Part 1 Lien and Power of Sale Series
Collections 101: Lien Registration
When a unit owner falls into arrears by failing to make their monthly common expense payments, the Corporation has a positive obligation under the Act, to take steps to secure the amounts owing.
Effective collections require more than simply tracking unpaid common expenses. They require careful attention to deadlines, accurate record-keeping and accurate communication between the owners, the Corporation and legal counsel.
A condominium corporation’s ability to collect common expenses by way of lien is an exceptionally important (and secure) collection tool, because the lien (if properly registered) takes priority over all mortgages against the unit.
The Importance of Timing
One of the first items that will need to be reviewed when a collection file is received is the unit ledger. The ledger not only identifies the amounts outstanding but also helps determine important collection deadlines, including the deadline for registering a condominium lien.
A condominium lien allows the Corporation to secure all amounts that are owing for the period three months before the registration of the lien. For example, if the owner defaults (in payment of common expenses) on January 1st: In order to ensure these amounts are secured by lien the Corporation must register a lien by March 31, 2026 (to ensure the January amounts are secured by way of lien).
Quite apart from this three-month period, collection timelines are often affected by a variety of factors, including notice requirements under the Condominium Act, 1998, notice and deemed service provisions contained in the Corporation’s governing documents, and the time required to review and prepare lien materials. The Condominium Act, 1998 – section 85(4) – requires that notice be provided to the owner and others having encumbrances against the unit in the prescribed form, Form 14, at least 10 days prior to the registration of the lien. If proper notice is not provided the lien may be considered invalid and the Corporation could lose all security under the lien.
The Ontario Court of Appeal in Carleton Condominium Corporation No. 476 v. Wong, 2020 ONCA 263 did uphold a Superior Court decision confirming how the 10-day notice period for condominium liens is calculated. In this case, a notice of lien was mailed to the owner on January 21 and the certificate of lien was registered on January 31. The owner argued that 10 “clear days” of notice were required and that service by mail was only effective several days after mailing, rendering the lien invalid. Both courts rejected these arguments, relying on the Legislation Act, 2006 and the corporation’s by-laws, which deemed notice effective on the date it was mailed. The courts confirmed that, when calculating the notice period, the date notice is given is excluded and the date of lien registration is included, meaning the January 31 registration was valid. The decision serves as a reminder that providing additional notice where possible can help avoid disputes over the validity of a lien. Legal counsel will be able to assist the Corporation in correct preparation of these documents and to ensure that all encumbrances are provided with the notice as required by the Act.
For this reason, it is often beneficial to identify potential lien files early and discuss them with legal counsel before deadlines become urgent.
Once the lien has been registered – and as long as the lien is not discharged by full payment of all amounts secured by the lien at a given point in time – the lien remains undischarged and continues to secure all arrears arising after registration of the lien.
If a lien is ever “paid in full” at a given point in time, the lien must be discharged (and a fresh lien is then necessary in order to secure any subsequent arrears).
Tracking Payment Deadlines
Careful tracking of payment deadlines is particularly important when dealing with chargebacks or other recoverable costs. The date an amount becomes due, and the date it becomes “common expense arrears”, can have a significant impact on collection strategy and the calculation of lien deadlines.
Another important consideration is as follows: In many cases, any payments from the owner can be applied to the earliest arrears, thereby “rolling forward” the three-month lien deadline. This is something to be discussed with legal counsel (in cases where this concept may apply).
When calculating deadlines, the Corporation should also keep in mind the potential impact of weekends, holidays, and deemed receipt provisions contained in the corporation’s governing documents.
A clear internal tracking system can help ensure that important dates are not overlooked and that collection steps are taken at the appropriate time.
Similarly, legal counsel should be kept informed of additional charges, upcoming special assessments, or other developments that may affect the amounts to be collected. Early communication often creates opportunities to maximize recovery and reduce avoidable costs.
Taking a Strategic Approach to Collections
Every collection file is unique. Factors such as the amount owing, the owner’s payment history, the nature of the arrears, and the corporation’s governing documents can all influence the most appropriate course of action.
In some situations, an early payment arrangement may resolve the matter efficiently. In others, it may be necessary to proceed quickly to protect the corporation’s lien rights. Understanding the circumstances of each file and seeking advice early can help corporations make informed decisions that balance cost, efficiency, and risk.
Final Thoughts
Successful collections are rarely the result of a single action. Rather, they are the product of careful record-keeping, proactive tracking of deadlines, timely communication, and collaboration between managers and legal counsel.
By maintaining organized records, and addressing potential collection issues early, the Corporation can ensure it is protecting the corporation’s security. Ultimately, a lien can be an effective tool for a Corporation to protect its financial health, and ensure secured interest in the amounts owing. If the Corporation requires assistance with registering a lien or determining deadlines, legal counsel can assist!
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