Enforcement of Payment
As discussed in a previous blog entry here, Bill 106 proposes to establish a more balanced playing field between condominium corporations and unit owners with respect to the enforcement of payment obligations.
Currently, under the Condominium Act, 1998 (the “Act”), when a monetary award (costs or damages) is granted by the court in favour of a condominium corporation and against a unit owner, the corporation has the authority to “charge back” this amount by adding it to that unit owner’s common expense account, which may be enforced by the condominium’s significant lien powers (see here for a discussion of those powers). However, a unit owner who is granted a monetary award against a condominium corporation must seek enforcement of the court order through the usual civil processes if the corporation fails to pay the award. In other words, the current Act makes it much easier for a condominium corporation to collect from a unit owner than vice versa.
Bill 106 proposes to remedy this imbalance by granting power to unit owners to “set off” the amount the corporation is ordered to pay against the owner’s common expense obligations – meaning that the owner could deduct from his monthly condominium fees whatever the corporation owes him, her or it.
What types of awards can be “charged back” or “set off”?
The changes proposed under Bill 106 provide condominium corporations and owners will have the authority to charge back and set off, respectively, the following:
- An award of costs granted by a court, an arbitrator or the Condominium Authority Tribunal (the “CAT”);
- an award of damages granted by a court;
- an award of compensation by an arbitrator or the CAT;
- any actual costs incurred in obtaining a court order; and
- any penalty amount awarded to a unit owner and against a corporation by the CAT.
So, what does this mean with respect to compliance applications before the court?
If the condominium corporation fails to pay a monetary award ordered by the court within the prescribed time (which will be set out in the regulations), a unit owner can set off these costs against his, her or its common expenses. For example, if a unit owner is awarded $20,000 by the court, and the condominium corporation does not pay the award within the prescribed time and the unit owner’s monthly common expenses are $250 per month, the unit owner can set off this cost award against the common expenses of the unit each month for 80 months, until he has recovered his cost award of $20,000.
Of course, the option to set off an award may not be a feasible one for many unit owners who may need the money to pay their legal fees in fairly short order or who may not live in the unit for the 80 months required to recover the full costs. This might leave a unit owner still having to rely on other civil processes (which can be complex and cumbersome) to ensure the corporation pays what is due more immediately.
On the other hand, if the condominium corporation is in receipt of a favourable court costs award, it will be able to immediately apply that amount to the common expenses.
And what about before an arbitrator?
Compensation or costs awarded through an arbitrator will be treated a little differently under the proposed changes to the Act. While the same set off and charge back provisions apply, unless the condominium corporation and unit owner agree in writing otherwise the award must be paid within 30 days of the arbitration order (or whatever other time period the order specifies).
While it appears the condominium corporation may be entitled to add the amount of the arbitration award to the contribution to the common expenses payable for the owner’s unit immediately, a unit owner must wait 30 days (or other agreed or ordered time period) to allow for payment of the order before setting off the amount against his, her or its common expenses payable. And, again, depending on the value of the award relative to the owner’s monthly common expense dues, the owner may have to wait a long while before the award is fully paid off.
And the CAT?
When a monetary order is made by the CAT, the amount of the order shall be paid within 30 days, unless the order specifies another time limit.
Similar to the scheme above for arbitration costs and compensation, the condominium corporation may immediately add the amount to the contribution to the common expenses payable for the owner’s unit. A unit owner, however, must wait the 30 days (or whatever other time period the order specifies) before setting off the amount against his, her or its common expenses payable.
In regard to all these circumstances, despite an attempt to balance the playing field (and some success in doing so), the scale still tips in favour of the condominium corporation.
As usual, whenever new legislation is proposed something seems to be missed, or new questions arise.
We note that the new set off provisions create an interesting issue that could arise when an owner to whom a condominium owes an award of costs, compensation, damages or a penalty, sells his her or its unit. If the sale is completed before the owner has recovered the full award, is the set off right transferrable to a new owner? We suspect not. Current case law on collecting common expenses tells us that common expenses are a personal debt of the unit owner to the condominium corporation, and a new owner of the unit is not responsible for this debt (unless of course, the condominium corporation has taken proper steps to secure a lien against the unit). Likewise (and perhaps even more so), any amounts owed by the condominium corporation to the owner would be personal debts to that owner. This would mean a unit owner to whom such funds are owed would need to take additional steps to enforce the award against the condominium corporation by way of the civil process to be assured of recovery.
We also note that Bill 106 does not indicate whether an owner is entitled to charge interest to the condominium corporation that delays or neglects to make payment. Most condominiums have provisions in their declarations or by-laws relating to interest owing on outstanding common expense debts. Many provide for a fairly high interest rate, often around 18-24%. Although an owner could be entitled to seek post-judgment interest in some cases, it appears this is yet another area where the advantages seem to weigh heavily in favour of the condominium and not the owner.