The Condominium Act, 1998 (the "Act") stipulates that when a condominium owner accumulates arrears in respect of their required contributions to common expenses, the condominium corporation has a lien against their unit. The lien expires three months after the default that gave rise to the lien occurred unless a certificate of lien is registered within that time.
However, this does not mean that a condominium corporation is barred from pursuing the arrears altogether if a certificate of lien is not registered within the three month period.
In a recent case called Carleton Condominium Corporation No. 396 v Burdet ("Burdet"), the Ontario Court of Appeal confirmed that condominium corporations are able initiate civil actions against defaulting owners - even if they have failed to register a lien within the prescribed time.
In coming to its decision, the Court relied on the language in section 136 of the Act which essentially states that since the Act does not expressly prohibit condominium corporations from suing defaulting owners for arrears, civil actions are a permissible avenue of recourse.
In this regard, the Court stated, "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 the arrears and the other owners must bear the consequences of the defaulting owner's non-payment."
The Burdet decision has also confirmed the right of condominium corporations to recover all of their reasonable legal and other costs that they incur in the course of their attempts to collect the arrears.
In Burdet, the defendants had accumulated $289,070.37 in combined principal and interest and were ordered to pay $790,914.63 in legal fees and disbursements.
Although the amounts of money and the circumstances involved in the Burdet case are extraordinary, the ruling is still important for the average condominium owner as it provides confirmation and clarity on the following points:
1. Condominium corporations can register liens against the units of owners who have accumulated common expense arrears as long as they do so within three months of the default in payment;
2. Even if a lien has not been registered in the prescribed time, condominium corporations can commence civil proceedings to sue defaulting owners for the arrears owing; and
3. Condominium corporations can seek reimbursement for all reasonable legal costs and other expenses incurred in connection with the collection or attempted collection of unpaid amounts.
For more information on condominium fees please contact a member of the Real Estate Team at Merovitz Potechin LLP.