Part 3 Lien and Power of Sale

When a Condominium Power of Sale Goes to Court

If an owner does not pay the arrears during the redemption period set out in the notice of sale and vacant possession of the unit is not provided, the power of sale process moves into the litigation stage.

While this stage can seem intimidating and uncertain, understanding the court process can help corporations better manage expectations regarding timelines and costs.

Issuing and Serving the Claim

A court claim in a power of sale process (namely a claim for possession and for determination / judgment in relation to the amount owing) is started by issuing and serving a Statement of Claim. The Statement of Claim must be properly served on the owner. In some cases, locating or serving the owner can be challenging and may require additional court motions or investigative steps. As a result, timelines can vary significantly from file to file.

Once served, the owner has an opportunity to defend the claim. If a defence is filed, the matter may proceed through a traditional litigation process with various procedural steps and potentially a trial.

Where no defence is filed, the owner may be noted in default.

If the owner is noted in default, the corporation can then seek judgment from the court for possession of the unit and for determination (and payment) of the arrears and related interest and costs. Obtaining judgment is not the end of the power of sale process. The final stage involves taking possession of the unit and ultimately selling the unit.

Taking Possession

After obtaining a court order, the corporation will typically make a final demand for vacant possession. If the owner still refuses to vacate, the Sheriff may be required to enforce the order (through a writ of possession issued by the Court).

Importantly, owners may still pay the outstanding amounts during this stage, which can require the corporation to halt enforcement efforts and discharge the lien. A corporation has a statutory obligation to discharge the lien where full amounts owing are paid. Failing to do so can leave the Corporation vulnerable to various legal claims. If you are unsure of what obligations the Corporation has upon payment please reach out to legal counsel.

Preparing the Unit for Sale

Once possession has been obtained, the corporation must take a number of steps before listing the property for sale (and going ahead to complete a sale of the property).

These steps commonly include inspecting the unit, addressing any contents left behind, obtaining appraisals, and retaining a realtor experienced with power of sale transactions. The corporation must also ensure the sale process is conducted carefully to minimize the risk of future claims relating to the sale. The Corporation can seek legal advice respecting these steps to ensure that the Corporation is minimizing the risk of claims against the Corporation for improvident sale, ie. a sale of a property for a price that is unreasonably lower than the property’s true market value or is otherwise unfair to the owner.  

Distribution of Sale Proceeds

After the unit is sold, the sale proceeds are distributed according to the priorities established by law.

Expenses related to the sale are paid first, followed by municipal tax arrears and then the amount of the condominium lien. Any remaining funds are distributed to mortgagees and other encumbrancers (according to their priorities) and then to the owner and/or paid into court. Unlike a foreclosure where the Mortgagee is able to keep any remaining funds after they are disbursed to the encumbrancers in priority, the Corporation is required to ensure the owner receives the remaining funds from the proceeds of the sale of the unit or these remaining funds are paid into court. The Corporation is not entitled to keep these funds, as the Corporation is only entitled to the amounts secured by way of lien (including the section 85(3) amounts).

Unlike the earlier stages of the process, there is no fixed timeline for the sale of a unit. Market conditions, property conditions, and buyer interest can all impact how long it takes for a sale to close.

Key Takeaway

A power of sale proceeding is a powerful remedy that helps condominium corporations recover unpaid common expenses and protect the corporation’s financial stability. However, the process requires patience, careful planning, and strict compliance with legal requirements from beginning to end. If you are unsure what the next steps are for the facts of a particular proceeding please reach out to legal counsel for additional information.

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