In a recent unreported Ottawa case, a condo owner sued his condominium to recover the legal fees charged against his unit following his failure to pay his common expenses on time. This case reminds owners of the importance of paying in time the totality of the arrears… including the interests and the legal fees incurred by the corporation to register a lien.
Facts of the Case
In October 2014, an Ottawa condominium corporation advised its owners that a special assessment was required to comply with the most recent reserve fund study. Owners were advised that a first instalment payment was due in March 2015 and that a second one was due in March 2016.
The owner of unit 204 did not pay the first instalment in time. As a result, a lien was registered on his unit. The mortgage lender eventually paid the special assessment together with the legal fees, interest and unpaid condo fees on behalf of the owner as it is often the case.
When the owner failed to pay the second instalment in time in 2016, the property manager sent three (3) letters to the owner advising that the unit was in arrears. The owner was given an extension of time to remit payment, without additional charges. When the owner did not comply, the corporation’s lawyer sent a Notice of Lien, requesting payment of the arrears, legal fees and interests. After having received the Notice of Lien, the owner paid the arrears but did not pay the accrued interest and the legal fees identified in the Notice of Lien. Despite voicemail messages from the property manager and the lawyer, the owner did not pay the legal fees and interest. Consequently a lien was registered on the unit. Once again, the mortgage lender eventually paid the legal fees and interest on behalf of the owner, which lead to the discharged of the lien.
This is where the case becomes interesting. The owner decided to sue in an attempt to recover the legal fees charged against his unit.
The owner commenced a claim in Small Claims Court against the property manager, alleging negligence and incompetence. The owner felt that he should not have to pay the legal fees and interest that were levied against his unit. He alleged that the legal fees were unnecessary and that the lien should not have been registered. He also complained of the fact that he did not receive a copy of the actual legal invoice.
The court dismissed the owner’s claim.
The judge found that legal fees of $1,800 to send the notice of lien, registering the lien and discharging it (in addition to corollary and related work) were reasonable. The judge agreed with the corporation that the owner’s partial payment of the principal alone (without paying the interest and legal fees) did not preclude the corporation from registering a lien against the unit:
The condominium corporation and its board are obliged to put a lien on the property to preserve the interest of the members of the condominium […] The corporation has a lien against a unit where the owner is in default of his obligation to contribute to the common expenses […] The lien must be registered within three months […] The lien includes all reasonable legal costs, in connection with the collection process.
The judge was also of the view that the property manager took reasonable steps in notifying the plaintiff of his financial obligations. The judge stated that “in choosing not to attend meetings of the condominium owners or to not fully read correspondence he received demonstrated that [the owner] had little interest in the upcoming assessments.” The judge concluded that the reason for the late payments was a lack of funds; not a lack of notifications.
The judge was also of the view that the description of legal services found in the Notice of Lien was adequate to describe the work required to secure the arrears. It was not reasonable to expect the law firm to invoice the owner directly, as the contractual relationship is between the law firm and the condominium corporation.
This case confirms that condominium corporations must register a lien to protect their ability to collect common expenses, even if partial a payment is made. The common expenses protected by a lien also include legal fees incurred to secure arrears. Owners must keep themselves informed about what is going on in their condominium community, including the existence of special assessments and their due dates.