Collections by Strata Corporations (22:IX)
|This information applies to British Columbia, Canada. Last reviewed for legal accuracy by the Law Students' Legal Advice Program on July 24, 2023.|
A. When Strata Lot Owners are Indebted to the Strata Corporation
1. How Strata Lot Owners Become Indebted to the Strata Corporation
A strata lot owner may become indebted to the strata corporation in several ways, including:
- The owner may be in arrears of strata fees or special levies;
- The owner could owe interest on outstanding strata fees;
- The owner may owe money for fines or costs of remedying if they have contravened a bylaw.
2. Treatment of Debt Owed to a Strata Corporation
a) Methods of Debt Collection by a Strata Corporation
A strata corporation can collect a dent by a:
- Forced sale proceeding;
- Arbitration proceeding; or
- Action in debt.
Owners and strata corporations can also resolve disputes over debts at the Civil Resolution Tribunal.
b) When the Strata Corporation is a Respondent
A strata corporation can also be named as a respondent in a foreclosure proceeding commenced by a mortgagee, during which the strata corporation can ensure the court makes an order to pay certain amounts that may be owing to the strata corporation.
B. Forced Sale Proceedings
Forced sale proceedings can only be used as an action taken to enforce a Certificate of Lien (Form G of the SPR). A strata corporation can only register a Certificate of Lien against an owner’s strata lot if the owner fails to pay any of the following (SPA, s 116(1)):
- Strata fees;
- A special levy;
- A reimbursement of the cost of work referred to in s 85 of the SPA;
- The strata lot’s share of a judgement against the strata corporation.
C. Court and Arbitration Proceedings
1. Amounts Owing Under the Certificate of Lien
Instead of proceeding directly with forced sale proceedings, the strata corporation may commence an action in debt in the Provincial Court (if the amount claimed is less than $35,000), Supreme Court, or initiate arbitration proceedings. For any of these options, the commencement must be authorized by a ¾ vote resolution in accordance with s 171. The commencement of a lawsuit in Provincial Court does not need a ¾ vote if the corporation has a bylaw that dispenses of that requirement. The limitation period for an action in debt is two years.
Alternatively, such actions can be claimed at the Civil Resolution Tribunal, which has no monetary limit.
2. Collection of Non-Lienable Amounts
An owner can be indebted to a strata corporation for several items that cannot be included in a Certificate of Lien, including:
- Costs of remedying bylaw contraventions;
- Insurance deductibles;
- Administrative fees;
- User fees;
- Move-in or move-out fees;
- Claims for damage to property caused by an owner or a person an owner is responsible for;
- Interest charged on debts other than outstanding strata fees and special levies;
- Legal fees;
- NSF charges;
- Other chargebacks.
A strata corporation can commence an action in court for the amounts in the same methods as a Certificate of Lien, in addition to the CRT. A ¾ vote resolution is not required to commence proceedings under the CRT.
For each non-lienable amount, a strata corporation must have the authority under the bylaws or SPA to charge is to the account of the strata lot owner and the must endure they comply with notice provisions under s 135 of the SPA. The strata corporation must also have a valid and enforceable bylaw or rule to create the debt, such as a “user fee” for the use of common property and common assets that is objectively foreseeable, as was the case in The Owners, Strata Plan LMS 3883 v De Vuyst, 2011 BCSC 1252.
D. Certificate of Payment
When a strata lot is being transferred, a Certificate of Payment must be filed at the Land Title Office (SPA, s 256) and must be provided by the strata corporation within one week of the request of the purchaser if not money is owing to the strata corporation or if money is owing but certain arrangements have been made to pay or to dispute the amount owing (s 115(1)). The strata corporation can charge a fee no greater than $15 for the Certificate of Payment (s 115(3)).
A strata corporation can refuse to provide the Certificate of Payment until all of the outstanding arrears are paid or satisfactory arrangements for payments have been made. Often, the owner will pay to negotiate a settlement with the strata corporation. If court proceedings have commenced to resolve any disputed fines or costs, the owner can pay the strata corporation “in trust” until a dispute is resolved, requiring the strata corporation to then provide a Certificate of Payment (s 115(1)(b)(i)). If no legal proceedings have started, a strata lot owner disputing fines or costs of remedying a bylaw contravention has no option other than payment.
E. Foreclosure Proceedings
A mortgagee can commence foreclosure proceedings against a strata lot owner that owes money to the strata lot and to the mortgagee on title. If a Certificate of Lien is registered by the strata corporation to a strata lot, the strata corporation gets named as a respondent in the mortgagee’s foreclosure proceedings. The money owing under the Strata corporation’s Certificate of Lien has priority over the mortgage (SPA, s 116).
It used to be the case that a strata corporation was required to give the mortgagee a Certificate of Payment when a foreclosed strata lot was sold. However, if there was money owed to the strata over and above the amount owed under a Certificate of Lien, strata corporations would refuse to provide a Certificate of Payment. As a result, the Land Title Office would refuse to register the transfer of the strata lot without a Certificate of Payment. Peoples Trust Co. v Meadowlark Estates Ltd., 2005 BCSC 51 resolved this dilemma by deciding that a change of ownership arising from a foreclosure proceeding does not trigger the requirement under the PSA to file a Certificate of Payment. This means that if a Certificate of Lien is not filed by the strata corporation at the time of the sale, they lost their opportunity to claim for any money owed to it.
F. Principles of Allocation of Payments
If there is no bylaw dealing with allocation of payments from owners, the strata corporation will apply the payment as directed by the owner.
Many strata corporations have adopted bylaws stating that payments will be allocated to fines first. This is allowed, per Chorney v The Owners, Strata Plan VIS 770, 2011 BCSC 1811, as long as the bylaw does not prevent an owner from contesting or refusing to pay fines while continuing to pay strata fees. A bylaw that allocates payments cannot override an owner’s express of implied direction to apply payments to strata fees and special levies.
|© Copyright 2023, The Greater Vancouver Law Students' Legal Advice Society.|