Adam v. Halifax County Condominium Corporation No. 267 (Small Claims Court of Nova Scotia)

An owner defaulted on payment of a special assessment.  The condominium corporation’s lawyer delivered demand letters, which referred to the corporation’s lien rights, including the right to recover legal charges.

 The Court said that the owner was not obligated to pay the legal costs related to the demand letters.  The Court said:

 The corporation justifies its action under Article IX, section 15(b) of the by-laws.  It provides as follows:

 In addition to any remedies or liens provided by the Act, if any owner is in default in payment of an assessment levied against him for a period of fifteen (15) days, the Board may bring legal action for and on behalf of the Corporation to enforce collection thereof by way of legal action, lien, and/or other means and there shall be added to any amount found due all costs, including all legal fees, disbursements and applicable taxes, of such action including costs as between solicitor and client.

In this case, the Corporation’s  lawyer wrote demand letters.  Consulting a lawyer and having the lawyer write letters is not, in my opinion, legal action.  I construe ‘legal action’ in the context of the provision to mean some legal proceeding, some step in a process towards a judicial resolution of a claim.  Furthermore, the amount is to be ‘found due’, which again presupposes an adjudication.   

[Editorial Note:  I don’t agree with this decision.  In my view, demand letters are a normal and reasonable part of a lawyer’s collection efforts on behalf of a condominium corporation.  They are a vital part of the overall “legal action” and very often save costs (by avoiding power of sale, court proceedings or other collection efforts).  I believe that the purpose of the by-law is to ensure that the defaulting owner covers all reasonable legal costs resulting from the default.  The rest of the owners should not be required to pay those costs.   

From a review of the decision, it appears that the adjudicator was not happy with the condominium corporation for a number of reasons (and this may explain the adjudicator’s desire to rule against the condominium corporation):

• The adjudicator felt that the legal fees for the demand letters were too high.
• The adjudicator noted that the corporation’s lawyer accepted an overpayment from the owner’s mortgagee. (It seems to me that this must have been an innocent oversight.)
• The adjudicator felt that the condominium corporation acted in an “arbitrary and high-handed” manner in arranging for payment by the owner’s mortgagee.  (The adjudicator was apparently not aware that Nova Scotia’s Condominium Act specifically contemplates such payments by mortgagees.)
• Finally, the adjudicator seemed to feel that the condominium corporation was not sufficiently understanding of the owner’s circumstances.  (The owner was out of the country through the summer and apparently only learned of the special assessment upon his return.  He then wrote to the condominium corporation pleading for time to pay because he had found himself without the funds needed to make immediate payment.  The adjudicator notes that “The corporation turned him down flat”.)  It seems to me that the owner was responsible for his particular circumstances.  And one has to assume that the condominium corporation had an important reason for the special assessment.  All of the owners in this condominium collectively needed one another to make timely payment. 

In my view, this is an unfortunate decision for Nova Scotia condominium corporations.]