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Arbitration

Also see:  Mediation; Dispute Resolution

Short Answer

A dispute resolution mechanism intended as an alternative to formal court proceedings while still involving a third-party "judge" (arbitrator or arbitration panel) whose decision is intended to be binding on the parties.

Definition

Arbitration is a formalistic dispute resolution process but is more flexible in its rules and structure than court.  For example, in arbitration proceedings the parties can choose the arbitrator who will hear the case, have greater flexibility in respect of evidence that can be submitted, and can determine what records will be kept of the proceedings (which, contrary to court records and proceedings, are private).  Also, unlike in court, where costs awards are generally limited, an arbitrator has the right to assign 100% liability to one party for the other party's costs of the proceedings.

Section 132 of the Condominium Act, 1998 (the "Act") provides that in situations where mediation is mandated by the Act and has failed, the parties are to proceed to arbitration. Failure of mediation is signified by (a) failure to have decided upon a mediator within 60 days of submitting the dispute to mediation, or (b) the mediator delivering a notice to the parties that the mediation has failed. The arbitration process is to commence immediately in the case of the first type of failure, or in the case of the second type, 30 days after the notice of failure is delivered.

The contexts in which the Act makes mediation and arbitration mandatory are:
  • disputes relating to agreements between a declarant and a condominium corporation;
  • disputes relating to agreements between two or more condominium corporations;
  • disputes relating to agreements made pursuant to section 98 of the Act;
  • disputes relating to agreements between a condominium corporation and its property manager;
  • disagreements relating to the declarant's first year budget and the obligation to be accountable for the same; and
  • disagreements between a condominium corporation and an owner with respect to any of the governing documents.

It is not possible for condominium corporations, unit owners and declarants to "contract out" of these obligations.
The Protecting Condominium Owners Act, 2015, when it comes into force, will add several new substantive provisions dealing with arbitration, including provisions allowing mediation to be by-passed in favour of arbitration and dealing with costs awards.  Further, when the Condominium Authority Tribunal is put into place, neither mediation or arbitration may be done if the matter is one that is designated as within the jurisdiction of that tribunal.  This article will be updated by the time the new legislation and related regulations are in force.

What you need to know…

…as a Unit Owner

In the condominium context in Ontario, disputes do not reach the arbitration stage if the parties are able to identify and agree upon a reasonable basis for settlement.  Such early settlement, whether through mediation or otherwise, is to be preferred.  However, on the chance that arbitration or court proceedings become necessary, unit owners should be diligent in retaining and preparing credible and reliable evidence supporting their experience and views of the circumstances at issue. 

As in all cases of legal dispute, unit owners are advised to seek legal counsel.  Often owners are unwilling to do so because of the risk of costs; however, generally, if the issue is genuinely one that is worth fighting over, it is worth getting help to do it right.  Individuals are typically at greater risk of both financial and emotional loss in disputes with corporations, and this risk can be amplified in condominiums which are owners' homes.  Often, the financial and emotional risks can be reduced if owners seek the assistance of legal counsel at an early stage.

If the condominium corporation has a by-law setting out mediation and/or arbitration procedures, these should be reviewed and followed.
…as a Board Member 

Condominium boards should almost never (if ever) rush toward formal legal proceedings involving a unit owner if there exists a reasonable chance of alternative settlement. In this regard, boards and unit owners are in much the same situation:  early settlement, whether through mediation or otherwise, is to be preferred; however, on the chance that arbitration or court proceedings become necessary, the board should be diligent in retaining and preparing credible and reliable evidence supporting their experience and views of the circumstances at issue.  Boards are also well advised to engage legal counsel at the very earliest stages of the dispute.

Boards would be wise to consider enacting arbitration procedure by-laws (and if they are made, to comply with the same) and also could seek to ensure that the declaration of the condominium includes provisions which make any costs awarded to the condominium in arbitration proceedings be deemed to be common expenses attributed to the disputing owner's unit so that the condominium has available the most effective and efficient collection mechanisms.
…as a Declarant

As noted above, certain disputes that a condominium corporation may have with its declarant are subject to the mandatory mediation and arbitration provisions of the Act.  Declarants who do not seek sincerely and reasonably to resolve disputes without necessitating formal legal proceedings are likely thereby to do more harm than good to their reputations in the market.