Wednesday, February 09, 2005

Faulty Fountain Causes Damage

Dear Betty

I am having a situation with a condominium that I manage and I would like your perspective.
1.Homeowner A, installed a fountain in his unit, which was faulty.
2 . The fountain leaked and damaged the unit below, Homeowner B. had damage to her hardwood floor and drywall. Her policy covered her own personal contents.
3. The adjustor for the corporation has given opinion that the damage is less than $5000; so it is to be covered by the corporation.
4. The Bylaws were amended by a 75% of the ownership agreeing that the corporation did not have to cover betterments and improvements. Homeowner B bought her unit with the improvement of hardwood floors. These floors are common property according to the adjustor and the bylaws. The Board states that they should not have to cover this cost because the bylaws were amended. The point is that prior to the amendment they were covered by the corporation, how does this amendment apply to her unit?

5. If Owner A is part of the corporation can the corporation sue him for the damages? Is the corporation technically suing themselves by suing Owner A?

The catch here is that the Condominium Property Act and Regulation in Alberta states that the corporation is responsible for insuring the unit, and the common property (under the condo insurance policy) which includes the floor, cabinets, ceilings etc. The difference to the corporation with improvements and betterments being the owners responsibility would mean that the cost difference between the upgrade to hardwood from the original floor material would be the responsibility of the Owner. The corporation would be responsible for the basic floor covering (before the improvement).

Having said all this, if your bylaws are drafted correctly the owner who caused the problem should be liable for all damage.

Regarding the question if a condominium corporations can sue themselves.

First, owners can sue the board but they need to realize the cost for the board to defend itself is paid from common expenses, this is why the statement "that they are technically suing themselves" is an important consideration before filing a suit.

Second, the Corporation can sue an Owner, but be aware that there have been cases where the court has ordered that the cost to the owner to defend himself and the costs for the corporation to prosecute can not be paid from the common funds, meaning the filing board members had to pay these costs personally when the suit filed was unreasonable.

In this case (the leaky fountain) the board (Corporation) would file a suit against the Owner who caused the damage. This is a reasonable course of action if this owner refuses to take responsibility after he has been notified. Possibly file in small claims court and have a board member represent the Corporation to keep costs manageable. The important thing here is to have the bylaw that supports that the owner is responsible for damage to the common property or unit property and the evidence that as a board you have been reasonable in dealing with this problem.

I hope this helps


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