Real estate developments can be an exciting business opportunity and new homes are much sought-after by purchasers, but when things go wrong with the build, issues can drag on for years. Maintaining an accurate record of who is responsible for what is key to resolving potential disputes, as one condo board found in the recent case of Condominium Corporation No 062 1161 v Park Place Communities Ltd, 2023 ABKB 373 (Park Place).
The developer in Park Place finished constructing a new condominium property in 2006, and the roof began leaking a short time after. From 2007 to 2012, the condo board and developer discussed the repair of the roof, and the developer continued to take steps to troubleshoot the issue. These efforts, however, were futile. Finally, in November 2012, the developer proposed to the condo board that they should share the cost of repairs 50-50. The condo board was not agreeable to this, and on April 30, 2013, the developer withdrew from the repair efforts and stated that any further communication on the matter should be conducted through its legal counsel.
The condo board subsequently sued the developer, filing a claim by the condominium corporation on August 22, 2013. The developer argued, however, that the condo board had waited too long to sue, and thus the developer was immune from the lawsuit. The Applications Judge disagreed, holding that the action had been brought in time. On appeal, the Court of King’s Bench agreed with the Applications Judge, stating that the developer’s actions and continued commitment to repairing the roof may have extended the limitation period.
But what is a limitation period, and when does the clock start running?
Limitation Periods and the Limitation Clock
Anyone pursuing a legal claim seeking a remedial order in respect of an injury, such as the leaky roof in Park Place, has a limited amount of time to commence court action before the claim “expires”. This is called the limitation period, and in Alberta it is governed by the Limitations Act. Under this Act, there are three (3) criteria that must be met before the limitation clock starts ticking:
- First, the individual must file their claim within two (2) years of when they first knew, or ought to have known, that they suffered an injury. This is described as the discoverability principle, but perhaps counter-intuitively, it means that the person filing the claim does not need to actually discover, say, the leaky roof for this criterion to be met. Rather, if a “reasonable person” should have discovered the leak earlier, then the limitation clock may have started at that earlier time. It is an objective test, based on what someone who is diligent but perhaps not a perfectionist might do in the same situation. For example, a reasonable person would most likely engage in regular building maintenance and hire skilled tradesmen to do work when needed.
- Second, the injury needs to be attributable to the conduct of the defendant, being the individual the claim is being brought against (such as the developer in Park Place).
- Third, the injury must warrant bringing a proceeding. We’ll discuss this third factor in greater detail below.
When all three criteria are met, the limitation clock starts ticking, and the claimant has two years to bring the action. The onus is on the person bringing the claim to show that on a balance of probabilities (more likely than not) the action has been brought within the two-year limitation period, or, as the developer in Park Place moving for summary dismissal, that the limitation period had expired and that they are immune to civil action in respect of the claim.
What Might Forestall the Start of a Limitation Period?
In Park Place, the condo board and the developer disagreed about when the limitation clock started ticking, based on the third criterion of when the injury warranted proceeding, or in other words, when it was reasonable to bring a claim. The condo board argued that the earliest the two-year limitation period could have started to run was in November 2012 when the developer proposed cost sharing. Using this date, the condo board filed their claim in time on August 22, 2013. But the developer argued that the limitation period started more than two years before the claim was filed, and that the latest date the clock could have started was July 28, 2011. On that day, the condo board treasurer consulted his own lawyer about a personal issue and learned there may be a limitation issue with regards to the leaky roof. So how do we determine when bringing a proceeding is warranted under the Limitations Act?
The Court in Park Place reasoned that a proceeding would most likely not be warranted where the liability-bearing party is assuming responsibility for the issue. Bringing an action at this stage would be too early, as based on previous Alberta case law, an action can only be brought where there is a genuine issue to be tried. If a party is still trying to fulfill their obligations, commencing an action is premature and unwarranted. In analyzing these limitations disputes, the court will consider the subjective view of the party bringing the action to determine whether it was a reasonable time to commence legal action, and whether the decision to bring an action was reasonable.
Another concept that may pause the limitation clock is promissory estoppel. Promissory estoppel is a contract law doctrine that prevents a party from going back on their promises (legalese for “no take-backs”). To establish promissory estoppel, (1) the liability-bearing party must have made a representation or promise, (2) the injured party must have reasonably relied on that promise, and (3) the reliance must have been detrimental to the injured party.
In Park Place, the developer impliedly promised to fix the roof from 2007 to November 2012 through actions such as hiring contractors and continually committing to making repairs. Promissory estoppel may extend a limitation period, as the injured party has no reason to believe that legal action is warranted when they are relying on the liability-bearing party’s representations. That belief is reasonable because they are taking the other party at their word. Once the injured party realizes that they have mistakenly relied on the other party, however, the limitation clock starts. Alternatively, if a reasonable person should have realized the mistake sooner, the limitation clock would start earlier. Promissory estoppel, as invoked by a plaintiff resisting a defendant’s limitations argument, could be understood as an “‘elaboration’ of the issue of when commencing proceedings were ‘warranted'”. In other words these arguments may well be “two sides of the same coin” (see para 34).
Putting Park Place Into Action
If you are engaged in any development or repair as either a developer or a condo corporation, keep a record of who is taking responsibility for what, and when those commitments are required to be completed. It’s also important to keep copies of any correspondences about the project. If you’re part of a condo board, maintain accurate and detailed minutes about projects, maintenance, and repairs, as well as communications with the developer and any warranty providers. If all parties appear to be holding up their end of the bargain, it may be too early to commence an action. However, circumstances may change quickly if one party changes their tune.
As Park Place dealt with an application by the condo developer for summary dismissal, the Court declined to determine whether the limitation period had actually been exceeded. Instead, the Court simply decided that the condo board’s arguments in response to the developer’s limitations defence had merit and therefore summary dismissal was not available to the developer.
Regardless of the ultimate outcome of this case, claims do not become easier or less costly with the passage of time. Sometimes the solution is filing but not serving a claim for up to one year, or filing a claim and entering into what is commonly referred to as a “standstill agreement” which temporarily suspends the requirements under the Rules of Court requiring the action to be prosecuted in a timely fashion and subject to certain deadlines. Standstill agreements can also be entered without an action having been commenced at all, simply to suspend operation of the limitation clock while the parties attempt to resolve the issue without litigation, which is something that the Court strives to encourage.
Establishing a limitation period is extremely fact-specific and nuanced, so waiting to commence an action is generally ill-advised and could result in losing the ability to pursue the claim at all. Even if you file in time, the longer you wait could jeopardize your ability to collect on a judgment, as the defendant may go out of business or dispose of assets before you have a chance to realize on any judgment. In short, if you are a condo board or manager grappling with deficiencies or incomplete construction, it’s never too early to speak with a lawyer and get advice on your legal rights, duties and options.
If you have any questions about this blog post or others, please contact me.
Special thanks to Catherine Ford, Field Law Summer Student, for assistance authoring this article.