifetime of a building. Although these high-priced and sluggish lawsuits are not the first choice for dispute resolution, they are unavoidable in some cases. Making a prediction about the cost of the lawsuit is tough because of this.

The length and price tag attached to them varies in different situations, which can prove exhausting in a community. Luckily most cases get off easy and are settled before the trial is completed. But this speedy and discounted process can quickly turn bitter with a lengthy settlement.

What can the owners expect?

Section 23 of the Condo Act applies to the cases where the corporation commences legal action on behalf of the owners. It states that before commencing certain legal actions, corporations must give written notice to owners of the general nature of the action. This is not applicable to all kinds of litigations.

This written notice is not necessary if the legal action:

  • Aims to implement a lien;
  • Aims to force the residents/owners to comply with the Act, the declaration and regulations;
  • If it is in small claim courts

It is also not necessary to provide written notice when a corporation is commencing legal action on its own behalf.

How do lawsuits in condos affect buyers and sellers?

Lawsuits can be troubling, be it in King West condos guaranteeing a 5-star living or in beautiful Yorkville condos. Whether you are a buyer or a seller, litigation affects the whole dynamic. When the status certificate reveals that a condo is facing litigation, the buyer comes across an interesting opportunity. The condo unit may be perfect for the buyer.

If the seller is ready to contribute towards impending costs, it could be a win-win for both parties. The buyer gets his preferred choice from the luxury condos Toronto since there would not be high demand for a condo facing litigation. At the same time, the seller gets to make a good deal.

Are there any alternatives?

As an alternative, groups can choose to set up a meeting on their own in the absence of an attorney. Occupants look up to mediation experts nowadays for direction and advice. They act as an unbiased barrier and offer solutions to reach an agreement.

There are other methods available as well if this doesn’t work out. These can be way faster and economical than facing lawsuits. Mediation is bound to fail if both parties don’t reach a compromise. In fact, arbitration is legally binding, unlike mediation.

What is in store for you?

So, you have made up your mind about the Toronto condos for sale. What is heading your way, and what are the challenges you will face ahead? Here is everything that is heading your way if you decide to move into a condo facing litigation.

Heavy on the pocket

Once Toronto condos are associated with a lawsuit, the prices will soar inevitably. It does not matter whether the corporation losses or wins the case; the fees will rise as a result. In any case, the condo corporation will be responsible for a part of its legal fees. If they lose the case, they will have to pay their fees as well as a part of the other side.

Condo corporations keep some money aside, which is for emergencies. This money is the 'reserve fund.' In Ontario, this money can be used only in case there are some major repairs to be made or a crisis to look into. So owners of the high-class Toronto Lofts will pay up in a suit in the form of a higher monthly figure. 

The price tag attached to the risk

Before you jump into the opportunity and buy the condo of your dreams, make sure you take the risk factor into account. The costs linked to the lawsuit need to be summed up with the purchasing cost of the condo unit. Before you make up your mind about the deal, keep a check on the magnitude of the lawsuit and its consequences as well.

To cover the impending litigation charges, you can have a lawyer ‘freeze’ a certain amount of cash. This money can be held back for a time frame until it is needed. It is better to be certain that it is not a real estate red flag, and you will be able to make up for the risk. If it does not seem worth it, there are plenty of other excellent options out there.

Mortgage lenders will naturally look out for extra lawsuit charges. So before anything else, they will grind the borrower on whether he will be able to pay the impending costs. These costs will be in addition to the total debt of the borrower.

Lenders will want to make sure that the climbing fees will not affect the agreement. So, it may become hard to get the required funds in Toronto condos facing litigation. So it is important to question whether you will be able to get a lender to finance it.

Selling can be troublesome

With a pending lawsuit in the picture, selling a condo can be a hard task even it is one of those luxurious waterfront condos. Buyers would not be easy to come by due to the fear of facing numerous financial issues. They might even decide to avoid it completely and look elsewhere.

Toronto Lofts and condos are in high demand because of the low-priced and comfortable living that they provide. More and more buyers are opting for these under the impression that it will be a less pricey investment. In this situation, they will tend to turn their backs on the condos, which are linked to a constant fear of impending costs. So you should contemplate whether a seller will be able to make full use of your ‘Toronto condos for sale’ sign.

Summing Up

It may be difficult to imagine that there may be demanding lawsuits hiding behind the beautiful curtains of picture-perfect Toronto condos. But it’s the harsh reality that the history of your dream condo might not be spotless. It is important to cautiously choose when it comes to finding the right condominium for you.

You do not want to get in a position where the beauty of the condo weighs out all the other important factors. It is imperative to keep a few things in mind, including costs, risk factors, mortgage, and future sale. If you find yourself in this situation, it is best to question whether it is a risk you are willing to take or not.

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