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

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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.

Top Condo Lessons of 2019

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As 2020 approaches I find myself reflecting on the most important news, cases, and events from this past year. There were several notable decisions released this year and a few that I’m sure we would all like to forget! The hardest part of these lists is selecting only ten to speak about. Here is my list of the top ten condo lessons for 2019:

Counting Isn’t as Easy as 1, 2, 3

The Court confirmed the 10 day notice requirement for liens can be calculated by excluding the date the notice of lien is mailed and including the date of registration. Sending the notice of lien on January 21 and registering the lien on January 31 was acceptable. (Note: this is the minimum; more time is generally better). See CCC 476 v. Wong (2019). Continue reading

A Warning to Owners Leasing their Units

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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

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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?

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Condo successful against owner with bed bugs and hoarding issues

An Ottawa condominium brought an application against an owner because of the owner’s failure to maintain and repair his unit, which was infested with bed bugs and full of an excessive amount of debris. There were various inspections and communications between 2013 and 2015. The condominium attempted to work with the owner, but the owner refused to take steps to clean the unit and prepare it for treatment for bed bugs. Continue reading

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. Continue reading