Freedom from outdoor maintenance and full access to top-tier amenities are among the biggest advantages to living in a condominium. These advantages, of course, come at a price – the common expense fee. Monthly maintenance or condominium fees are usually predictable and known to a buyer prior to entering an Agreement for Purchase and Sale of a condominium unit. What is often lesser understood are the other ways in which the condominium corporation can obtain fees from condominium owners.
Special Assessments
A condominium corporation creates a budget for every fiscal year and must find a way to cover its expenses if there is a budget shortfall. Large shortfalls can force the corporation to assess an extra one-time charge to each condominium unit, known as a special assessment. Special assessments can occur for many reasons, including unforeseen repairs or the corporation losing a court case.
An existing owner of a condominium unit will be subject to any additional costs levied as the result of a special assessment so long as the condominium corporation followed the proper procedure in levying the special assessment.
A prospective owner of a residential condominium corporation will need to obtain and carefully review, the status certificate from the condominium corporation to determine their potential exposure to an upcoming special assessment. My colleague, Ashley Bennet provides an excellent overview of status certificates and their implications to special assessments in her article How a Condominium Status Certificate Can Help Prospective Purchasers Limit Risk which can be found Here.
Chargebacks
A chargeback is when the condominium corporation charges an owner for costs the owner has caused the condominium corporation to incur. Incurred costs could include damage to common areas, repair costs, cleaning costs and legal fees. Often, the governing documents of a condominium corporation (i.e., Declaration, Rules and Regulations and Bylaws) will specifically outline what additional costs may form the basis of a chargeback to a condominium owner and the process for the chargeback of those costs. Initially, a chargeback typically appears as a bill separate from the condominium owner’s common expenses. At this point, the chargeback is an invoice unlinked to the condominium unit.
In the event the governing documents of the condominium corporation are silent on this issue of chargeback, The Condominium Act sets out specific situations in which condominium corporations can add the costs of a chargeback to the common expenses payable for an owner’s condominium unit.
One of the most common inquires we receive is whether a client’s condominium corporation can chargeback for legal consultation fees. Unfortunately, these inquires almost always occur after a condominium corporation has already attempted to chargeback their legal consultation fees as additional common expenses. Typically, a condominium corporation then threatens to place a lien (which is a legal process of attaching the debt to your property) on the condominium unit in an attempt to recover the outstanding common expenses and their additional legal fees. At this point, it is typically necessary to retain a lawyer to review the condominium governing documents and advise whether the condominium corporation has a legal basis for proceeding with a lien.
The legal basis for a lien can be found in the condominium corporation governing documents or by way of statute. Condominium corporation governing documents are unique and will require individual review and analysis to determine whether they provide a legal basis for a chargeback and subsequent registration of lien. Statutorily, section 134(5) of the Condominium Act requires a Court Order prior to legal expenses being added to the common expenses of a unit.
In the absence of a contractual and/or statutory basis and/or court order, the Court will likely find that a lien placed on a condominium unit for a chargeback common expense is invalid and will discharge the lien; as was done in Amlani v. York Condominium Corporation No. 473.
When to Contact a Lawyer
If the condominium corporation levies a chargeback against your condominium unit, it is important to seek legal advice immediately as the condominium corporation will incur additional legal expenses to provide a Notice of Lien and to register a lien and will add these costs to the chargeback. If the chargeback is supported by the governing documents of the condominium corporation, then a subsequent lien and the significant legal costs of placing that lien on the property will be valid. In contrast, if the chargeback is not valid, a skilled lawyer, like one of our litigation lawyers at Soloway Wright may be able to resolve the issue with no fee being paid to the condominium corporation.
About the Author: Michael practices general litigation, including Condominium Law, Medical Malpractice, Personal Injury, Estates Litigation and Commercial Litigation. Michael has appeared before the Condominium Authority Tribunal, Superior Court of Justice, the Ontario Court of Justice, Divisional Court of Ontario, the Federal Court, and various administrative tribunals.
Soloway Wright LLP is a community-based law firm with offices in Ottawa and Kingston. With over 75 years of experience, our team of over 35 specialty lawyers in Ottawa and Kingston offer a dynamic blend of knowledge and experience to clients requiring assistance with Business Law, Commercial Leasing, Commercial Litigation, Condominium Law, Construction Law, Corporate Finance & Securities, Employment, Labour & Public Law, Workplace Investigations, Environmental Law, Estate Planning & Administration, Insurance Law, Medical Malpractice, Personal Injury, Municipal, Land Development & Expropriation, Real Estate & Development, and Tax Law matters. Our goal is to bring your legal issue to an effective, affordable, and successful conclusion.
DISCLAIMER: This article is for general information purposes only and is not (and should not be construed as) legal advice. The information contained herein summarizes only certain aspects of the subject matter and is not a comprehensive review of applicable law. All of the foregoing is subject to legal and accounting advice based on the particular circumstances of each potential client.
