In a recent Ottawa case, the courts clarified how condo corporations are to calculate the minimum 10-day notice requirement prior to being able to register a lien on a defaulting unit. This post sheds some light on this tricky requirement.
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The timely payment of condo fees is essential to the survival of condo corporations. This money, the life blood of condo corporations, is required for corporations to function. If an owner fails to pay his or her share, all other owners suffer. For this reason, the Condo Act provides corporations with an automatic and enforceable lien against the defaulting owner.
For the lien to remain valid, however, it must be registered on title within three months of when the default first occurred. If the lien is not registered on title within this time frame, it expires. Or stated otherwise, until registered, the lien can only protect 3 months worth of arrears. Naturally, once registered, the lien also covers all future common expenses in addition to all interests owed on the arrears and all reasonable legal costs and reasonable expenses incurred by the corporation in connection with the collection (or attempted collection) of the unpaid amount.
The lien can be enforced in the same manner as a mortgage and can even lead to the forced sale of the unit.
The condo lien is a tremendously powerful collection tool. Once registered, it takes priority over (nearly) all previously registered encumbrances, including mortgages. For this reason, many mortgage lenders step in to pay condo arrears to have the lien discharge and therefore preserve their priority as a creditor.
Minimum notice required
To benefit from the protection of liens, condo corporations must follow the prescribed procedure to a T. Failure to do so may invalidate the lien all together.
One of the prerequisite conditions to a lien’s validity is that proper notice be provided to the owner prior the lien being registered. On this, section 85 (4) of the Condo Act reads:
At least 10 days before the day a certificate of lien is registered, the corporation shall give written notice of the lien to the owner whose unit is affected by the lien.
In the court case being discussed in this post, a dispute arose around the meaning of this section. In said case, a notice of lien was mailed out on January 21 and the lien was registered on January 31. The owner (incidentally, a lawyer) argued that this time frame did not provide him with the required notice. He basically raise two main arguments:
- First, he relied on rule 16 of the Ontario Rules of civil procedure, which provides that anything served by mail is only effective on the fifth day after the document has been mailed. By this calculation, the lien could not have been registered before February 5th.
- Alternatively, he argued that section 85(4) of the Condo Act required 10 “clear days” since it reads that “at least 10 days before the certificate lien is registered…”. This, according to the owner, required that 10 full day pass before the lien could be registered. Stated otherwise, he argued that the corporation could not register the lien on the 10th day, but only on the 11th day.
The corporation, for its part, relied on section 89 of the Legislation Act, which provides that, in any legislation, a reference to a number of days between two events excludes the day on which the first event happens (the notice of lien going out) and includes the day on which the second event happens (the registration of the lien), even if the legislation includes words such as “at least” or “not less than” a specific number of days.
The judge agreed with the corporation. This meant that, in this case, the corporation did not have to count January 21 but had to count January 31 in its calculation of the 10 day notice period.
Let’s illustrate this:
If you are standing still and I ask you to take 10 steps forward, you obviously don’t count were you are standing as a step. You only start counting steps as you move forward and you obviously count the last step as your 10th one. The same applies to counting days in a calendar.
In its reasoning, the judge also emphasised the “fair, large and liberal interpretation” of the Condo Act required to attain its objects, that of safeguarding the financial viability of condo corporation in a manner which fairly balances the rights of the various stakeholders.
How does this apply to notices of meetings?
It is interesting to note that the sections of the Condo Act dealing with notices of lien and with notices of owners’ meeting have similar language. In both cases they provide for a written notice to be given at least X days before an event (10 days before registration of a lien and 15 days before the meeting of owners).
In our view, this case also answer a recurring question: when sending out your notice of meeting, do you have to add extra days for mailing purposes? In our view, this case clarifies that you do not. When counting when to send your notice of meeting, start on the meeting day and count backwards. Don’t count the day of the meeting but count the day of the mailing.
When in doubt, use our AGM Calculator when trying to figure out when to send your notices out.
- The notice of lien must be mailed at least 10 days before you can register the lien;
- When counting the days, don’t count the day you mail the notice out but do count the day when you intend on registering the certificate of lien;
- You don’t need to add extra days to allow for mailing (having stated this, we suggest you also send an electronic copy to the last known email addresses, in addition to the mailed copy);
- You can register the certificate of lien on the 10th day.