A recent Court of Appeal decision has confirmed condominium corporations can recover unpaid fees in court even if they fail to register a lien against an owner, lawyers say.
The court dismissed the submission of Ottawa lawyer Claude-Alain Burdet, who argued that Carleton Condominium Corporation did not have the right to sue him for nearly $300,000 in unpaid condominium fees from a unit he owned in an Ottawa building.
Burdet claimed Carleton Condominium Corporation’s only recourse should be to register a lien, but the court ruled against him, saying condominium corporations also have the power to sue to recover unsecured arrears under a section of the Condominium Act, 1998.
“It cannot have been the intention behind the Condominium Act, 1998 that if a condominium owner fails to pay common expenses and for some reason the corporation does not register a lien, the corporation is powerless to recover arrears and the other owners must bear the consequences of the defaulting owner’s non-payment,” the decision said.
“While the lien provisions offer an efficient enforcement mechanism, the Act does not specifically provide that a corporation cannot also sue to recover judgment.”
The Condominium Act requires owners to pay common expense fees to the condominium corporation, and if they fail to do so, corporations can register a lien within three months that the arrears start to amass.
Condo lawyers say the decision is significant because it confirms that right of condominium corporations to secure arrears even if they have not registered a lien.
“If for some reason you don’t lien within the three-month period, you still have recourse and can go after a unit owner through the courts,” says Denise Lash, a Toronto condo lawyer.
“Just because you haven’t liened doesn’t mean you lose your right to collect those common expenses from that unit owner.”
In 2009, Carleton Condominium Corporation first started its legal action against Burdet and a group that owned 21 units in the Ottawa building.
The corporation registered liens against 16 of those units in 2005 and registered liens against five other condos in 2009, says Nancy Houle, of Nelligan O’Brien Payne LLP, who represented the condominium corporation in the case.
“One of the reasons for drafting the claim in such a way was to ensure that the corporation could obtain relief — via a judgment — even if the liens were not valid,” Houle says.
“Fortunately, at the end of the day, all existing liens were found to be valid.”
Houle and her colleagues successfully argued the corporation had the right to sue, citing s. 136 of the Condominium Act, which states, “Unless this act specifically provides the contrary, nothing in this act restricts the remedies otherwise available to a person for the failure of another to perform a duty imposed by this act.”
On the first day of trial, counsel for the appellants said none of the defendants owned units in the building anymore, according to the court decision. Lawyers for the condominium corporation performed a title search that same evening and found that every unit except one had been transferred to an entity called Enterprises Ted Rubac Inc..
When they realized “Ted Rubac” was “C.A. Burdet” spelled backwards, Houle and her colleagues successfully moved to have the entity added as a defendant.
In his appeal, Burdet argued that the original trial judge had erred when he determined the liens against his property were valid. Burdet claimed that he did not owe any arrears when the liens were registered, but the trial judge found there were arrears of common expense fees when the liens were registered, and that the liens were, therefore, valid.
Burdet also argued that the original judgment was flawed because a court-appointed administrator had been administering the property since 2002 — an appointment Burdet disputes.
“The action leading to the judgment below and to this appeal is fatally flawed, since it was pursued by the court manager,” Burdet argued in his appeal.
However, the Court of Appeal found “no evidence of error in the trial judge’s reasons” and, therefore, threw out Burdet’s appeal.
Since 2009, when the condominium corporation started its legal action, Burdet and the other condominium owners he represented owe approximately $490,000 in total arrears between a partial summary judgment in 2011 and the recent Court of Appeal decision, as well as $790,000 in legal fees and disbursements, Houle says.
“The key thing for these types of cases is Section 85 of the Condonominium Act allows the condominium corporation to recover its reasonable cost in collection,” she says.
“The reason that’s so important is other owners should not bear the consequences of one owner not paying and the corporation having to incur costs to collect.”
Houle says the legal fees and disbursements were high in this case, but they were reasonable because of the steps the appellants took to lengthen the proceedings.
Antoni Casalinuovo, a condo lawyer at Elia Associates PC, says the appeals court’s decision also recognizes the fact that the condo corporation should be recovering all reasonable legal costs.
“It’s not fair to pass these expenses off to all the other unit owners who basically paid their bills — or paid their statutory obligations,” he says.
“It’s a good decision. The Court of Appeal could have easily turned around and made life more difficult for condo lawyers, but it didn’t,” he adds.
Burdet could not be reached for comment.