New to the Condominium Way of Life?

Photo by Burst on Pexels.com

A Post for those New to the Condominium Way of Life

If you have never lived in a condominium (“condo”) before or have recently moved into one, you may find that you have some questions about matters such as your condo fees and the authorities that the condo’s board of director has. This is the first in a series of interview-style posts that seek to answer some of those questions so that you can navigate through the condo world (hopefully) without any issues. 

We hope that you find these Q and A style posts helpful!

Q: Where do my condo fees go? To whom do I pay them?

A: All payments for condo fees, including monthly fees, special assessments, or other charges, should be payable to the condo. Payments should not be payable to the superintendent, a director, officer, manager or the management company for the condo. The condo’s by-laws may describe the permitted payment options, such as post-dated cheques or electronic funds transfer (EFT) (which is sometimes called pre-authorized payments (PAP)). Most condos do not accept cash payments. The payments are usually delivered to the manager to deposit to the condo’s bank accounts.

Q: What are the condo fees used for?

A: The fees collected from owners are used to pay for the common expenses of the condo, such as maintenance and repairs, utilities (if individual meters are not installed for the units), and professional fees (i.e. for the condo manager, lawyer, engineer, and auditor). The condo’s declaration and by-laws should describe the common expenses in detail.

Q: What happens if I do not pay my condo fees?

A: A condo’s primary source of revenue is from monthly fee payments from its owners. If owners do not pay their share of the costs the condo may not have sufficient funds to pay its bills as they become due.

Q: What are the repercussions of not paying my condo fees?

A: If an owner does not pay their share of the common expense the condo may register a lien against their unit under section 85 of the Condominium Act, 1998. A lien is similar to a mortgage as it permits the condo, like a mortgage lender, to sell the unit if the owner defaults in their obligations. The condo is also entitled to collect interest on the arrears, collection costs (i.e. manager’s fees to send notices of arrears), and legal costs. The lien is not discharged until the condo receives payment in full.

Q: What if I can’t pay right now simply because of COVID?

A: While it is unfortunate that some owners may struggle to pay their condo fees because of the pandemic, it does not change the fact that they are legally required to pay according to the Condominium Act, 1998 and the Declaration. The courts have confirmed that an inability to pay condo fees is not a defence to an action by a condo trying to sell an owner’s unit. A condo may agree to a payment plan with an owner to give them more time to pay their condo fees, but this should not be expected by an owner as it is rarely an option. In short, the owner must find sufficient funds to pay the condo on time or the condo could sell their home.

Special thanks to Zach Powell, summer student at Robson Carpenter LLP, for asking the questions owners want to know and preparing this post.

Have a question you think new owners need to know? Send it to us and you may see it in a future post.

Owner’s Meritless Challenge to Lien Results in Big Win for Condo

Photo by Karolina Grabowska on Pexels.com

A recent case demonstrates the possible consequences when owners choose not to pay their monthly common expenses on time and the condominium is forced to take steps to lien the unit and sell it. The unit owner had not paid her common expenses since June of 2018. The Condominium registered a lien against her unit on January 31, 2019. The owner did not pay to discharge the lien, so on May 14, 2019 the Condominium issued a statement of claim seeking to obtain possession of the unit so it could sell it. The owner filed a statement of defence and counterclaim in which she claimed to have paid her common expenses to the manager. She also sought $11,350 in damages for a flood in her unit.

The condominium brought a motion for summary judgment so it could continue its efforts to sell the unit. At the hearing the owner offered to pay the outstanding common expenses. The parties could not agree on the amount of legal costs the owner should pay to the condominium. The condominium sought all of its legal costs ($56,000) from the owner. The owner argued no more than $15,000 would be reasonable.

The judge reviewed the relevant provisions of the Condominium Act, 1998, including section 85(3) which states the lien includes interest and “all reasonable legal costs and reasonable expenses” incurred to collect the outstanding amount. The judge stated that the phrase “all reasonable legal costs” signals that condominiums ought to be entitled to more than partial indemnity costs. Subject to the court’s overriding discretion to determine costs, the condominium is entitled to recover all of its legal costs when enforcing a debt owed by an owner so long as those costs are reasonable.

