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.

However, the owner argued that the lien was registered “out of time” – that is, beyond the three-month period following the date on which the owner was required to pay the legal costs (i.e. the “date of default”).

The Court disagreed with the owner and upheld the lien. The Court said that the lien was not out of time because payments made by the owner (towards monthly common expenses) had been properly applied to the earliest arrears (including the particular legal costs) so that the lien rights had “rolled forward” as a result, and this had created a more recent date of default.

This principle has been expressed in previous Court decisions, but this is another helpful decision on the point. As a result, condominium Boards and Managers should be careful to ensure that any payments from owners are always applied to the earliest (oldest) arrears, and that this is reflected on the unit ledger.

For more tips on collecting condominium arrears, check out our previous blog on the subject.