Fairness for All or Sanctity for the Offender?

…potential fallout from YCC 345 v. Qi

YCC 345 v. Qi is yet another of what is becoming a long line of cases evidencing the willingness and desire of the courts to hit back at condominium corporations under the guise of fairness.  The facts are unimpressive – Qi fails to pay common expenses; unit is liened; condo enforces lien; Qi fails to retain counsel; condo gets default judgement (to sell unit); Qi finally retains counsel who succeeds in re-opening the case; legal costs escalate.  The only issue becomes costs to be recovered in the collection or attempted collection of receivables. 

It is unfortunate that we are also seeing an increasing number of cases where the costs incurred almost beg for a challenge. In this case, legal fees quickly rose to almost $36,000, while the amount of the debt appeared to total approximately $10,000.  However, it remains the rationale of the courts in justifying lower cost awards that risk derailing the ability of condominium corporations to effectively and efficiently collect unpaid common expenses.

Condominium corporations are the next level of government.  Like all other levels of government, they require a tax base upon which to function.  If a “tax payer” does not pay, the condominium corporation relies on the s.85 lien process to efficiently and effectively collect the debt, late payment interest, and all reasonable costs incurred in the collection or attempted collection of the debt.  The logic is simple:  the condominium corporation operates on a without profit basis; there are rarely operational surpluses that can be drawn upon when one or more owners chose not to pay;  the Condominium Act is clear that there is no good reason not to pay;  a condominium does not necessarily have the budget to absorb the costs associated with litigation (particularly with smaller condominiums);  the condominium corporation complies with its obligations to set the annual budget and send out notices to all owners; many condominiums send out reminder letters;  the Act requires that the Form 14 – Notice of Lien be sent to owners; it is the duty of the unit owner to pay common expenses; and ultimately, there is rarely, if ever, a good reason not to pay.

Balance this against the reasoning of the court (paraphrased) in YCC 345 v. Qi:

1. “Legal expenses charged are immensely disproportionate to the arrears” – respectfully, this will always be the case.  The Act requires that the condominium lien be perfected within three months of the arrears first arising.  Some condominium corporations have common expenses obligations that are below $100 per month.  To issue the Form 14 – Notice of Lien, perfect the lien by registration of same at the Land Registry Office, register the discharge of lien, and report to the condominium will generally start legal costs at over $1,200.  Therefore, to start, the Act requires that upwards of $1,200 be spent to recover as little as $300.  The condominium corporation has no choice.  The non-paying unit owner does.

2. The owner has also been charged interest on arrears at a significant rate of 12%” – respectfully, 12% interest should not be considered significant given that the condominium corporation cannot legally loan money.  The interest rate should serve as a deterrent – not a financing option.  My own preference is to see interest rates set as high as 18-24%.  A condominium corporation should not have to compete with credit card companies (institutions that are specifically set up to loan money) when it comes to getting paid.

3. “The relatively simple collection activity involved calls into question the amount of legal costs involved” – respectfully, while the collection process on most files is fairly straightforward, we are held to a standard of perfection for the work that we do.  Many of us who do a significant amount of common expense collection work have developed and invested in practices and policies to ensure the accuracy and effectiveness of our work, while doing so as cost effectively as possible.  It remains in this case that the owner ignored his obligation to pay, then ignored the legal proceedings.  It was only at the 11^th hour – after the owner had legally lost title to the unit - that the owner retained counsel and everything had to then be re-visited.

4. “YCC 345 could have taken steps to reduce the conflict by explaining or apologizing to Qi” – respectfully, the condominium corporation acted as required under the Act and its by-laws – Qi did not.  Qi is the author of this entire legal process. Many condominium corporations voluntarily send out reminder letters to unit owners when none are required.  Often, Form 14 – Notices of Lien are sent by both regular and registered mail when only regular is required.  Typically, condominium corporations, through counsel, send repeated notices after the lien is registered to try to gain voluntary payment of the debt.  However, when the owner choses to “make hay”, it seems to matter less and less that the condominium corporation has been consistent in its practice or that the debt originated from the actions of the owner, when the times comes to award costs.

5. “Qi offered to settle” – respectfully, there seems to be an expectation of late that a condominium corporation should be thankful to receive less than 100% from a unit owner that forced legal proceedings when that owner chose not to pay.  If the collection process became necessary only through the acts of Qi, and offer to settle should include 100% of common expenses, 100% of late payment interest, and 100% of legal costs. 

More and more, condominium corporation boards are feeling caught between an obligation to “enforce” and cost awards that will penalize the greater community.  Section 17(3) places a duty on the condominium corporation to take all reasonable steps to effect compliance with the Act.  The common expense collection process is most efficiently followed if a set process is established and followed.   Breach of Section 17(3) can attract punitive damages [see Dyke v. Metropolitan Toronto Condo. Corp. No. 972], as it should.  Yet, if we are to believe that all other unit owners are entirely innocent in the process, board members are often, and understandably, cognizant of not wanting to impact these other owners in terms of costs and, increasingly, it seems, are becoming hesitant to act.  

Respectfully, it appears that we are entering a realm where the unit owner that does not want to follow the framework of the Act, and who creates inefficiencies within the operation of the condominium corporation, is the one whose actions are increasingly being subsidized by his/her innocent neighbours. 

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