Power of Sale: The Risks for Owners
Court Orders Owner to Pay Amounts Due
Dissention in a community is always difficult. This is compounded when an owner refuses to recognize their statutory obligation to comply with the Condominium Act, 1998 (the “Act”), the Corporation’s governing documents and previous Court orders.
In a recent decision by the Superior Court of Justice (where our firm represented the Condominium Corporation), the Court determined the amount owing by the owner (including significant costs) and granted the Condominium Corporation’s claim for leave to issue a writ of possession if the amounts owing under liens registered pursuant to Section 85 of the Act were not paid in full.
In this case, there was a long-standing dispute between the owner and the condominium corporation which resulted in compliance Applications before the Court as well as other litigation commenced by the owner. See our previous blog on the compliance issues.
In this case, the owner failed to make payment of a special assessment in or about March 2016. Despite efforts to secure collection, no payment was made so a lien was registered. Over the next few years, the Corporation sought to collect the amounts owing under the lien. However, payment was not made and the amount owing continued to grow due to further refusals to pay special assessments and other charges. As a result, the file moved to power of sale and a claim was brought for possession of the unit.
In reviewing the issues, the Court stated as follows:
- Common expenses are the lifeblood of a condominium corporation. Without this source of revenue, the operation of a condominium would grind to a halt. The Court of Appeal reviewed the legislative intent of Section 85 of the Condominium Act, dealing with the collection of common expenses, in TSCC 1908 v. Stefco, 2014 ONCA 696. The Court held that Section 85 is “designed to safeguard the financial viability of a condominium corporation in a manner that fairly balances the rights of various stakeholders”.
- Unit owners are required to pay their share of the common expenses, even when they are disputing such expenses or making a claim against the corporation. In default of payment of common expenses, the corporation has a lien against the owner’s unit which may be enforced in the same manner as a mortgage. That is the purpose of the present proceeding…
The confirmation that owners cannot withhold common expense payments due to a dispute or an alleged claim against the corporation is essential to remember as we see many cases of an owner refusing to pay an amount owing due to an alleged claim against the condominium. These can be expensive lessons for owners as the Act contains strict recovery rights (including rights to costs and to interest on arrears).
The ultimate question before the Court was “what was the total amount due and payable under the lien (as of a particular date)?”.
In the original decision, issued November 9, 2021, the Court found as follows:
- The lien was valid and enforceable.
- Condominium Corporations can apply payments to the earliest arrears.
- The owner was responsible for the following amounts under the lien:
- All common expense arrears owing ($14,321.79);
- Legal costs awarded to the condominium corporation in other proceedings ($39,391.00);
- Interest (at 12%) on the amounts owing;
- Legal fees and disbursements of the condominium corporation in the proceeding (prior to trial): $63,575.00; and
- Costs of the condominium corporation in relation to the trial (to be determined)
- The Court said that the owner was not responsible to pay certain other legal costs respecting non-compliance (incurred outside of Court procedures).
Recently, the Court issued its decision on costs of the trial. In that decision, the Court confirmed that the Owner was required to pay the costs of the Corporation on a substantial indemnity basis (including the reasonable additional actual costs under Section 85), which were set at $50,000 (inclusive of HST and disbursements). The Court stated:
I come to this conclusion because the Condominium Corporation succeeded in proving that the defendants wrongfully and persistently refused to pay common expense arrears properly charged to their unit as well as court ordered costs as noted above, and also because they refused a settlement offer less than their ultimate liability, delivering only a counter-offer not made in good faith. I find that the claim for costs of this trial were properly incurred to establish the amount of the liens and to collect the amounts secured by the liens. [Emphasis added.]
The Court also confirmed that the writ of possession could be issued if all amounts due and payable under the lien are not paid within 30 days of the release of the endorsement.
While no condominium corporation wants to be in a position where it is required to go to Court (or take possession of a unit) due to the actions of an owner, it is helpful to know that there are protections in place for condominium corporations when an owner refuses to make the necessary payments owed to the condominium corporation.
For copies of the decisions, click here and here.
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