The marketing message behind the Condominium boom in Canada’s urban jungles is all about newness. The smell of new carpets and freshly cut flowers in the lobby appeals to the allure of modernity. The reality of the condominium as a form of residential property has been with us for decades, and condominium law has been overlaid on top of conventional property law. Buried within the registered title documents are discrepancies waiting for parties to turn them into legal disputes. With so many deals taking place, and lawyers not being trained in ‘parochial’ property law, condominium title disputes will only increase with time and the volume of transactions.
One problem area, hitherto unknown in the legal community, is the effect of adverse possession on exclusive use common elements. The physical integration of a common element into a unit owner’s unit is not uncommon. For example, balconies, parking spaces, and storage areas are typically common elements that are allocated to units by the developer as units are sold on the drawing board. Mistakes are not that frequent, but frequent enough. By operation of law, the original allocations filed with the condominium declaration are fixed and presumptive unless amended in accordance with the statute.
But if a developer makes a deal with an early buyer to reconfigure an exclusive-use common element, the developer may perform the construction work but neglect to amend the title documents. Lawyers acting on transactions, relying on title insurance or the work of clerks, can assume clients know what they are buying and fail to provide the required title opinion. Decades may pass before a subsequent owner of one unit notices that a parking space or storage area used by a neighbour actually “belongs” to him and not to the neighbour.
The common wisdom is that adverse possession does not apply to condominiums because condominiums are all subject to Land Titles legislation. As modern title registers go this way, the concept of adverse possession is becoming folklore. For example, a neighbour builds a fence inside your property line and you don’t sign a license allowing his use of your land. With the passage of time, your land on the other side of the fence vests in the neighbour. Land Titles legislation has eliminated adverse possession for the freehold, so this is a vanishing problem. But does the Land Titles exemption apply to common elements?
The Statute of Limitations
Adverse possession is a doctrine of common-law rooted in the possessory origins of English real property law. Nevertheless, in most cases the courts rely on the statutory 10-year rule as a matter of certainty. In practice, no claim in adverse possession of a duration less than the statutory rule is likely to succeed.
The first point to consider in matters involving the long passage of time is that one must select the right iteration of the statute of limitations. Because property rights are substantive, most laws regarding ownership or quasi-ownership are not retroactive. In Ontario, for example, the 2004 reform of the statutes of limitation are only becoming relevant because the 10-year rule for statutory adverse possession would only have accrued in 2014. In most instances, the 10-year analysis requires consideration of s. 4 of the 1990 revision of the Limitations Act:
No person shall make an entry or distress, or bring an action to recover any land or rent, but within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to some person through whom the person making or bringing it claims, or if the right did not accrue to any person through whom that person claims, then within ten years next after the time at which the right to make such entry or distress, or to bring such action, first accrued to the person making or bringing it. R.S.O. 1990, c. L.15, s. 4. [emphasis added]
“Land” is a defined term under s. 1 of the 1990 revision of the Limitations Act:
“land” includes messuages and all other hereditaments, whether corporeal or incorporeal, chattels and other personal property transmissible to heirs, money to be laid out in the purchase of land, and any share of the same hereditaments and properties or any of them, any estate of inheritance, or estate for any life or lives, or other estate transmissible to heirs, any possibility, right or title of entry or action, and any other interest capable of being inherited, whether the same estates, possibilities, rights, titles and interest or any of them, are in possession, reversion, remainder or contingency.
Under various iterations of the Condominium Act, units and common elements are real property “for all purposes.” Adverse possession codified under s. 4 of the Limitations Act was established by evidence of three facts: (1) actual possession, (2) intention to exclude the true owner (i.e. on title) and (3) effective exclusion: Masidon Investments v. Ham, 1984 CarswellOnt 578 (C.A.), at para. 14. The middle element, intention to exclude, may be inferred when there is a mutual mistake based on a belief that the party in possession is the true owner: Teis v. Ancaster, 1997 CarswellOnt 2970 (C.A.), at para. 30.
This still does not determine the issue, because of the exemption under s. 51 of the Land Titles Act:
Despite any provision of this Act, the Real Property Limitations Act or any other Act, no title to and no right or interest in land registered under this Act that is adverse to or in derogation of the title of the registered owner shall be acquired hereafter or be deemed to have been acquired heretofore by any length of possession or by prescription. (emphasis added)
Ontario condominium lawyers have generally construed this provision to exclude the concept of adverse possession from condominium law. Not so fast – does such an opinion stand the scrutiny of a proper statutory interpretation analysis?
