Be Careful not to Fall Behind on Your Condo Fees

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Condo fees often confuse homebuyers, who don't realize what these costs cover and how they work. Many people believe condo fees are an unnecessary burden and prefer condos with the lowest maintenance fees. But these monthly payments cover a resident's share of common expenses, including amenities, a reserve fund used for major repairs and renovations, a master insurance policy, maintenance, trash removal, and utilities. These expenses are set in a budget, which is prepared each year by the condominium board. This means that condo fees can change every few years, reflecting an increase in utility rates and upkeep costs. Plus, the Condominium Act of Ontario entitles the board of directors to pass bylaws to govern the assessment and collection of contributions toward common expenses. Many condo owners don't realize that if they owe a monthly condo fee, the board of directors is entitled to enforce the payment not only through regular court proceedings but also by enforcing a lien or using tenant's rent.

toronto skyline from lake ontario

Toronto Skyline from Lake Ontario by andrewarchy

The Board of Directors Is Allowed to Enforce a Lien

Pursuant to Sections 85 and 86 of the Ontario Condominium Act, if an owner doesn't pay his share of the common expense contributions, the condominium corporation is entitled to have, register, and enforce a lien against the owner's unit. This means the condominium board can sell your unit if you fall behind with condo fees. But the board should exercise this power with special care, and it's responsible for the proper and thoughtful use of its lien powers. The board of directors should never abuse its powers or bully unit owners into paying any costs. This conduct is forbidden — even if there are legitimate circumstances for a lien. Maxim Zavet, a real estate lawyer from Toronto, commented on the lien power of the condominium board,

The condominium lien is an extraordinary remedy because the condominium lien has priority over almost anything else registered or not registered before it, including a mortgage. Further, under a condominium lien, the condominium corporation can conduct a power of sale, which means selling the unit to another party for the repayment of the debt. The super priority status of the condominium lien means that upon a power of sale, the lien gets paid out first and other encumbrances after.

condo inside

Inside of a Condo by Jason Paris

First of all, the condo board should try to resolve the arrears by speaking with the owner or sending him a demand letter, and only if they're unable to settle their issues by a compromise, the condo board should exercise its lien powers. The board has to give written notice of the lien to the delinquent owner ten days before it registers a certificate of lien. The notice must accord with a prescribed from, include a claim for the amounts covered by the lien, and be served either by personal service on the unit owner or via prepaid mail addressed to the unit owner.

The amounts covered by the lien include:

  • Condo fees
  • Damages and costs awarded by a court against a unit owner and in favour of the condominium board
  • Costs arising of a unit owner's failure to follow an agreement concerning an addition, alteration, or improvement
  • Costs of the board of directors performing repair work on behalf of the unit owner

Condo fees cover only costs specified in a declaration or costs defined in the Condominium Act as common expenses. The Condominium Act sets out that common expenses are expenses related to the performance of the objects and duties of a corporation and all expenses specified as common expenses in this Act or in a declaration. Note that the lien doesn't cover the amount charged according to condominium by-laws and rules or late fees and other penalties imposed by the board of directors.

toronto scarbourough

Suburban Skyline by Benson Kua

The board should serve its notice of lien correctly. Otherwise, it could have trouble enforcing the lien. Ten days after it serves the notice of lien, the board may register a certificate of lien. If the board fails to register the certificate of lien within three months from the date of the default that gave rise to the lien occurred, the right to exercise a lien expires. However, this doesn't affect the board's right to enforce the unit owner to fulfill her obligation through regular court proceedings.

Enforcing a lien is an efficient system of collecting arrears without having to go before a court. Robert Gardiner of Gardiner Miller Arnold LLP in Toronto — who has done more than 4,000 liens for condominium clients — remarked,

We're so certain that we'll collect the fees without going to court using the lien process that we don't even charge our condominium clients as we're certain that we will collect our fees and any interest through the lien process.

After serving a notice and registering a certificate of lien, the unit owner should pay all the payments to the solicitor for the board of directors in trust, allowing the solicitor to determine when the lien is fully repaid. The payments include the unpaid amount of condo fees, interest on it, and all reasonable legal costs and expenses that the corporation takes on in the liens process. Once the unit owner pays all the amounts the lien covers, the board must discharge the certificate of lien.

Paying Condo Fee Arrears from a Tenant's Rent

Under Section 87 of the Condominium Act, if a renter who has leased a unit defaults in her obligation to pay condo fees, the board of directors may (by written notice to the lessee) require the renter to pay to the board the lesser of the amount of the default and the amount of the rent due under the lease. This means that part of the tenant's rent may go to condo fee arrears without violating the rental agreement.

looking through bedroom

Looking Through Bedroom by Dan Dickinson

According to the Condo Information Centre run by Anne-Marie Ambert, a York University professor who was the president of a large high-rise with 30 years of condo experience, the board rarely takes this option. In addition, the Condo Information Centre added,

Tenants lose nothing in this situation but it is a nuisance and it may worry them. Tenants who refuse to participate can eventually be evicted after proper procedures have been followed.

The board of directors has to notify the tenant as well as the owner either by personal service or by sending prepaid mail. After receiving notice, the tenant has to pay the required amounts to the board of directors. Payments of the tenant to the board of directors count as payments towards rent under the lease, and the tenant can't be considered in default of an obligation in the lease.

Living room and a cool view

Living Room and a Cool View by Dan Dickinson

Paying outstanding condo fees from a tenant's rent provides a quicker and less severe way of ensuring that unit owners pay their condo fees on time. It's important to remember that a unit owner isn't able to evade his obligation to pay condo fees by waiving or abandoning the right to use the common amenities, or by making a claim against the board of directors, or if by-laws or declarations restrict him from using the amenities.

If you're considering buying a condo, you should always review all the documents that outline the condo corporation's finances and its reserve fund. Request a status certificate, which is a document containing a statement of the condo fees and any defaults in their payments, as well as other important information concerning the board of directors' finances.

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