Condo can’t revive lost lien right using section 134

The Court of Appeal released another condominium case this month: Toronto Standard Condominium Corporation No. 1908 v. Stefco Plumbing & Mechanical Contracting Inc. As a refresher, this is the case where the declarant refused to release control of the condominium to the owners. The owners called the turn-over meeting and elected a new board. The declarant refused to acknowledge them. An application was brought to validate the meeting; the owners were successful. The declarant failed to comply with a court order that it produce records and an accounting of all payments made. The condominium recreated the accounting records and determined that one owner owed close to $50,000.00. A lien was registered against the owner’s units, but the lien could only cover the previous 3 months as set out in the Act. Prior to this, the owner defaulted under his mortgage. The mortgagee sold his units. Unfortunately, there was not enough money from the sale of the units to pay the mortgagee and the condominium so an issue arose as to which took priority – the condominium’s claim for arrears (outside of the lien) or the mortgagee’s claim under the mortgage.

The condominium argued that section 134 of the Condominium Act, 1998 gave the court the authority to make an order that the arrears took priority over the mortgage. The application judge characterized it as an “attempt to revise lien rights previously lost.”  The judge ordered the owner to pay common expense arrears, but only those under the lien took priority. The rest of the arrears were to be paid after the mortgagee. The condominium appealed. 

The Court of Appeal dismissed the appeal. The Court found that the interpretation of section 134 put forward by the condominium was contrary to the purpose, scheme and language of Act. The Court held that the ability to revive a lost lien right using section 134 “ignores the fair balance the legislature has struck between the rights of mortgagees and condominium corporations.”

While it was no fault of the owners or new board, this case is another reminder of the consequences of failing to register a lien within the 3 month period set out in the Act. In this case, if the lien would have been registered by the declarant board it could have covered all of the arrears. I wonder if the declarant or declarant-appointed directors have been served?