Applying an Owner’s Payments to the Earliest Arrears

In the recent case of Toronto Condominium Corp 1462 v Dangubic, the condominium corporation registered a lien against an owner’s unit for recovery of legal costs incurred by the corporation in relation to “compliance letters” sent by the corporation’s legal counsel to the owner. The Court confirmed that the condominium corporation was entitled to recover these amounts as additional common expenses pursuant to indemnification provisions contained in the corporation’s Declaration and By-laws.

Continue reading “Applying an Owner’s Payments to the Earliest Arrears”

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Appeal Court Confirms Owner’s Obligation to Prove Case When Challenging Lien

In the recent decision Washington v. York Condominium Corporation No. 441, the Divisional Court confirmed that when a unit owner challenges a lien, it is the unit owner’s obligation to establish, on a balance of probabilities, that he or she was not responsible for the alleged damage.  In this case, the appellate judge set aside a lower court decision ordering a condominium corporation to return a chargeback to a unit owner.

This case concerned a plumbing blockage that affected the plaintiff owner’s unit, along with three other units, in the condominium.  The owner (and plaintiff) used his unit to prepare food for Caribbean cuisine dishes for restaurants.  Apart from the plaintiff, no other owners involved used their units in a way that produced food grease.

After discovering the blockage, the plaintiff contacted a plumber to assess the situation.  The same plumber was then hired by the property manager to clear the blockage.  The plumber’s notes revealed the caused of the blockage was from grease or hardened grease.  In addition, the plumber filmed the actual clearing of the blockage in which he states that the blockage is “grease and chicken grease”.

Based on the above information, the Board of Directors concluded that the plaintiff’s unit was the cause of the blockage, and demanded payment for costs incurred in the amount of $17,336.84.  Later, the condominium registered a lien against the plaintiff’s unit.  The plaintiff paid the above-noted amount and commenced an action claiming his unit was not the cause of the plumbing blockage.

The trial judge agreed with the plaintiff and rendered judgment in his favour.  The trial judge reasoned that, based on the totality of the evidence, the condominium failed to definitively prove that the source of the blockage was from the plaintiff’s unit.

The Divisional Court disagreed.  It confirmed that it was the plaintiff’s obligation to establish, more likely than not, that he was not the source of the plumbing blockage.  The Divisional Court also stated that the trial judge failed to consider key evidence: the audio of the above-noted video; and the reasoning of the Board of Directors to conclude the plaintiff was the source of the blockage.  The trial judge had discounted the reasoning of the Board of Directors on the basis that the members were “irresponsible” and “rather flippant” in their decision because their discussion of the subject was “laden with expletives”.  In other words, the members were excessively cursing.

The Divisional Court disagreed with the trial judge’s consideration of the evidence because it did not accord with the required degree of deference to which a Board of Directors of a condominium corporation is entitled, as outlined by the Ontario Court of Appeal.  Following the argument of our very own Christy Allen, the Ontario Court of Appeal in 3716724 Canada Inc. v. Carleton Condominium Corp. No 375 confirmed that courts should be careful not to usurp the functions of the boards of condominium corporations, especially when the Board has acted reasonably, honestly, and in good faith.

Overall, this decision serves as a reminder to condominium corporations that if an owner challenges a lien, it is the owner’s obligation – and not the condominium’s obligation – to establish that he or she was more likely than not, not the source of the alleged damage.  While the owner bears this onus of proof, the condominium is always open to lead evidence that will result in the plaintiff failing to establish his or her case.

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Collection Tips – Part 2

You registered a lien on a unit…now what? Here are some considerations to keep in mind once you are in the lien process:

1) Once the lien process has begun, condominiums should generally continue to accept all payments from the owner, however:

  • You may not wish to accept the payment if the owner purports to make a partial payment in ‘full satisfaction of all arrears’.
  • If legal counsel is involved, you may want to direct that all payments be made through the legal counsel. Alternatively, if payments are made directly to the corporation, be sure to contact legal counsel to obtain an update of the outstanding arrears (including legal costs and interest). In this way, you will always know what amount remains outstanding.

2) Ensure that the Unit ledger is kept up to date.

3) Until the arrears are paid, the owner will generally not have the benefit of a vote. [See Section 49(1) of the Condominium Act, 1998 (the “Act”).]

4) In the event that the lien is not paid off, the Corporation will need to consider whether it will enforce the lien by way of power of sale. Section 85(6) of the Act states that the lien may be enforced in the same manner as a mortgage. Accordingly, the Corporation may wish to follow the procedures outlined in the Mortgages Act and the Land Registration Reform Act for sale of the unit. In some cases, foreclosure may also be worth considering. [Note: the lien must be enforced within 10 years from the date of registration of the lien.]

5) If there are any unsecured arrears (arrears that are perhaps not secured by the lien, for example because they fall outside of the three month lien period), the Corporation will need to consider whether it will be pursuing these arrears by way of court process. [Note: the two year general limitation period will likely apply.]

6) Also remember that, if the Unit is rented, Section 87 of the Act allows the Corporation to direct a tenant to pay rents directly to the Corporation. This collection right applies also to unsecured arrears. This can also assist the Corporation in collecting arrears in a more timely fashion.

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Assessment of Legal Fees for Lien

We recently responded to an owner’s assessment of our legal bill in relation to a lien.

We had registered a notice of lien against the owner’s unit, on behalf of a co-tenacy association. The owner then sought to assess the legal bill (which had been included as part of the lien amount) before an assessment officer/assessor.

A lawyer’s client (in this case, the condominium corporation) has the right to arrange for assessment of the lawyer’s bill under Ontario’s Solicitors Act. The Solicitors Act also says that any party who is liable to pay a legal bill (in this case, the owner) can also arrange to have the bill assessed by an assessor.

In our case, the assessor confirmed that our legal bill was reasonable. But the assessor went on to say that the owner was not liable to pay the legal costs, and therefore assessed the legal bill at $nil.

We appealed the assessor’s decision to a judge, and the judge overturned the decision. The judge said:

  • The assessor had no authority to determine whether or not the owner was obligated to pay the legal costs. The assessor could only assess the legal bill. In other words, the assessor could only determine the reasonableness of the legal bill.
  • The assessor’s finding that the legal bill was reasonable was accepted and the bill was accordingly assessed in its full amount.

The decision in Aiello v. Nelligan O’Brien Payne can be found in Superior Court File No. 13-57411.

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