Improper notice invalidates a lien

In York Condominium Corporation No. 82 v. Bujold, the Ontario Court of Appeal heard a case about a condominium lien. The facts are important to understanding the case. Briefly, the condominium served a notice of lien on the owner on June 22, 2007. However, the lien was not registered on title to the owner’s unit until September 25, 2007 (more than three months later). The judge held the lien had expired. The condominium appealed to the Court of Appeal.

The first issue before the court was whether the condominium’s lien had expired. The court held that the lien had expired as it related to those prior to June 25, 2007 (three months before registration), but was potentially valid for those afterward. The court stated:

Delayed registration does not invalidate all liens, just those that arose from defaults that occurred more than three months before the registration.

This means that any arrears that arose after June 25th, such as July 1st, August 1st, and September 1st, were covered by the lien registered on September 25th. However, the condominium could not rely upon the registered lien to cover previous arrears as the lien right had expired as it was not registered within three months of the default. For instance, to cover arrears from June 1st, the lien must have been registered before September 1st.

The second issue before the court was whether proper notice of the lien was provided to the owner. The court found that improper notice was provided as the notice did not disclose the full amount of the registered lien. The court’s reasoning was that since each default gives rise to a new lien, and section 85(4) of the Condominium Act, 1998, requires written notice “of the lien”, notice of each lien (default) was required. The court did not feel this would create hardship to the condominium as all future defaults would be covered once the lien is registered.

Legally, the court’s reasoning is simple to understand. The owner must receive notice of the full amount to be included in the lien prior to registration. However, practically speaking, the decision causes a host of issues. For one, if notice must be provided for each default, does that mean that the condominium must provide a separate notice of lien for each monthly default? This would be additional work for the condominium (and additional cost for the owner). Can one notice of lien be sent for several months as long as it includes the total amount of arrears? What is the best way to identify the arrears on the notice of lien? Some lawyers advise their clients to send a separate notice of lien for each monthly default, while others advise one notice identifying the total amount (i.e. May, June and July’s arrears) is sufficient.

The conservative approach would appear to be to send a notice for each default and register a lien to match the first notice sent to the owner. This way, the amount is the same for the notice and the registered lien. The subsequent defaults would then shelter under the registered lien. If several notices are sent, the owner could conceivably argue that the notice was not adequate as it did not include the full amount (i.e. the amounts set out in subsequent notices).

Thoughts?