Arbitration is expensive

Arbitration is expensive and the costs can rival or exceed going to court. The stakes are high for an owner who may have to pay the corporation’s costs if they lose but less so for a board who will spread their costs among all of the owners through their condo fees.

The courts have confirmed that, after reviewing the owner’s prior conduct, it is within an arbitrator’s discretion to order the owner to pay up to all the condo corporation’s costs.

These costs can be huge, as in Italiano v. Toronto Standard Condominium Corporation No. 1507, where the owner was obligated to pay in excess of $81,000 for the corporation’s legal fees, mediation and arbitration costs. This is a heavy price to pay for playing loud music in a condo with thin walls.

In a Court of Appeal for British Columbia decision, Hunt v. The Owners, Strata Plan LMS 2556, the owners, Mr. & Mrs. Hunt requested that a dispute over an owners plans to install an air conditioning unit go to arbitration.

The Hunts wanted a single arbitrator decide the issue; the strata wanted three arbitrators. The Hunts, who represented themselves, lost and were hit with the three strata's legal costs. ON top of that, they had to pay the arbitrators’ fees, which including taxes, totalled $106,008.

Remarking on this case, Paul G. Mendes, a BC lawyer, wrote:
"Arbitrators are private judges, and they don’t come cheap. One of the arbitrators, in this case, charged $400 per hour or $3,000 per day to hear the arbitration. One of the things that the strata’s lawyer discussed with the arbitrator in those informal communications was how worried the unit owners were about the cost of the arbitration after they were asked to pay $15,000 for their share of the arbitrator’s fees!

Arbitrations can be very effective for resolving specialized disputes quickly, but they can also be punishingly expensive, so they are generally not suited to resolving most strata disputes. The dispute here was over the installation of an air conditioning unit on the common property. The Hunts opposed the AC unit because they felt it would be too noisy and that it would unreasonably interfere with the use and enjoyment of their strata lot. Although it is possible that that dispute was worth $106,000 to the parties, that seems extremely unlikely to me.

For that reason, I always advise against using arbitration to decide most strata disputes. The cost of losing the arbitration can be punishing and is often disproportionate to what is at stake in the typical strata dispute.

That is not to say that there is no place for arbitrations in strata disputes, but it does not mean that you should think long and hard about initiating a strata arbitration when much less costly options like Court and the CRT are available."

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