Liability of Condominium Corporations in Ontario
Question:
Please explain unlimited liability and limited liability regarding condominiums under the Condominium Act?
Answer:
You should start out with the proposition that all individuals are responsible for their actions. There is no limitation upon their liability to third parties.
In the 17th century, the first corporations were created. They were special “persons” referred to as “bodies corporate” that were provided with an entitlement to limited liability. The Hudson Bay Company is one of them.
Today, virtually all corporations have limited liability. This means that the liability of the owners is limited to the contribution that they made to the corporation to purchase their shares in the first place.
Limited liability is also afforded to limited partnerships. A partners’ liability will be limited to the amount they agreed to pay to the partnership, provided that they are in fact “limited partners”. The “General Partner” will be fully responsible.
Now, of course, the standard has changed: virtually all corporations have limited liability. There is one exception to the general rule, and that is, Condominium corporations. Here, the owners are responsible on a pro rata basis for the entire debt of the corporation.
The only way an owner could limit their liability would be to incorporate a company to own the condominium unit. However, be cautious, because this creates some additional issues that must be considered.
The following provision in the Act is relevant:
Effect on encumbrances
13. Upon the registration of the declaration and description, an encumbrance against the common elements is no longer enforceable against the common elements but is enforceable against all the units and common interests.
If you are concerned about your liability as an owner of a unit in a condominium, then you should consult with your lawyer or real estate solicitor in order to obtain advice as to what steps might be appropriate for you to lessen your risks and exposure.
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com