Collecting Liens through Power of Sale

28 novembre 2019 | Caleb Edwards

( Disponible en anglais seulement )

Under Section 85 of the Condominium Act, 1998, S.O. 1998, c. 19 (the “Condo Act”), a condominium corporation may register a lien against a unit owner in arrears of common expenses.

Unless the owner agrees to pay, registering a lien gives notice to other parties of the corporation’s claim against the owner and his or her unit, but does not actually serve to collect any funds for the corporation.  In order to recover the amounts owing, further steps are required.

The corporation can recover on the lien by exercising a power of sale.  In other words, the corporation can take legal steps in order to be permitted to sell the unit in spite of any objections by the unit owner.  Funds from the sale will be applied to the amounts owed to the corporation (including for reasonable legal fees) and any surplus will be returned to the unit owner.

This article deals with the steps to be taken between registering a lien and selling the unit.  Not surprisingly, as this is a far-reaching power, there are several regulations and proscribed waiting periods in order to ensure that unit owners’ interests and rights are not trampled on.

Notice of Sale Under Lien

Section 85(6) of the Condo Act provides that the lien “may be enforced in the same manner as a mortgage.” In order to collect on the lien, therefore, the corporation must rely on the Mortgages Act, R.S.O. 1990, c.M.40 (the “Mortgages Act”) and the dates set out therein.

Section 31 of the Mortgages Act requires notice to every person who appears to have an interest in the property as listed in the parcel register and the index of executions for the property.  There is also a small list of additional parties that may have to receive notice.  Counsel can assist with determining who should receive notice and providing the required notice.  This notice must be issued in a specific form required by the Mortgages Act.

Under Section 32, notice cannot be issued until the lien has been registered for 15 days. As a practical matter, we would recommend that Notice of Sale under Lien not be issued immediately after the expiration of this 15 day period.  Acting quickly increases the chance that some party may claim that they were not properly notified of the lien.  The mere fact that a lien was placed on the property may also prompt the unit owner to find a way to pay the outstanding amounts.  A good rule of thumb is to allow two to three months before moving to the next step.

Once the Notice of Sale under Lien is issued (in the form required by the Mortgages Act), the owner has at least 45 days from the date of the notice to ‘redeem’ the property.  Redemption, in this case, would mean that the owner pays the amounts outstanding and costs.  The amount to be paid is listed in the notice.

Issuing a Statement of Claim

If the owner still refuses or is unable to pay, the corporation can issue a statement of claim for possession of the unit.  This is a normal statement of claim, except that, instead of damages, the corporation will be seeking possession of the unit.  Generally, any owner of the unit will be named as a defendant.  Once issued, the claim must be properly served on every defendant.

Because it is a statement of claim, the Rules of Civil Procedure give the defendant(s) twenty days from the date they were served to put forward their statement of defense.  As a practical matter, a defendant with a reasonable defence is likely to have raised it already in the process.  For the most part, these claims will go unopposed.

Applying for Default Judgment

Provided that the owner(s) do not defend the matter, the corporation can apply for a default judgment 21 days after the claim is initially served.  In the motion for default judgment, counsel will ask the court to order payment of the full amount outstanding and for an order giving possession of the unit to the corporation so that it can be sold.

The length of time that a court will take to issue the judgment is not proscribed.  This can result in frustrating delays as the corporation must wait for the court to decide to sign and issue the judgment.  Once the judgment is obtained it must be served on any defendant(s).

Writ of Possession

Ten (10) days after serving the judgment, the corporation can bring a claim for a “writ of possession.”  This is another motion in the same action.  The corporation is seeking to formally have the court order the local Sheriff to remove the unit occupants and give the corporation possession of a now-vacant condo unit.

Caution must be taken at this stage to ensure that the defendant(s) have been properly served, as courts are reluctant to sign orders removing people from their homes.  The court will likely scrutinize the motion documents to ensure that the letter of the law has been fulfilled.

Provided the court is satisfied, it will issue the writ of possession.  This will be given to the Sheriff, who will issue an eviction notice informing the unit owner(s) that they have ten (10) days before they will be evicted.  Once the ten (10) days are expired, the Sheriff will evict the owner(s) if they have not already left.

At this point, the locks can be changed and the unit listed for sale.

Conclusion

As is evident, this is a lengthy process that can result in several delays.  By working closely with counsel, it should be possible to move the process forward smoothly.  At the same time, if the unit owner is responsive, they can be reminded that they have the power of redemption right up until the unit is sold.  Provided they pay all the amounts then due, they can prevent themselves from being evicted from their home.

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