|CONDOMINIUM COLLECTIONS: BEST PRACTICES - Where and how is the Notice of Lien to be sent?|
Best Practices: Where and how is the Notice of Lien to be sent?
Recently, the question was asked whether it is necessary to carry out a search of title prior to issuing the Notice of Lien (a.k.a. Form 14). The answer, in my view, is a resounding “no”!
Prior to May 5, 2001 (i.e. under the old Condominium Act), there was no requirement for any prior notice to be given to unit owners before a lien was registered. In fact, even when the lien was registered (and this has not changed), notice is only required to be given to the mortgagee on or before the date of registration – no notice had to be given to the unit owner. This practice was harsh as unit owners were, and remain, responsible to pay all legal costs associated with registration of the lien and collection of the debt.
When the current Condominium Act came into force on May 5, 2001, the Form 14 – Notice of Lien was introduced. The Form 14 is effectively a mandatory pre-notice given to unit owners. Sub-sections 85(4) and (5) of the Condominium Act, 1998 (the “Act”) specifically read as follows:
(4) At least 10 days before the day a certificate of lien is registered, the corporation shall give written notice of the lien to the owner whose unit is affected by the lien;
(5) The corporation shall give the notice by personal service or by sending it by prepaid mail addressed to the owner at the address for service that appears in the record of the corporation maintained under subsection 47(2). [emphasis added]
In considering Best Practices, three (3) points are worth noting:
Sub-searching title at the Form 14 stage has been subject to some debate. Ultimately though, besides failing to satisfy the Act’s notice requirements, a sub-search cannot serve the condominium corporation’s best interest specifically because the sub-search will also identify those parties having encumbrances registered against title - thereby creating a “catch-22” scenario for the condominium corporation. On the one hand, the Form 14 is a mandatory pre-notice intended for the unit owner (only), and efforts should be made to keep costs reasonable. On the other hand, given that encumbrancers on title are now indentified, it would not be reasonable for the condominium corporation to then ignore their interests by not also giving notice of the common expense arrears before additional costs are incurred with the registration of the lien. It would therefore follow that such notice should be by registered mail to comply with the mandatory notice to encumbrancers on or before the date the lien is registered so as to avoid duplication of tasks and costs. However, once this is done, the condominium corporation is only one step away from registering the lien and most of the cost involved in that process has been expended. This slippery slope towards increased cost (which, in and of itself can hinder a speedy resolution) and risk can be avoided by not deviating from the Act in this regard.
The Act provides condominium corporations with a very powerful tool to recover unpaid common expenses. When the process is correctly carried out, the condominium corporation is virtually guaranteed recovery of 100% of the debt, late payment interest and all legal costs.
If you have any other questions concerning the collection of common expenses, please feel free to contact us for other Best Practice tips.
Richard A. Elia - June 2012
B. Comm., LL.B., LL.M.(ADR), A.C.C.I.
T: 416-446-0800 ext 801
Richard has been actively involved in the area of Condominium Law since 1994. In 2001, Richard opened Elia Associates, Barristers & Solicitors, where, in conjunction with the other lawyers in the firm, Richard is able to offer condominium corporations a full range of legal services including real estate law, corporate and commercial law, civil litigation, employment law, human rights law and appropriate dispute resolution. Richard has a particular interest in investigating the sources of conflict and dispute within condominium communities, and the concept of avoiding disputes by addressing conflicts at the earliest possible stages.
 When our Best Practices are followed throughout the course of a common expense collection file, we have yet to have a file successfully challenged in court. Best Practices to us are those that have been developed by our office in the course of handling thousands of collection files over the past decade.
 While the documents of most condominiums that we have dealt with over the years provide that notice is given when the document is placed in the mail box, there are a few condominiums that deem receipt only after a certain number of days. This must still be verified with respect to each condominium corporation individually.