Paying the piper: Five steps to collecting outstanding strata fees

The Strata Property Act places many obligations on strata corporations. In order for a strata corporation to meet its financial obligations, strata lot owners are required to vote on budgets and contribute to operating funds by way of strata fees.

In an ideal world, strata lot owners will pay their fees. However, from time to time, an owner may fall into arrears. When confronted with a delinquent account, a strata council must take action given its duty to act in the best interests of the strata corporation. So how does a strata corporation realize on those outstanding fees?

Strata corporations are provided with a few debt collecting options. For the purposes of this article, we will focus on what is arguably the quickest and most efficient method of collecting outstanding strata fees, the “Forced Sale Proceeding”.

Forced Sale Proceedings can be broken down into five (5) major steps:

1. Making the demand;
2. Filing the Certificate of Lien;
3. Commencing the petition;
4. Making court appearance(s); and
5. Pursuing costs.

Step 1: Making the demand

Under section 112 of the Strata Property Act, before a strata corporation can register a lien against an owner’s strata lot, it must first give the owner at least two (2) weeks’ written notice demanding payment and indicating that a lien may be registered in the event payment is not received. In addition, it is advisable to give a copy of the demand to the owner’s mortgagee. The mortgagee can be instrumental in addressing strata fee arrears by either paying them or insisting that payment be made.

Step 2: Filing the Certificate of Lien

Once the notice period has elapsed, section 116 of the Strata Property Act allows a strata corporation to register a Certificate of Lien against the owner’s strata lot with the Land Title Office. To ensure the lien is registered successfully, the strata corporation must file the Certificate of Lien in its prescribed form with the required signatures.

Once registered, the Certificate of Lien creates a lien against the owner’s strata lot in favour of the strata corporation for the amount owing. Subject to a few exceptions, the strata corporation’s lien ranks in priority to every other lien or charge registered against the strata lot.

Step 3: Commencing the petition

If the indebted owner does not pay the arrears after the Certificate of Lien is registered, section 117 of the Strata Property Act permits the strata corporation to commence legal proceedings by way of a Petition.

It is important to note that, unlike other legal proceedings, a ¾ vote resolution is not required before commencing the Petition. However, the strata council must authorize the Petition’s commencement. If the Council retains legal counsel to navigate these proceedings, then requisite approvals must be obtained for the associated legal fee expenditures.

The Petition will summarize the events giving rise to the legal proceeding and further set out the relief sought by the strata corporation. The typical relief sought will include the following:

1. Judgment for the arrears owing under the Certificate of Lien;
2. Redemption period;
3. Conduct of sale; and
4. Sale of the strata lot to be approved by the Court.

Step 4: Making court appearance(s)

Generally, two court appearances are required to force the sale of a strata lot.

At the first appearance, the Court may grant judgment for (i) the arrears owing under the Certificate of Lien and (ii) the conduct of sale for the strata lot. The judgment will also be subject to a redemption period.

A second court appearance will be required to approve the strata lot’s sale in the event the owner fails to pay the arrears during the redemption period. The parties are further free to negotiate a settlement at any point in this process, and without the need for further Court appearances.

Step 5: Pursuing costs

Costs are always at the forefront when deciding to pursue a legal option. Fortunately, strata corporations may pursue costs for registering or enforcing the Certificate of Lien. According to section 118 of the Strata Property Act, the following costs may be added to the amount owing under the lien:

• reasonable legal costs;
• land title and court registry fees; and
• other reasonable disbursements.

Taking the next step:

Collections are not pleasant, but necessary. When it comes to outstanding strata fees, Forced Sale Proceedings provide strata corporations with an effective step up from the usual debt collections options.

Does your Council need assistance taking the next step on collections? For further assistance, feel free to contact: Anil Aggarwal, Associate, Strata Property Practice Group.