Liens a key option for condos

Lawyers who represent condominium corporations are increasingly resorting to laws under Ontario’s Condominium Act to help their clients collect arrears from owners who haven’t paid their common expense fees.

But rarely do such matters go to court as lawyers assist their clients by leveraging s. 84 of the act to facilitate a lien on the owner in order to get the fees.

In many instances when a condominium corporation doesn’t get the maintenance fees from several owners, it can experience serious cash-flow problems. As a result, lawyers may have to activate a lien to help the client recover the cash.

Brad Bain, a partner at Lerners LLP in London, Ont., has many condominium corporation clients and says it’s important to ensure they collect the fees. “There are many condominium corporations that do have owners who don’t pay their fees and it’s critical that they collect,” he says.

He advises his clients to first deliver a letter requesting payment within a 24- to 48-hour time period. If they don’t hear from the owner, they should then send a second letter letting the owner know they’ll proceed to get a registered lien against the unit.

A certificate of lien that the condominium corporation can register allows it to collect interest and other costs, such as legal expenses, that it has incurred.

According to Bain, the certificate of lien should be given to both the unit owner and all mortgagees. The notice should specify the total amount owed in order to discharge the lien.

As well, Bain says the notice should go to all parties that have registered an encumbrance against the property, as permitted under s. 86(3) of the act.

The lawyer must conduct a search in order to accurately determine the mortgagees on the title, he says.

In a paper he wrote about registering a lien for the London chapter of the Canadian Condominium Institute, he noted that the act “gives the corporation the authority to enforce its lien in the same manner as a mortgage.

This means the board has the option of foreclosure or power of sale to enforce payment of the full amount owed.”

Ultimately, if it follows the procedure, the condominium corporation can make sure it has the power to undertake the efficient and effective collection of all common expense arrears, says Bain.

“It can be a very efficient collection system to register a lien. As a lawyer, you have an obligation to make sure your clients have the ability to collect any arrears they have outstanding.”

Bain adds that he has rarely had to go the route of power of sale for a client because the lien system usually works well.

Robert Gardiner of Gardiner Miller Arnold LLP in Toronto has done more than 4,000 liens for condominium clients and says it’s a very effective means of assisting them.

“We’re so certain that we’ll collect the fees without going to court using the lien process that we don’t even charge our condominium clients as we’re certain that we will collect our fees and any interest through the lien process,” he says.

He notes he has had instances where the owner has a legal claim against the condominium even as another section of the act enables a lien. “Even if they have some sort of legal claim against the condominium corporation, they still have to pay the common element fees as s. 84 specifies that.”

According to Gardiner, a lien expires 90 days after the last default. “So the property manager and the lawyer have to jump on this,” he says. “It’s a very automatic process.”

While he acknowledges that there is a very meticulous process to enforcing a lien, it’s a very effective way to recover money for the client. “Going to Small Claims Court is not that economically effective,” he says.

Under the Condominium Act, there are other provisions to recoup money from owners who have done damage to other units or the common areas. Gardiner has pursued those options numerous times as well.

“Section 92 in the act says the owner has to pay for the repair of any common elements and also if the owner fails to maintain their unit like a water or gas leak,” he says.

“As well, s. 105 of the act specifies that if there is damage to the unit that is covered by the condominium’s insurance and the resident was responsible, there could be a deductible up to $5,000 and the owner has to pay that as most condos will have a bylaw that specifies that the owner has to pay the deductible.”

In addition, in cases where an owner has caused damage to either neighbouring units or the common areas in the condominium, there are ways to go to arbitration or mediation to resolve the matter, Gardiner notes.

“If an owner does something in breach of the declaration of the bylaws or rules of the condominium corporation, in many cases we proceed by mediation or arbitration because under s. 134, there are provisions” for alternative dispute resolution, he says.

“Yet in some matters, we do go directly to court and get a compliance order and if there are any costs, we can actually lien the unit for the entire cost.”

While Ontario’s Condominium Act has been around since 1998, many lawyers are reportedly using it much more frequently for liens as their condominium clients are experiencing a greater number of failures to pay fees than ever before.

“With the number I’ve dealt with, there definitely is an increase,” says Gardiner. “But this is definitely the best means instead of going to court.”

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