11/08/2022 – Jurisdiction Ontario
Part 79 published on 01/09/2022
Court finds that amounts claimed under lien are unreasonable and discharges lien
The condominium corporation had registered a lien against the owner’s unit, for recovery of a plumbing bill of $330 and a water bill of $698 and for related collection costs. The owner then asserted a claim in Small Claims Court for various matters including recovery of the amounts claimed under the lien.
Prior to the conclusion of Small Claims Court claim, the owner offered to pay off the lien (but not including any costs of the condominium corporation in relation to the Small Claims Court claim). The condominium corporation refused payment, unless the owner also agreed to dismiss the Small Claims Court claim and to pay the condominium corporation’s full costs in relation to that claim.
The Small Claims Court ultimately dismissed the owner’s claim and ordered the owner to pay costs of $4,524.00 to the condominium corporation (as against total costs incurred by the condominium corporation of over $22,000.00).
The condominium corporation then sought summary judgment in relation to its outstanding lien. On the motion for summary judgment, the condominium corporation sought the following relief:
- arrears of $34,561 in common expenses’ arrears allegedly covered by the lien against Ms. Chreim’s unit. This amount consists of its defence costs in the Small Claims Court action, including those ordered payable by the Deputy Judge, and interest on those costs calculated at 12% a year.
- The Corporation also seeks full recovery of $52,613 in legal fees and disbursements in this action,
- a declaration that the lien against Ms. Chreim’s unit and the Notice of Sale are valid,
- an order for vacant possession, and
- other related relief.
The Court dismissed the corporation’s motion for summary judgment and ordered that the lien be discharged. The Court held that no amount was owing under the lien. The Court held that the condominium corporation had improperly refused the payments offered by the owner. The Court also held that the legal costs claimed by the corporation under the lien were unreasonable. The Court said:
I begin by observing that s. 85 does not, on my reading, contemplate a situation where a lien might be maintained even though all common expenses and legal expenses in relation to their collection have been paid. There is one allowance, in the language for the anticipated costs. Pursuant to s. 85(3), a lien secures “all reasonable legal costs and reasonable expenses that the corporation incurs in connection with the collection or attempted collection”, which explicitly includes the costs of discharging the lien. It makes sense, from a practical perspective, that a corporation would seek payment in advance of the costs of discharge before actually discharging a lien, and s. 85(3) is consistent with this practical reality. Beyond this, however, the language of s. 85 does not support the theory that a corporation could keep a lien in place to defend a legal challenge to the billing of amounts already fully paid by a unit holder.
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I likewise find that the lien on Ms. Chreim’s unit was maintained without justification after she paid all arrears owed. The costs of defending Ms. Chreim’s action were not costs incurred “in connection with the collection or attempted collection” of her share of common expenses. They could not have been, because all common expenses, including the costs of registration and discharge, had already been fully collected.
As other courts have observed, s. 85 is vital to the functioning of condominiums in Ontario. It gives condominium corporations the ability to collect each unit holder’s fair share of common expenses so that it can finance ongoing operations, and it protects innocent unit holders from having to pay a disproportionate share of costs resulting from the unreasonable conduct of any single owner. These are important policy goals that inform the interpretation and application of s. 85.
The flip side of this is that s. 85 gives condominium corporations enormous leverage. Pursuant to s. 85(6), a lien may be enforced in the same manner as a mortgage, over which it takes priority further to s. 86(1). As a result, a unit holder who does not pay a lien may lose their home. Pursuant to s. 85(3), the amount secured by a lien is always greater than the amount at issue at registration, because the lien covers the costs of discharge. No statutory requirement requires the corporation to keep a unit holder advised of the total amount secured on an ongoing basis once the lien is in place, or to prove that it has actually incurred the legal costs it claims.
In the circumstances of this case, the legitimate policy goals of s. 85 are not undermined by a determination that CCC No 56 was required to discharge the lien against Ms. Chreim’s unit after she paid all arrears demanded on January 29, 2019. The Corporation could have safeguarded its interests, and those of other unit holders, by defending the Small Claims Court action in a reasonable and proportionate way, and then by registering a lien on the unit if Ms. Chreim did not pay a cost award. Ms. Chreim did not jeopardize the Corporation’s operation by withholding common expenses. She had the right to challenge the common expenses levied by the Corporation and an arguable basis to do so in the circumstances. The tens of thousands of dollars of legal costs incurred by CCC No 56 in the Small Claims Court action were not the result of unreasonable action on her part. They flowed instead from the Corporation’s decision to weaponize the lien to attempt to get Ms. Chreim to abandon her lawsuit, and its decision to run up huge and unreasonable legal fees in defence of a modest claim, a point on which I will expand below.
I conclude that the lien is not valid because it should have been discharged after Ms. Chreim paid all outstanding amounts on January 29, 2019.
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Taking into account the excessive fees demanded by Gowlings and paid by Ms. Chreim in January 2019; CCC No 56’s retention of these payments for its future legal costs and failure to attribute these payments to Ms. Chreim’s account; the significant and unexplained tripling of rates by lawyers working on the file in mid-2019, after the amount paid by Ms. Chreim had been exhausted; and the gross disproportionality between the legal fees claimed and the amount at issue; I conclude that the legal fees claimed by CCC No 56 are unreasonable.
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I further find that CCC No 56 is foreclosed from recovering costs that it failed to recover in the Small Claims Court action.
CARLETON Condominium Corp. No. 56 v. Chreim – ONSC