Collecting Chargebacks - Good News and Bad News
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March 09, 2012 |  |
Benjamin Rutherford |  |
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A recent case reaffirms some important principles regarding condominium liens and helps to re-establish what sort of charges a condominium can add to the common expenses payable in respect of a unit.
However, the case also comes with a caution that costs and chargebacks are subject to limitation periods and must be pursued in a timely way.
The case, Channa v. Carleton Condominium Corp. No. 429 dealt with a unit owner who sued the condominium to challenge a condominium lien that was registered on title to her unit. The unit owner maintained that she had paid all amounts owing because she had eventually paid the total common expenses, but nothing else.
The condominium, in turn, sued the unit owner for costs incurred in gaining entry into the unit owner’s unit, costs incurred in relation to certain unauthorized modifications the unit owner made to the common elements, and orders requiring the unit owner to comply with the requirements of section 98 of the Condominium Act, 1998, with respect to modifications to the common elements.
The parties had mixed success: The court held that the lien was valid because the unit owner had not paid all monies owing under it, but found the condominium corporation was now out of time to claim the costs it had incurred gaining entry to the unit owner’s unit and dealing with the unauthorized alterations to the common elements.
The case reaffirms some important principles with respect to condominium liens:
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legal costs and interests form an indivisible part of a condominium lien: a condominium lien is not paid off and should not be discharged if the owner only pays the regular common expense payments secured by the lien.
- A condominium corporation can apply payments to previous amounts owing in the absence of any direction to the contrary.
The case also helps to re-establish what sort of things may be added to the common expenses of a unit.
Relying on two cases which were successfully argued by members of this firm (namely, Italiano v. Toronto Standard Condominium Corporation No. 1507 (2008) CanLII 32322, and Mancuso v. York Condominium Corporation No. 216, (2008) CanLII 20343) the court found that a condominium corporation is entitled to apply the costs of remedying breaches to the common expenses payable in respect of the unit without a court order.
This is significant.
Before it began to be eroded by cases like the Italiano case, the prevailing wisdom was that a condominium corporation could not add such costs to the common expenses absent a court order even if the declaration, by-laws or rules said it could. The Channa case is now part of a growing body of law that suggests that condominium corporations can do so.
But the Channa case also comes with a caution.
While the court found that the condominium was entitled to apply the costs of remedying breaches to the common expenses, the court found that not only had the condominium missed the three month window to register a lien, it had also missed the statutory two-year limitation period to make a claim.
Sometimes, chargebacks are left on a unit owner’s account to be dealt with at some future time, such as the sale of a unit. But the Channa case confirms that if the chargeback is left for longer than two years, the condominium may not be able to claim it.
It is possible to make unsecured common expenses back into secured common expenses by the means of a court order. However, even if your condo lawyer can fix this situation, it is good practice should be to ensure the timely collection of common expenses by way of a condominium lien, and to deal with chargebacks in a timely manner.
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