Is lien work really for lawyers only?

liensThis post is likely to be unpopular with my colleagues, but it needs to be said.

Lien work is gravy work for lawyers. It takes us very little time from start to finish, it can be easily delegated to staff, and it can be very lucrative because most boards don’t know or care what is charged since the owner foots the bill. As a result, many law firms spend thousands of dollars a year on advertising their lien work. Take a look at the advertisements in the condo industry magazines for the past year. I bet you find at least 2 firms advertising their special lien software or collection “guarantees”.

In recent weeks you’ve probably read an article or two about the appropriateness of non-lawyers registering and discharging liens. The discussion stems from a single Small Claims Court case where an owner sued a property management company after it registered and discharged a lien against her unit. The owner (a paralegal) felt that it was inappropriate for the management company to use an in-house paralegal to register and discharge the lien.  She brought an action in the Small Claims Court seeking the return of the legal fees she paid ($819.25) for the lien and punitive damages.

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Changes are Coming – Chargebacks

chargeback.jpgLast Friday I participated in the ACMO Burlington conference as a speaker on the legal panel. One of the topics that I briefly spoke about was chargebacks and liens. I spoke about the changes coming to the lien and chargeback processes in the Condominium Act, 1998 (the “Act”). Today I’m going to summarize my presentation for those who were not able to attend the conference.  Continue reading

The Condo’s Lien Right – When Does Default Occur?

bank.jpgRecently, the court released an interesting decision on cost awards against owners and the right to lien.The facts are lengthy, but it is important to understand the background.

The condominium brought a compliance proceeding against one of the owners. The condominium was successful. The judge made an endorsement that required the owner to pay $15,000.00 in costs within 30 days of the date of the endorsement. The condominium switched counsel and management companies shortly after the endorsement was made. Several months later the condominium added $44,000 to the unit owner’s ledger. The condominium’s lawyer then sent a letter to the owner demanding payment within 30 days.  The owners did not pay so the condominium’s lawyer sent a notice of lien in November 2011 and registered the lien in December 2011. The condominium served a statement of claim for possession and a default judgment was signed in April 2013. A notice of sale was sent in May that indicated $77,709 was owing. The condominium obtained possession of the unit in November 2013.

In December 2013, the owner stopped paying his mortgage. The lender, CIBC, began making demands for payment. CIBC obtained judgment on October 22, 2014, for $135,411 plus costs. For unexplained reasons, CIBC was not aware of the power of sale proceedings of the condominium and the fact that the condominium was set to sell the unit within a few days. The condominium and CIBC agreed to continue with the sale of the unit and hold the proceeds in trust until a court could determine the priority of the lien and mortgage.  Continue reading

Improper Use of the Indemnification Clause

Many declarations contain a clause that requires the owners to indemnify the corporation for a loss, cost, damage or injury to the common elements or units if it was caused by the owner, his family, tenants, guests etc. Many condominiums attempt to apply these clauses to other types of expenses incurred by the condominium, such as legal costs.

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Lien Deadlines

Today I thought that I would share a practical tip about liens with you.

Many boards like to wait until the very last moment to register a lien so they give the owner the most time possible to make payment. This is risky because the lien right expires and delaying may mean the condominium is unable to register a lien before the right expires. As you know, section 85 of the Condominium Act, 1998, states that the lien right expires 3 months after the default if a lien is not registered against the unit (or POTL for common elements condominiums).

The 3 month period set out in the Act isn’t the only deadline you need to be aware of. It is important to note that the electronic registration system used by most lawyers only permits documents to be registered between the hours of 8:30 a.m. and 5:00 p.m. Monday to Friday, excluding holidays. So if you send instructions to lien to the lawyer at 4:55 p.m. on the last day of the month there is a good chance that they may not have time to register it and the condominium will lose the right to register a lien for the oldest arrears.  Continue reading

Chargeback or Fine?

I’m often asked by directors if they can fine owners for unruly or disruptive behaviour, like excessive noise or improper parking. The simple answer in Ontario is no. While a condominium cannot fine an owner, it may be able to charge some costs back to the offending unit owner in certain circumstances. This process is typically referred to as a “chargeback”.

The Condominium Act, 1998, is clear that a condominium may only lien an owner for “common expenses”, which according to the Act are “expenses related to the performance of the objects and duties of a corporation and all expenses specified as common expenses in this Act or in a declaration”. It is noteworthy that it says the Act or declaration, not the by-laws or rules. This seems to suggest that an indemnification clause in a by-law or rule is not sufficient, in itself, to support a lien against a unit for a chargeback.

A provision in a by-law or rule may be sufficient to support a lien against a unit for a chargeback if it is authorized by the Act. For example, a condominium may pass a by-law extending the circumstances where a deductible may be charged back to an owner. While the provision is within a by-law, it is enforceable because of section 105 of the Act, which authorizes a condominium to pass such a by-law.

This is a controversial topic. Many lawyers ignore the definition of “common expenses” in the Act and rely upon provisions in rules and by-laws, without further support, to charge costs back to owners. If you have any doubts about the condominium’s ability to charge back an amount to an owner you should discuss it with the condominium’s lawyer or property manager.

For more information, see the Ontario government’s website.

 

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.  Continue reading