Collecting Chargebacks Will Soon Become More Of A Challenge

Coming amendments to Section 84 of the Condominium Act will give owners new rights to challenge chargebacks. By way of summary, owners will have new procedures by which to “appeal” chargebacks to the new Condominium Authority Tribunal (which I think will be possible in most cases) or to the Courts.

If and when owners have the right to appeal chargebacks to the Tribunal, this will give owners a fairly inexpensive way in which to challenge and/or delay payment of chargebacks.

A big practical problem for condominium corporations is that the Tribunal’s process can be quite involved and time-consuming, and therefore could be quite expensive (assuming the condominium corporation seeks assistance in the process from a consultant, like a lawyer, a paralegal, or an experienced property manager).  And the costs for this type of assistance generally won’t be recoverable because the Tribunal generally won’t order the owner to pay such costs (even when the owner is completely in the wrong)!

This means that condominium corporations will soon need to find economical ways to handle these sorts of “chargeback appeals.” 

In some cases (that are more involved), having the assistance of a lawyer, paralegal, or experienced property manager may be unavoidable. At DHA, we’re applying our minds to possibilities for reducing the costs of these matters.

The bottom line is as follows: We’re nervous about the practical implications of the coming “chargeback challenge process.” In the end, the costs of the process may defeat the entire purpose. So again, we’ll need to look for practical alternatives.

With that said, there are steps condominiums can take now to better protect the corporation in the event of a chargeback challenge in the future. As we’ve mentioned in our previous blogs, a key requirement is a strong indemnification provision in the Declaration, allowing the condominium to add such chargebacks to the owner’s common expenses. Some Declarations don’t have any indemnification provision, and in many other cases the existing provision is just not very strong.

Making sure that there is a strong indemnification provision in the Declaration is key step in the process, if condominium corporations hope to successfully collect chargebacks from owners.

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