Royal Connaught developers taking unit owners to court over lobby fee arrears

Developers of the historic Royal Connaught are taking the condo's residents to court over what they claim are thousands of dollars in unpaid lobby use fees.

While the luxurious Grand Lobby was a focal point in marketing materials for the rebirth of the hotel-turned-condo, dozens of unit owners expressed shock in 2019 upon learning they'd have to pay a monthly toll just to go through it.

What ensued was what one Spectator columnist dubbed a civil war" between developers who maintained the unusual lobby fees were legal and residents who called them bait-and-switch tactics.

Now, that brewing saga will soon play out in a Hamilton courtroom.

According to a court application filed by Royal Connaught Inc. last fall, owners of nearly 140 units in the building have allegedly wrongfully entered" its lobby over the past four years after not paying thousands of dollars worth of annual lobby fees.

The application alleges Wentworth Standard Condominium Corporation 566 (WSCC 566) - one of two condo boards in the building - owes developers more than $172,300, according to a lobby licence agreement signed in 2018.

Royal Connaught Inc. is seeking an injunction against the board and its members prohibiting them from entering or traversing the lobby until their arrears are paid, the application states.

The application notes the other condo board in the building - WSCC 573, which represents about 90 units made in the second phase of the building project - has made every monthly payment since the original agreement.

Developers of the downtown landmark couldn't be reached for comment. But developer Rudi Spallacci previously told The Spectator the ownership of the lobby was clearly stated in every purchaser agreement."

In a statement, Robert Mullin, the lawyer representing WSCC 566, said the board's directors are actively reviewing the application with the hopes of a resolution that is agreeable for all parties."

The court application will be heard March 8.

For unit owner Lynda Zugec, the injunction sought by Royal Connaught Inc. marks the latest in a string of disconnects between residents and developers of the century-old architectural gem.

The lobby was a selling feature of the condo," said Zugec, noting the developers had a sales office set up in the Grand Lobby before she moved into her one-bedroom condo in 2017.

It's a common space with a gym and a theatre and elevators that go up to our units. Why should we have to pay for that?"

The answer to that question lies in a lobby licence agreement, signed in May 2018, that established the Grand Lobby as a separate legal entity to the condo residence, according to Royal Connaught's court application. It required WSCC 566 to fork up nearly $69,000 a year - or about $40 a month per unit - if its members wished to ingress to or egress from" the lobby.

While WSCC 566 voted to terminate the lobby agreement in July 2019, Royal Connaught claims that wasn't valid because the board agreed to the lobby licence when it was declared a corporation, the application states. And, if the licence was in fact terminated, then unit owners have since wrongfully entered, traversed and used" the lobby without permission, the developers allege.

So where does that leave Zugec and other unit owners, and how do they get into their condos without passing the lobby?

There's a side door that gives us access, but we shouldn't have to use that," she said. Even if there was an agreement with the board, we've been misled. It was a bait-and-switch."

The practice of developers separating common elements in a condo building - and then leasing those back to condo corporations - has increased in recent years, according to the Ontario Condominium Act.

(T)his practice inflates the cost of units and has become an unnecessary source of tension within condo communities," a recent provincial review of the act found.

At the crux of Zugec's frustration is the lobby licence ordeal isn't the only thing sparking tension among unit owners.

In a newsletter to owners last August, the board cited its many concerns" over the city designating the Royal Connaught as a heritage building because it will increase operating costs. Another issue, they said, are movie shoots on the property and the associated energy costs which are ultimately borne by residents.

Spallacci previously told The Spectator said the lobby matter is separate" from the designation question.

Protecting the exterior of the building as well as the lobby and the mezzanine is good for the building, it's good for the residents who live here and it's good for the city," he said in an email.

Sebastian Bron is a reporter at The Spectator. sbron@thespec.com