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Lien challenges: applying pressure doesn’t stop the bleeding


By Tony Bui on April 30, 2021 POSTED IN CASE STUDIES, LIENS AND COLLECTION

When condo owners get hit with a lien, things typically go one of two ways: the owner pays the lien and everyone moves on with their life or the owner disputes the lien and a contentious battle ensues. A registered lien secures “reasonable legal costs and reasonable expenses incurred by the corporation to collect the lien” per section 85 of the Condo Act. Corporations often turn to their lawyers in lien battles and recoverable legal costs and expenses begin to mount. One owner recently learned that lesson the hard way. In MTCC 868 v. Pang, the condominium registered a lien as the owner failed to pay her common expenses for approximately seven months and had a history of missing payments. The owner did not pay her arrears after the lien was registered so the corporation commenced a legal proceeding to obtain vacant possession of the owner’s unit to sell it and recover her arrears. At this point, the owner owed around $21,000 but this did not include the corporation’s legal bills to collect the lien. The corporation sought its full legal costs to recover the lien which amounted to $56,327.33. The owner argued this figure was unreasonable and started a counterclaim against the corporation alleging she paid her common expenses and that the corporation damaged her unit. The Ontario Superior Court found her arguments meritless and, in any event, these arguments did not relieve her of her obligation to pay her common expenses. The Court ultimately awarded the corporation its full costs of $56,327.33 noting: The use of the phrase “all reasonable legal costs” in s. 85(3) of the Condominium Act signals that the Condominium is entitled to more than partial indemnity costs…the Condominium is entitled to recover all the legal costs it incurred to enforce the debt owing by Ms. Pang, so long as those costs are reasonable. While the legal fees claimed by the Condominium are high, particularly when compared to the amount owing by Ms. Pang for her unpaid common expenses and interest, I nonetheless find that they are reasonable for several reasons. […] Ms. Pang chose to withhold her common expense payments and vigorously defend against the Condominium’s claim. While litigants should not be penalized for reasonably defending against the case, Ms. Pang’s defence was devoid of merit. She cannot complain about the legal costs the Condominium incurred as a result of her litigation strategy. She also cannot expect the innocent unit owners to pay the legal fees that were reasonably incurred by the Condominium to secure payment of her unpaid common expenses. Tony’s Takeaway from this case is that in most lien disputes, prudent owners should pay the lien at the earliest opportunity “under protest” if they dispute it, and then challenge it after it is discharged or the arrears confirmed as satisfied: this approach stops the bleeding from accrued interest and mounting legal fees the longer the lien goes uncollected. By resolving the lien at the earliest opportunity, the interest/legal fees are capped as of the date the lien is resolved. While an owner may still be liable for paying the corporation’s legal costs if it unsuccessfully challenges the lien in court, the courts may exercise their discretion to award only partial costs as opposed to “all reasonable legal costs” a condo is entitled to under s. 85(3) of the Condo Act. If the owner in MTCC 868 v. Pang had taken this approach, they may not have been on the hook for as hefty a legal bill.