Recent Ottawa Case Requires Update To Lien Collection Practices: Who Should Issue The Form 14 Notice Of Lien?

The recent Ontario Superior Court of Justice decision in Mei Ki Ching v. Carleton Condominium Corporation No. 203, 2019 ONSC 4338 (“Ching”) has potentially forced a significant change to condominium lien collection processes under the Condominium Act, 1998 (the “Act”). 

The Case of the Separated Spouse

In this Superior Court decision, released on September 10^th 2019, the separated wife of the husband who was on title as the registered owner of the condominium Unit; brought a lawsuit against the Condominium Corporation for failing to provide her with sufficient notice of the Unit’s common expense arrears, which led to a Condominium Lien being registered on title to the Unit and the condominium taking possession of the Unit via Power of Sale proceedings.  

Even though the wife was not on title as a registered owner of the Unit, the Court nonetheless found that the condominium ought to have issued all of its notices to her separate address as well, because she had, through family law proceedings, registered a Designation of Matrimonial Home notice on title to the Unit (a “DMH”).  

Accordingly, the Court ruled that the condominium’s Certificate of Lien that was supposed to secure approximately $100,000 in arrears, was invalid against the wife.

Important Takeaway for Condominiums

Perhaps the most important aspect of the Court’s decision in Ching is a judicial finding that the initial Notice of Lien (what was called a “Form 14”) is the beginning of an important legal process, and should be issued by a lawyer – because a land title search of the condominium Unit must be conducted first, before issuing the Form 14, in order to ascertain whether there are any spouses of the owner(s) who ought to receive a copy of the Form 14 as well.  Otherwise, as the Ching decision found, the entire Condominium Lien could be invalidated due to no Form 14 notice having been given to that spouse.

Before this ruling, some condominiums would have their Condominium Manager (or the Manager’s head office) issue the Form 14 to the Unit’s address for service, without conducting a title search of the Unit with the Land Registry Office of Ontario (the “LRO”) electronically beforehand.  If the Unit’s common expense arrears (as listed in the Form 14) were not paid off by within the 10-day (or more) redemption period, only then would the LRO title search be conducted by the condominium’s lawyers, when the condominium’s lawyers register a Certificate of Lien on title to the Unit. The lawyers’ office would also issue a Notice of Registered Lien to any encumbrancers who had also registered their instruments on title; for example, a bank would also receive the Notice of Registered Lien due to their registered mortgage.

Now, following the Ching decision, condominiums must conduct a LRO title search of the Unit before the Form 14 is issued. This impacts both the timing of issuing these Form 14s and, unfortunately, their cost – costs of which are ultimately passed on to the individual Unit Owner in arrears, as part of the legal costs and expenses incurred in the collection matter.

What the Superior Court Found in this Case

At paragraph 43 of the ruling, the Superior Court found that the condominium’s lawyer (or more likely, the lawyer’s Collections Clerk) failed to properly review title to the Unit in question.  The Judge held that the lawyer’s office did review title because the lawyer sent a Notice of Registered Lien to the 1^st mortgagee on title to the Unit, the existence of which the lawyer likely only discovered because of a title search – but the lawyer must have missed, or not known the importance of, the DMH that the separated wife had registered on title as well.

While the Court recognized that the registration of a DMH on title under family law proceedings is not a common occurrence, it was nevertheless incumbent on the lawyer’s office to review title carefully and ensure that all of the required notices were sent out to all of the required parties.

What the Superior Court May Not Have Understood

At paragraph 44 of the ruling, the Superior Court noted that it is not “unduly onerous” for Condominium Corporations to also give notice to a non-owner spouse along with to the registered owner; ostensibly because “the title to a condominium unit may now be reviewed easily on a computer at a minimal cost”. 

However, what the Judge may not have recognized is that in this industry, it is often the Manager or their head office that issues these Form 14s – even if, at a later stage, the Certificate of Lien is registered by the condominium’s lawyer and the Notice of Registered Lien is issued by that lawyer as well.  Most Managers and management companies do not have access to the online electronic system for searching title with the LRO – likely because of the significant expense and expertise required in navigating and using same, only real estate lawyers and condominium lawyers typically have this type of access.

Accordingly, the Court may not have recognized the sea change in industry practices that the Ching decision has brought.  Now, Form 14s across Ontario will likely have to be issued by each condominium’s lawyer only – instead of by Management.

Going Forward: Let Us Issue the Form 14s For You!

Elia Associates has always issued Form 14s for our condominium clients by both registered mail and regular mail, as a good way to evidence the delivery of the only legally-required notice under the Act that must be issued before a Condominium Lien is registered.  While some of our condominium clients have asked their Condominium Managers (or their head offices) to issue the Form 14s instead, this Ching ruling now requires a land title search to be conducted on the Unit beforehand – something that not all management companies can, or are willing to, do on their own.

While the Ching decision may be appealed, until it is successfully overturned by a higher Court, we ask our condominium clients to review their common expense collection procedures in light of this case law development, and to ensure that they provide instructions to our office at the Form 14 Notice of Lien stage; with enough time for us to conduct a LRO title search of the Unit, prior to issuing the Form 14.  While we try and accommodate any last-minute requests for Form 14s, every month Elia Associates publishes in advance our monthly deadlines associated with common expense collections.

Please contact our office if you have any questions or concerns about any of the above, or how Elia Associates can help guide your condominium through this complex lien collection process.

All of the information contained in this article is of a general nature for informational purposes only, and is not intended to represent the definitive opinion of the firm of Elia Associates on any particular matter. Although every effort is made to ensure that the information contained in this newsletter is accurate and up-to-date, the reader should not act upon it without obtaining appropriate professional advice and assistance.

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