The judge acknowledged the fees sought by the condominium were high, but found them reasonable in the circumstances of the case. The owner had repeatedly defaulted in her fees in the past, which resulted in liens and power of sale proceedings. The owner was well aware of the consequences of not paying common expenses and the legal steps the condominium would take to recover any unpaid amount. The legal work done by the condominium was necessary to collect from the owner as the owner refused to pay the amount owing to the condominium. The judge also felt the owner’s litigation strategy was to delay the matter to avoid her obligation to pay her share of the common expenses. The judge found that she was not entitled to complain about costs incurred as a result of her own litigation strategy. Lastly, the owner made no efforts to settle the matter and refused reasonable settlement offers from the condominium until just before the hearing.

The case is an interesting one. While I agree that the owner’s own litigation strategy appears to have greatly increased the condominium’s costs, some of the time claimed by the condominium seems unreasonable. For example, spending almost 5 hours to register a lien, seems excessive. A lien usually takes less than an hour to prepare and register. Even including a notice of lien would not bring the time to close to 5 hours. Similarly, 38 hours to review and reply to a responding motion record that, according to the judge, did not contain any evidence to substantiate the claim seems extreme.

Whose Notice is it Anyway?

038.jpg

The Condominium Act, 1998 provides that an owner is entitled to notice when a condominium corporation takes action to perfect and enforce a lien, however, the recent decision in Mei Ki Ching v Carleton Condominium Corporation No. 203 demonstrates that a spouse that is not a registered owner of a unit may be entitled to the same notice.

Facts

  • McIntosh (the “Owner”) is the sole registered owner of a unit within the condominium plan (the “Unit”);
  • Ching (the “Spouse”) is not a registered owner of the Unit;
  • The Unit was the matrimonial home of the Owner and Spouse;
  • The Owner and Spouse separated in July of 2014;
  • The Owner continued to occupy the unit after separation;
  • In May of 2015, the Spouse registered a designation that the unit was the matrimonial home (the “DMH”);
  • The DMH contained the Spouse’s name and current address;
  • In March of 2017 the Owner defaulted in the Owner’s contributions to the common expenses of the condominium corporation;
  • In March of 2017 the condominium corporation began taking steps to perfect and enforce its lien in accordance with the Condominium Act, 1998;
  • The condominium corporation eventually takes possession of the Unit; and
  • After the condominium corporation took possession of the Unit the Spouse obtained an order granting her exclusive possession of the Unit and vesting the Unit in her name.

The Decision

The Family Law Act, 1990 makes it clear that each spouse has an equal entitlement to the matrimonial home and to give effect to such equal entitlement, a spouse with the right of possession in the matrimonial homes has the same right of redemption or relief against forfeiture as the other spouse and is entitled to the same notice respecting the claim and its enforcement or realization.  The provisions of the Family Law Act, 1990 further required the condominium corporation to provide notice to the Spouse at the usual or last known address of the Spouse or, if none, the address of the matrimonial home.

Despite being aware of the Spouse’s current address because of the registration of the DMH, the condominium corporation failed to provide notice to the Spouse when it took actions to perfect and enforce the lien.

The Court found because reasonable inquiries (in this case, a title search for a nominal fee) by the condominium corporation could have made the name and current address of the Spouse known to the condominium corporation, the condominium corporation was required to provide the Spouse with same notice that was provided to the owner respecting the lien and its enforcement.

Because of the condominium corporation’s failure to provide the required notice, the Court found the lien to be invalid against the Spouse, although the Spouse was required to make certain payments towards common expenses, a special assessment, and late fees.

The Issue for Condominium Corporations Generally

In this case, the DMH provided the condominium corporation with all the information it required to effect proper notice on the Spouse.  Other than a title search, which, absent the registration of a DMH would likely not provide a condominium corporation with the necessary information to determine if there is a spousal interest in the unit, the Court provides no guidance as to what efforts a condominium corporation must take to be considered to have made reasonable inquiries.

Is a condominium corporation to make inquiries of the registered owner? Search marriage records? Contact the lawyer that acted on behalf of the owner when such owner purchased the property?

In the absence of any information about a spouse, will it be sufficient to address all notices to the registered owner and spouse (i.e. John Smith and Spouse) and send them to the unit or the registered owner’s address for service?

There is no doubt reasonable inquiries will depend on the particular circumstances that surround a condominium corporation’s enforcement efforts but, the industry may not get guidance as to when the inquiries of a condominium corporation are reasonable in the circumstances until a similar case is decided.