Dissecting the Land Titles exemption
The words “title of the registered owner” constitute the key to opening up the mystery of the exemption. What is ownership, and how does the condominium legislation confer ownership? The enforcement of a condominium declaration is considered subordinate to statutory rights and the enforcement of the provisions in a declaration are subject to limitations of action and real property prescription periods: Toronto Common Element Condominium Corporation No. 1508 v. William Stasyna, 2012 ONSC 1504, at paras. 40-42. So anything less than “title of the registered owner” is subject to statutory limitation periods.
In every iteration of the Condominium Act in Ontario, it was the description and the definition of “unit” that has defined an owner’s title, and not the declaration. Allocations of exclusive use over common elements are contained in declarations, not descriptions. Therefore, s. 51 of the Land Titles Act did not affect the operation of adverse possession or land prescriptions with regard to the contents of a declaration.
An exclusive-use common element is not part of the owner’s unit. A common element is owned by all owners as tenants in common, whether or not it is designated for use by all or by the owner of one or more units. An owner with exclusive use would never own the exclusive use of the common element because ownership is held in common. Therefore, s. 51 of the Land Titles Actwould not apply. The phrase “the title of the registered owner” under s. 51 is made up of expressly defined terms. Is the operation of adverse possession on an allocation of exclusive use of a common element under the Condominium Act a derogation of “title of the registered owner”? We must examine the meaning of the three constituent terms: “title,” “registered” and “owner.”
In the 1990 revision of the Land Titles Act, “title” is not defined but provided for three types of title in ss. 36-38 in a section of Part IV called “Titles.” Each of sections 36, 37 and 38 provide for, in sequence, absolute title, qualified title and leasehold title. Title in the condominium context must be absolute title and not qualified or leasehold: s. 144(1):
144. (1) Except as provided by subsection (2), where land described in a description as defined in the Condominium Act or shown on a plan of subdivision is situate in a land titles division, the description along with the appropriate declaration or the plan of subdivision, as the case may be, shall be registered under this Act.
This provision confirms that the description, not the declaration, is the document that defines title. Read grammatically, s. 144(1) clearly limits the type of title eligible to be registered for a condominium to absolute title, as opposed to qualified title or leasehold title.
The word “registered” is defined under s. 1 as “registered under this Act.” As a qualifier of the word “owner,” clearly “registered owner” means a person whose ownership interest is registered under the Land Titles Act.
The word “owner” is defined under the Land Titles Act as “an owner in fee simple.” Had the legislature intended to oust s. 4 of the 1990 Limitations Act entirely from lands registered under Land Titles, it would have mirrored the language of s. 4 (“any land or rent”) and not limited the application to title held in fee simple. Consequently, if the title or interest is other than an estate in fee simple, s. 51 of the Land Titles Act does not apply.
A fee simple is a common law phrase denoting the highest form of private ownership, with an unfettered right of assignment and survivorship: Re Forfar and Township of East Gwillimbury, 1971 CanLII 543 (ON CA), Ferguson v. Innes, 1894 CanLII 28 (ON CA), at para. 11 (at p. 10).
The definition of “owner” under the Land Titles Act differs from its counterpart in the various iterations of the Condominium Act, in that the latter refers to the freehold estates in a unit or in a common element (“common interest” being defined as the “interest in the common elements appurtenant to a unit”).
The tenancy in common of the common elements of a condominium is a “novel form of property ownership” which departs from the traditional rights of tenants in common at Common Law: Carleton Condominium Corp. No. 11 v. Shenkman Corp. Ltd., 1985 CarswellOnt 713, 49 O.R. (2d) 194, at para. 20 (at p. 15).
Common interests in a condominium’s common elements cannot be separated, divided or partitioned. Unlike land held in fee simple, common elements cannot be dealt with independent of units in the condominium. Had the legislature intended to expand the effect of s. 51 to ownership of a statutory tenancy in common, it could have amended the definition of “owner” in the Land Titles Act beyond the owner of the estate in fee simple.
Consequently, the prescription period as well as common-law adverse possession rule can confer upon the ‘squatting’ unit-owner a right to exclusive use of the disputed space that extinguishes a claim for an allocation of exclusive use under a condominium declaration. The physical status quo and boundaries, with the passage of time, can thus legally trump the black letter of the declaration registered on title.