Canada: Beware Of Defective Notice Of Lien

Last Updated: March 25 2014
Article by Odysseas Papadimitriou

For some, the decision of the Ontario Court of Appeal in York Condominium Corporation No. 82 v. Bujold was viewed as a game changer. For us, the courts interpretation of section 85 of the Condominium Act, 1998 confirms the advice that we have been giving our clients relating to the importance of diligent compliance with the notice requirements under section 85 of the Act.

In Bujold, the condominium corporation served the unit owner with a Notice of Lien on June 22, 2007, for common expense arrears, including the payment due on June 1, 2007. However, the corporation did not register a Certificate of Lien until September 25, 2007.

When the corporation brought a motion for summary judgment to take possession of Ms. Bujold's unit, the court reviewed whether the corporation had complied with the provisions of section 85 of the Act. Section 85 provides that:

  1. a condominium corporation has a lien that arises upon each default of an owner's obligation to pay common expenses;
  2. the lien expires 3 months after the date of default unless a Certificate of Lien is registered;
  3. registration of a Certificate of Lien consolidates only those liens that arose in the three months before registration; and
  4. the corporation must give written notice "of the lien" at least ten (10) days before a Certificate of Lien is registered.

The court held that the lien had expired as it had not been registered within 3 months of the date of default. The corporation appealed the decision.

The Court of Appeal upheld the lower court's decision. The Court confirmed that the plain meaning of section 85 is such that a new lien arises each month that a unit owner fails to pay his or her common expenses and the lien expires three months after the default arises, unless the corporation registers a Certificate of Lien in that time. By registering its lien on September 25, 2007, the corporation lost its lien rights for arrears arising more than three months earlier.

The Court then considered whether the Notice of Lien given on June 22, 2007, was sufficient to cover the common expense arrears for the period between the date of the Notice and the date that the Certificate of Lien was registered (i.e. July 1, August 1, and September 1). The Court held that since the corporation's Notice of Lien related to an expired lien (i.e. the June 1 default), it could not cover subsequent defaults. Once the corporation's ability to lien for the June 1 arrears had expired, the Notice that it had issued for that default also expired. The corporation should have issued a new Notice of Lien prior to registering a Certificate of Lien.

Some have interpreted the Court's decision in Bujold as requiring a condominium corporation to register its lien in the same month that the Notice of Lien was delivered. We respectfully disagree with this view. The Bujold decision correctly applies the provisions of section 85 of the Act and confirms two valuable practice tips that condominium corporations, and their solicitors, should follow:

  1. If the lien for which a Notice of Lien was given has expired (i.e. by the failure to register within 3 months) or been cured as a result of partial payment, the condominium corporation must issue a new Notice of Lien; and
  2. Partial payments should not be accepted after a Notice of Lien has been issued, unless the corporation is prepared to issue a new Notice of Lien after acceptance of the partial payment, in which case the owner should be advised that the Notice of Lien will need to be re-issued and there will be additional costs as a result.

Best practices dictate registration of a Certificate of Lien in a timely manner. On most occasions, the Certificate of Lien will likely be registered in the same month that the Notice of Lien was issued. Nevertheless, the failure to register a Certificate of Lien in the same month that the Notice of Lien is sent does not automatically invalidate the Notice of Lien, as long as the lien is within the 3 month period.


Ontario Municipal Board Proceedings: The option of appealing a Committee of Adjustment's decision to the Ontario Municipal Board (the "OMB") is more readily available to unit owners than condominium corporations. Unlike individual owners, under the Condominium Act, 1998, a condominium corporation is required to notify all owners in advance of filing an appeal application to the OMB.

Rent Control in New Condos: With the high tenancy rates in most new condominiums, there is increasing political pressure to expand the rent control provisions of the Residential Tenancies Act, 2006 (the "RTA"). Currently, the annual rent increase guidelines of the RTA do not apply to buildings built after June 17, 1998, and buildings that were converted to residential use prior to 1991. Landlords in these types of buildings can increase the annual rent beyond the amount permitted under the RTA. In condominiums built after June 17, 1998, this often allows the landlord/owner to pass annual maintenance fee increases to the tenants. Arguably, the lack of rent control has also made investing in new condominiums more appealing and helped foster the rapid growth of condominium development in Ontario. Repealing the rent control exemptions of the RTA may have greater consequences than some politicians are anticipating. With municipal and (likely) provincial elections in 2014, stay tuned for more developments on this story.

Service of Notice to Owners: If an owner consents in writing, the condominium corporation may deliver notices to the owner by facsimile, e-mail or other electronic means, including notices of owners' meetings. If you are looking to reduce administrative costs in your condominium, consider having a standard form that an owner can sign and return to management to authorize delivery of notices by electronic means. The form should be distributed to the owners and also be made available to the owners at the registration desk during the annual general meeting.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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