In bad times – and sometimes in good times – strata owners fall behind on their monthly strata maintenance fees and these fees begin to pile up. Other times, special levies are costlier than owners can endure and go unpaid.
Strata corporations are not without recourse and have powerful collection tools at their disposal. Under Section 116 of the Strata Property Act (“SPA”), strata corporations can register a lien against the strata lot in a Form G Certificate of Lien. These are commonly known as strata liens.
The following can be included in a strata lien: strata maintenance fees, special levies, interest up to 10 per cent (permitted by the strata’s bylaws or included as a special levy), the costs of filing a lien, the reasonable legal and administrative costs for filing the lien, and the cost of removing the lien.
Under Section 112 of the SPA, the strata corporation must make a written demand to the owner providing them with at least two (2) weeks to pay the outstanding arrears as well as state that a strata lien may be registered if payment is not received within that period.
After filing a strata lien – and if the strata owner refuses or neglects to pay the outstanding strata arrears – the strata corporation has the power under Section 117 of the SPA to escalate the matter by a court ordered forced sale of the strata lot.
It is important to note that strata corporations should register a Form G Certificate of Lien in a timely manner in order to preserve its priority ahead of any other creditors. Until a Form G Certificate of Lien is filed, strata corporations are vulnerable to an owner that makes an assignment into bankruptcy or proposal under the Bankruptcy and Insolvency Act (“BIA”). Upon a bankruptcy or proposal under the BIA, there is an automatic stay of proceedings that prevents a strata corporation from taking any further execution steps against an owner with strata arrears. That includes registering a Form G Certificate of Lien against the strata lot, which is an execution step. If this happens, the creditor strata corporation becomes an unsecured creditor in the bankruptcy or proposal and is forced to deal with the bankrupt owner in the insolvency process.
Forced sale applications proceed summarily by way of a Petition to the BC Supreme Court. Any registered charge holders on the strata lot are listed as a Respondent on the Petition. For example, this may include a mortgagor, any judgment creditors, and tax authorities with charges against the strata lot.
A residential mortgage enforcement (foreclosure) proceeding normally provides the debtor with a six (6) month redemption period to either repay or rehabilitate the mortgage in default. A forced sale typically only provides an owner with thirty (30) days to repay the entire outstanding strata arrears, including reasonable legal and administrative costs and the costs of removing the lien.
If an owner is unable to pay their strata fees or special levies, they are well advised to quickly seek legal advice, especially when a demand letter is received from the strata corporation or a forced sale process has been commenced.
Strata Corporations should ensure that outstanding strata fees or special levies are enforced in timely manner. Otherwise strata corporations may lose an effective and powerful collection tool at their disposal.
Cody Reedman is a litigation, collections, and insolvency lawyer at Becker & Company. He regularly advises and acts for strata corporations in forced sale proceedings.
Whether you act for a strata corporation that is owed strata fees or special levies by an owner, or dealing with an owner with unpaid strata fees who has or is considering making use of the BIA feel free to contact Becker & Company Lawyers or visit our Strata Fees Collection Page online (https://www.beckerlawyers.ca/services/online-strata-fee-collection/)
Becker & Company Lawyers also acts and advises owners a facing enforcement or collection action by strata corporations for unpaid strata maintenance fees and special levies. Please contact our office to make an appointment with one of our lawyers to discuss your individual situation.