Welcome news for BC Strata Corporations: BCCA clarifies that strata corporations are entitled to full indemnity of legal costs of lien registration and enforcement provided those legal costs are reasonable
The British Columbia Court of Appeal released its decision, The Owners, Strata Plan KAS 2428 v Baettig, 2017 BCCA 377 on October 31, 2017, that reviewed and clarified a long-standing question of “reasonable legal costs” in Section 118 of the Strata Property Act.
That is whether strata corporations are entitled to recover their actual legal fees or only costs pursuant to the Supreme Court Rules. Absent a provision in a strata’s bylaws, the strata is entitled to costs on a solicitor – client basis. The Supreme Court Rules may also allow a successful litigant to recover a portion of their legal fees. Accordingly, the costs of lien registration and enforcement can become a significant burden on a strata corporation (and the owners) when strata corporations are forced to pay for any shortfall or reduced recovery of their legal fees.
The Strata Lien
The circumstances when a strata corporation registers a lien is when “the owner fails to pay the strata corporation any of the following with respect to the strata lot”: (i) strata maintenance fees, (ii) special levies, (iii) a reimbursement of the cost of work referred to in section 85, and (iv) the strata lot’s share of a judgment against the strata corporation.
If there is sufficient equity, any creditors with an interest in the owner’s unit will be paid out in full. In the event there is not enough equity and there would be a shortfall, liens under the Strata Property Act possess a higher payment priority than a mortgage. This does not guarantee payment in full, but usually means that strata corporations will receive either full or substantially all of its fees.
The Court in The Owners, Strata Plan KAS 2428 v Baettig engaged in a fairly thorough review of the legislative scheme and statutory interpretation of Section 116 to 118 of the Strata Property Act and former Condominium Act.
One of the interesting points was the court’s comments at paragraph 78 to 83 on ensuring appropriate safeguards are built into the registration and enforcement process to third parties such as mortgagors but also the delinquent owner themselves.
The Court noted that the Supreme Court Rules 18-1 provides that:(1) At any stage of a proceeding, the court may direct that an inquiry, assessment or accounting be held by a master, registrar or special referee;
(2) The court may direct that the result of an inquiry, assessment or accounting be certified by the master, registrar or special referee and, in that event, the certificate, if filed under subrule;
(9) is binding on the parties to the proceeding.
In this case, the Court directed “a registrar of the Supreme Court of British Columbia to conduct an assessment as to whether the costs claimed by the Strata pursuant to s. 118 of the SPA were reasonably necessary to register the lien and conduct the enforcement proceedings”.
As a takeaway, this decision provides much needed clarity on strata’s recoverability of legal fees in lien registration and enforcement matters. It is expected that this decision will encourage strata corporations to take legal action against delinquent owners.
As a safeguard, the Court noted that the owners and other stakeholders have recourse to ensure that only reasonable legal fees are included under the lien. While there does not appear to be any reported decisions, the writer expects that assessments of the reasonableness of legal fees under a strata lien will be treated similarly to a taxation or a review of a lawyer’s account under the Legal Profession Act. This will ensure that any legal fees incurred under the strata lien are fair and reasonable in the circumstances.
Cody Reedman is a litigation, insolvency and strata lawyer at Becker & Company. Becker & Company is a full service law firm located in Pitt Meadows, British Columbia. We provide services across the Lower Mainland, Fraser Valley and throughout British Columbia. We regularly act for strata corporations, property managers, and owners in a broad range of strata matters, including lien registration and enforcement services.
Please note that this article is for general information purposes only. If you require legal advice please seek a qualified lawyer in your jurisdiction.