A Warning to Owners Leasing their Units

stencil.default (14)

A recent case provides a warning to owners leasing their units. Briefly, the facts are as follows. A unit owner leased her unit to a tenant. The tenant “did not live harmoniously with his neighbours” and was in constant conflict with management. He sued the condominium for over $5,000,000. The condominium’s lawyer wrote to the owner to warn them that the costs incurred by the condominium to defend itself against the tenant’s claim would be sought from them. The owner’s son, who was power of attorney, ignored the warning and provided an affidavit in support of the tenant’s claim against the condominium. The tenant’s claim “failed miserably” and the condominium sought to recover about $86,000 in legal fees from the owner.  The owner refused to pay and the condominium registered a lien against the unit.

The court found no reason to question the validity of the lien. The main argument presented by the defendants was that the owner was not properly served by the condominium. The court found that the owner was in India at the time and it was difficult for her own family to contact her. “It would not be realistic to require the corporation to serve her personally and the law does not require it.”

The court reviewed the new provisions of the Condominium Act, 1998 at paragraph 27:

The Condominium Act establishes what must be done to serve a document for the purposes of the Act:

  • Section 46.1(3)(b) requires the corporation to keep a record of each unit owner’s address for service if that address is in Ontario.
  •  Section 46.1(4) states that a document can be served on an owner in several different ways including delivery by prepaid mail addressed to the owner at the address for service that appears in the records of the corporation.

The court was satisfied that the documents were served on the owner when the condominium sent the document via registered and regular mail to the address for service provided by the owner. “There was nothing more that the corporation could do.”

The owner also disputed the validity of the process because the condominium did not bring an action or have a hearing before registering the lien. The court reviewed section 85(1) of the Act and confirmed the process does not require an action to be commenced prior to the registration of a lien against a unit. The condominium must register the lien within three months of the default and must provide notice of the lien at least ten days before registering it. The condominium satisfied the requirements of the Act.

The owner tried to argue that it was not fair for them to be responsible for their tenant. In response, the court said:

[36]           The simple answer to the questions raised by the Sandhu family is that section 134(5) of the Condominium Act makes the unit owner responsible for the financial consequences of her tenant’s actions. If a corporation is awarded costs in an order which is made against an owner or an occupier of a unit, the costs, including the legal fees of the corporation, are added to the common expenses of the unit. That is simply the law of Ontario.

[37]           There are very good reasons for that law. One must consider the nature of condominiums and the rules that are necessary to regulate them. A condominium draws many strangers to live together in a single building. For many unit owners, the purchase of their condominium unit will be the largest financial investment of their lives. It is essential that the building is managed in a way that preserves the value of the property and maintains a sense of fairness for everyone.

[38]           The sense of fairness is created by imposing strict responsibilities both on unit owners and managing corporations. Unit owners are responsible for paying their share of the common expenses and for the conduct of any one who occupies their unit. The corporation is responsible for collecting the common expenses and notifying the unit owner of any troubling behaviour by a tenant. The purpose of the legislation is to ensure that the actions of a single unit owner do not give rise to additional expenses for all the other unit owners.

The court, while sympathetic to the owner’s situation, granted judgment in favour of the condominium and granted it possession of the unit so it can sell the unit to recover the amounts owing under the lien.

 

 

Owner’s Challenge to Special Assessment

black and white people bar men

Photo by Gratisography on Pexels.com

A unit owner recently brought an application to the court for an order declaring a notice of sale issued by a condominium under a lien null and void. The owner was also the condominium’s declarant. The declarant did not turn over the condominium to the owners when required by the Act or contribute to the common expenses for the units it still owned. Sound familiar?

Continue reading

The Battle Rages On…

stencil.default (8).jpg

A few years ago I wrote about a case that had dragged on for over six years.  It involved a former director and a condominium. The director took various steps without legal authorization from the board, including terminating the manager and commencing a legal action against the property management company and its president. The director also commenced an action against the condominium and accepted service of his own claim so the other directors were not aware of the claim. This was all within 4 months of being elected by the owners. Not surprisingly, the owners requisitioned a meeting to remove him. That didn’t stop him. He started 5 legal actions in 2010, all of which were dismissed with costs. He appealed, which was also dismissed. Continue reading

Winter Case Law Reading

winter

I feel like all I write about these days is Bill 106 (the amendments to the Act). Today, I’m getting back to my roots and writing about some important decisions released by the courts and tribunals in Ontario in the past few months. The first is about the enforcement of a lien. The second is about an owner who won’t quit. And the third is about a director who felt she was discriminated against because of her age. All of the decisions are available on CanLII if you want to read them in their entirety.   Continue reading

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.

Continue reading

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