CONDOCENTRIC: BEST PRACTICES - Where and how is the Form 14 to be sent?

Common Expense Collections

Best Practices[1]: Where and how is the Form 14 to be sent?

Recently, the question was asked whether it is necessary to carry out a search of title prior to issuing the Form 14 – Notice of Lien. The answer, in my view, is a resounding “no”!

Prior to May 5, 2001 (i.e. under the old Condominium Act), there was no requirement for any prior notice to be given to unit owners before a lien was registered. In fact, even when the lien was registered (and this has not changed), notice is only required to be given to the mortgagee on or before the date of registration – no notice had to be given to the unit owner. This practice was harsh as unit owners were, and remain, responsible to pay all legal costs associated with registration of the lien and collection of the debt.

When the current Condominium Act came into force on May 5, 2001, the Form 14 – Notice of Lien was introduced. The Form 14 is effectively a mandatory pre-notice given to unit owners. Sub-sections 85(4) and (5) of the Condominium Act, 1998 (the “Act”) specifically read as follows:

(4) 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;

(5) The corporation shall give the notice by personal service or by sending it by prepaid mail addressed to the owner at the address for service that appears in the record of the corporation maintained under subsection 47(2). [emphasis added]

In considering Best Practices, three (3) points are worth noting:

1. “At least 10 days before…” – It is not unexpected that this type of language has been considered by the Courts in the past. While there have been different interpretations, we feel that a conservative approach best serves condominium corporations. Specifically, Best Practices in calculating the 10 day period means not including the day of mailing or the day of receipt[2]. 
2. “…by sending it by prepaid mail…” – Prepaid regular mail is required by the Act and should always be carried out. Best Practices include also sending the Form 14 by registered mail so as to ensure that, for nominal cost, there is no question with the evidentiary trial should same be called into question.
3.  “…sub-section 47(2).” – Best Practices involves establishing a consistent policy of only giving notice to the name and address for service that has been given, in writing, to the condominium corporation by the owner of the unit. The Act puts the onus on the unit owner to advise the owner in writing of this, and of any changes to this information. Carrying out a sub-search of the unit to identify the owner does not assist for two (2) reasons: first, this information does not serve to alter the register of the condominium corporation; and second, while the lien secures legal costs incurred in the collection or attempted collection of the debt, such costs must be reasonable. Given that the Form 14 serves both as a mandatory pre-notice and the first step in the legal collection process, there is interest in balancing compliance with the Act and keeping costs reasonable. A sub-search of title will necessarily be required if and when the unit is liened. At that time, the cost of the sub-search is both necessary and reasonable. 

Sub-searching title at the Form 14 stage has been subject to some debate. Ultimately though, besides failing to satisfy the Act’s notice requirements, a sub-search cannot serve the condominium corporation’s best interest specifically because the sub-search will also identify those parties having encumbrances registered against title - thereby creating a “catch-22” scenario for the condominium corporation. On the one hand, the Form 14 is a mandatory pre-notice intended for the unit owner (only), and efforts should be made to keep costs reasonable. On the other hand, given that encumbrancers on title are now identified, it would not be reasonable for the condominium corporation to then ignore their interests by not also giving notice of the common expense arrears before additional costs are incurred with the registration of the lien. It would therefore follow that such notice should be by registered mail to comply with the mandatory notice to encumbrancers on or before the date the lien is registered so as to avoid duplication of tasks and costs. However, once this is done, the condominium corporation is only one step away from registering the lien and most of the cost involved in that process has been expended. This slippery slope towards increased cost (which, in and of itself can hinder a speedy resolution) and risk can be avoided by not deviating from the Act in this regard.

The Act provides condominium corporations with a very powerful tool to recover unpaid common expenses. When the process is correctly carried out, the condominium corporation is virtually guaranteed recovery of 100% of the debt, late payment interest and all legal costs.

If you have any other questions concerning the collection of common expenses, please feel free to contact us for other Best Practice tips. 

[1] When our Best Practices are followed throughout the course of a common expense collection file, we have yet to have a file successfully challenged in court. Best Practices to us are those that have been developed by our office in the course of handling thousands of collection files over the past decade. 

[2] While the documents of most condominiums that we have dealt with over the years provide that notice is given when the document is placed in the mail box, there are a few condominiums that deem receipt only after a certain number of days. This must still be verified with respect to each condominium corporation individually.

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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