Trivia Question – A condominium corporation repairs a leaky toilet because a unit owner failed to do so. The corporation immediately sends a letter to the unit owner demanding payment of the plumber’s invoice within two weeks of the date of the letter. The owner refuses to pay. When does the deadline to register a lien start to run? After two weeks? When the cost is added to the unit ledger? After the condominium pays the plumber?
The recent CIBC Mortgages decision confirms that lien periods begin to run when payment is due but not made. In the example above, the lien period would begin to run the day after the payment deadline specified in the letter.
In CIBC Mortgages Inc. v. York Condominium Corporation No. 385, the Court confirmed that a condominium lien is not valid unless it is registered within three months. The question is, three months from when? The answer is important because the lien period is unforgiving.
York Condominium Corporation No. 385 commenced compliance proceedings and obtained a number of restraining orders against a unit owner. The owner was ordered to pay the condominium’s costs fixed at $15,000 within 30 days, being March 16, 2011.
The condominium corporation sought to recover all of its legal costs ($44,272.63) from the owner by adding the costs to the common expenses for the unit. This is permitted under the Condominium Act, 1998 (Ontario). The condominium corporation did not demand payment of the $44,272.63 until August, 2011, approximately 6 months after the court order had been made. The corporation eventually registered a lien in December, 2011. The amounts owing were not paid.
The condominium corporation sold the unit under Power of Sale for $110,000.00. The corporation claimed its lien amounted to $113,616.68 and wanted to keep all of the proceeds of sale. CIBC, the mortgage holder, claimed the lien was invalid because it had not been registered within the time specified in the Condominium Act, 1998 (Ontario). CIBC wanted to keep the proceeds of sale to satisfy a $135,411.79 judgment under the mortgage.
The Court was asked to decide if the condominium corporation’s lien was valid. The Court held that the lien was not valid because it had not been registered within three months of the payment default. For lien purposes, a payment default occurs when a payment is due but not made. The Court decided that the three month lien period began to run on March 17, 2011, the day after the payment was due but not made. By the time the condominium corporation registered the lien in December, 2011, the three-month lien period had expired.
As expired liens are not enforceable, CIBC was permitted to keep all of the proceeds of sale. All condominium owners ended up being responsible for the costs of the enforcement proceedings. Unfortunately for those owners, the condominium corporation was also ordered to pay CIBC a further $62,510.85 in legal costs for the lawsuit in which the lien was deemed to be invalid.
Condominium corporations cannot extend a lien period after it has expired. Condominium corporations should always monitor the expiration of lien periods. If you have any questions about when your corporation’s lien rights may expire, you should contact the corporation’s legal counsel as soon as these questions arise.