Is It Possible To ‘Revive’ Condominium Lien Rights?
In a previous decision of the Superior Court, the Court said that it is possible to “revive” lien rights after expiration of the normal three-month lien period, by bringing an Application for recovery of the arrears under Section 134 of the Condominium Act, 1998. According to that previous decision, a condominium corporation then acquires a fresh right to register a lien (for the amount awarded under Section 134). In this way, the corporation can recover “old” arrears by way of lien.
However, of particular note in the previous Court case is the fact that no mortgagee was involved. In other words, no other registered encumbrancer appeared to be impacted by the Court Order permitting the registration of a lien for the “old” arrears.
In the recent Ontario Superior Court decision in TSCC No. 198 v. Stefco Plumbing & Mechanical Contracting Inc., 2013 ONSC 7709, the Court again dealt with the rights of a condominium corporation to seek an Order permitting it to register a lien for “old” arrears. But in the Stefco case, there was an existing mortgage, and the mortgagee was involved in the Court Application.
The Court confirmed that the condominium corporation’s Application was commenced under section 134 with a view to effectively “reviving” its lien rights under section 85 of the Act.
The Court reviewed section 85 of the Act, which governs a condominium corporation’s lien rights. The Court took particular note of the requirement under that section to provide a mortgagee with notice of the condominium corporation’s lien. The Court concluded that the purpose of the notice requirement is to permit mortgagees to take whatever steps may be necessary (and available) to protect their interest in the property, and the Order sought by the condominium corporation would have had the effect of denying a mortgagee the opportunity to protect its own interest.
The Court ultimately refused to grant an Order permitting the condominium corporation to register a lien for the “old” arrears, because this would have been prejudicial to the mortgagee. [The Court did grant judgment to the condominium corporation for the amounts owing by the unit owner. However, as a standard judgment creditor, the condominium corporation would have no security over the owner’s unit.]
In our view, the Stefco decision makes sense. As a general rule, a lien must be registered within three months of the default. And the primary purpose of this three-month lien period is to protect the unit mortgagee(s). However, I also add the following notes:
(a) It seems to me that there may still be room to argue that a condominium corporation can “revive” its lien rights by way of Application under Section 134 of the Act, but on the understanding that the revived lien will not take priority over any unit mortgage.
(b) The Courts have also confirmed that payments received by a condominium corporation can often be applied to the earliest arrears, thereby “rolling forward” the three-month lien period.