CONDOCENTRIC: Corporate Blue Jays Busting Urban Nests

The following excerpt is reprinted with permission of its author, John Sewell, former mayor of Toronto. The complete article first appeared in Eye Weekly Magazine on June 20, 2002, and addressed the increasing challenge of hotel-like businesses operating within residential condominiums. One of the many issues that this situation raises is: if a single company or individual purchases/controls a majority of the units with a view to carrying on a commercial business within a residential condominium, could any elected board be able to able to fulfill its duties without finding itself repeatedly in conflict of interest with the objects and duties set out in the Condominium Act?

It's a new style of block busting. Thirty years ago a developer could become entrenched in an area by purchasing and then running down houses so a neighbourhood became unattractive for others to buy into. Existing owners who decided to sell because the area was no longer pleasant quickly found the only buyer around was the developer. They were captives of the developer. Today it's condo busting, with slightly different techniques.

But that's not the way Skyline Properties sees what it is doing in Condo Corporation No. 1385, the apartment building at the corner of Front Street E. and Jarvis Street, across from the St. Lawrence Market's south building.

Ross Linden, chief executive officer of Skyline's parent company, says the business is not that of a hotel but the long-term rental of executive suites. "We provide a residential environment away from home," he says in an interview. "That's what extended stay is all about. Our current policy is a minimum stay of 30 days.

"We tend to be low-key," he continues. "We love to be in the building, and we think there's a way of living side by side with owners."

The long-term residents don't see it that way at all. After enduring the problems of short-term guests who thought they were staying in the hotel -- groups of young people running around the corridors from party to party -- and dealing with Skyline's cleaning staff and their hotel carts in the hallways, the duly elected condo board imposed a requirement that leases be for a minimum of six months, and all leases had to go through the board.

Skyline, which purchased 54 units and then sold them under a management lease back to investors from the Middle East, forced the board to hold several membership votes on the new rules. When it was unable to overturn the new rules, it went to the courts.

Skyline asked for an interim injunction against the six-month rule. In mid May a judge rejected the request, doubting that Skyline had any right to rent its units without restrictions.

"A number of cases before this court," wrote the judge, "have held that the rules adopted by condominium corporations to prevent the operation of what is effectively a hotel are reasonable." The court awarded legal costs against Skyline, but the company continues to seek the longer term injunction, as well as damages against board members.

With a condo board and its front-desk staff opposing it, Skyline found the only way it could get custodial staff in to clean the units was through a rear fire escape entrance, which it propped open. (Cleaning materials, sheets, towels, and other paraphernalia needed to service paying guests were stored in a commercial unit on Jarvis Street.)

Last month several units directly off this back stairway were broken into, although whether the open doorway was a proximate cause of these incidents or whether it was just a coincidence remains unclear.

Since that time, the condo board has imposed new security measures, including cameras as well as timed and electronic locks to prevent these entries.

Skyline has not relented. In late May it distributed a letter stating "a number of owners have had enough of this confrontational attitude and have approached Skyline and offered to sell us their units."

The letter warns that owners are "facing a protracted and expensive lawsuit" and disingenuously continues, "We seek to put an end to this confrontation and to settle this matter responsibly and in the best interests of all owners."

Skyline claims it now owns 69 units and manages a further 10. Linden wouldn't say whether Skyline was trying for majority control to depose the condo board and take over the building. Asked if Skyline's strategy is to force a vote during the summer when some owners opposing Skyline's operation would be away, Linden replied, "It isn't wise to speculate."

Skyline brought the same kind of court action on its adjacent and physically linked condo neighbour, Condo Corp. No. 1280.

After losing that court action last September, Skyline backed off No. 1280 to concentrate on No. 1385, and it is now offering to trade its remaining units in 1280 to owners in 1385. Skyline has a significant block of votes, whereas the residential owners all operate as individuals.

From “Common Elements” Summer 2002

All of the information contained in this article is of a general nature for informational purposes only, and is not intended to represent the definitive opinion of the firm of Elia Associates on any particular matter. Although every effort is made to ensure that the information contained in this newsletter is accurate and up-to-date, the reader should not act upon it without obtaining appropriate professional advice and assistance.

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