As COVID-19 continues to take its toll, what does this mean for condominiums as monthly common element fees continue to become due? Are the lien procedures in the Condominium Act, 1998 (the “Act”) still viable?
Enforcement in the Current Environment
The short answer is a qualified "yes". Pursuant to section
84 of the Act, owners are required to contribute to common expenses, without exemption. Section 85 of the Act provides that a condominium may collect these arrears by registering a lien within three (3) months of the default. That said, with COVID-19, what should a condominium do?
The overarching concept is that a condominium still has statutory and regulatory rights & duties to protect its own financial health. Liens registered after the three (3) month window would not be valid and secured collections lost, despite the current environment Ontario faces. Registering a lien is still recommended; that said, a number of steps may be taken to allow a condominium to protect itself while significantly reducing the burden such a process may impose on a unit owner.
These strategies may include the following. First, if a unit owner has fallen into arrears, it may be prudent for a condominium to await the full three (3) month period before registering a lien, rather than proceeding within the first or second month of arrears. Second, if a condominium is approaching the three (3) month deadline, although not traditionally recommended, the unit owner could pay the most dated arrears, thereby falling into sixty days (60) arrears and thereby avoiding a lien. This process would be akin to a rolling arrears, never surpassing sixty (60) days. Third, our offices would strongly encourage boards and property managers to enhance communication by calling and emailing defaulting unit owner(s) during this time, in an effort to have them pay at least the oldest month’s arrears. Fourth, it may be prudent for condominiums to waive interest, often as high as 18%. Fifth, at this time it would be prudent to forego minor chargebacks, for example for declaration and rule violations considering to be a "cost of doing business". Sixth, if power of sale proceedings are underway, suspending such may be also be prudent. Seventh, once the lien is registered, employing a healthy pause before any enforcement is taken would be advisable. Once a lien is registered, it is subject to a ten year limitation period, so the condominium would have a great deal of time to address personal and overall circumstances. Eighth, once the lien is registered a condominium could entertain payment plans normally beyond timelines a condominium is comfortable with, including the waiver of fees.
In sum, although specific matters should always have specific legal advice, overall our offices recommend the consideration of the following:
But to lessen the impact, condominiums may:
(90) day deadline, allowing for rolling arrears within the thirty (30) and sixty (60) day window;
- Ensure liens are registered within three (3) months of the arrears arising;
- Enhance contact with defaulting unit owners, via phone or e-mail;
- Consider only collecting arrears at the ninety (90) day ceiling, in an effort to avoid invoking the lien power at all;
- Also consider collecting arrears only at the ninety
- Waive interest for defaulting unit owners;
- Forgo liens for minor charge-backs;
- Consideration of healthy payment plans once the lien is registered; and,
- Once registered a condominium could invoke a significant pause before proceeding with enforcement, allowing circumstances to evolve.
As the law has not changed, condominiums should still register liens for unpaid common element fees. That said as circumstances have changed, condominiums can employ a host of strategies to significantly soften this process for unit owners.
The content of this article is intended to provide a general guide to the subject matter and is not legal advice. Specialist advice should be sought regarding your specific circumstance.