Collections During a Pandemic www choa bc ca

Collections During a Pandemic www. choa. bc. ca 1. 877. 353. 2462 Presented by: Matthew Fischer www. fischerandcompany. ca 250 -712 -0066 We gratefully acknowledge the financial support of BC Housing as part of the Building Excellence Research & Education Grants Program

Many thanks to this week’s Webinar Sponsor

Privacy Ø The information presented and discussed in the seminar is not intended as legal advice or an opinion on the merits or questions raised by a participant, and is only intended for educational purposes. Ø Due to the nature of information protected under the Personal Information Protection Act, and the confidentiality of each participant and their strata corporation, answers to strata corporation specific questions cannot be given during the seminar. Ø Participants are advised to seek legal counsel independently regarding the specific nature of a bylaw, bylaw enforcement, interpretation of legislation, or matters relating to contractual relationships. Ø Participants are requested to respect the privacy of those persons attending and participating in the seminars. 3

Summary Review ØThis is a summary overview of the proper process for collection of unpaid strata fees, special levy contributions and other charges which are most strongly protected by the provisions of the Strata Property Act and by the Courts. ØThe longer seminar includes more information on other categories of debts such as fines. ØWe will start with thoughts about collections during a pandemic and will take questions at the end if time permits. 4

Covid-19 and Collections Ø Pandemic and economic recession can make it emotionally challenging for strata councils to address owners who haven’t paid their strata fees or special levies. Ø You can be sympathetic, but you also have to be firm. Ø Times of economic stress can make it more likely that owners will default and seek insolvency protection – and that makes promptly and formally securing debts particularly important. 5

Covid-19 and Collections If you are providing an owner “time to pay” or agree to arrangements to pay, remember: The obligation to pay strata fees or a special levy is the same for all owners and the duty of council to enforce bylaws and resolutions carries the same due date for everyone. If you have made different arrangement, you may prevent effective collection of unpaid contributions by making it impossible to secure the debt or withhold a Form F on sale of a strata lot. 6

Why Take Action? Strata Corporation Duties ØStrata Corporations need prompt payment of strata fees and special levies to operate. ØCouncil has a duty to take reasonable steps to protect and collect unpaid contributions. ØDelay can prevent recovery – the Limitation Act normally only provides 2 years to sue. ØUndue delay can make recovery more difficult. ØHaving a reputation for being passive can encourage owners to defer payment. 7

Can council be proactive? Ø Deter late payment by taking firm, consistent and fair action, enforcing the bylaws regarding payment, and creating a reputation for effective collections. Ø Ensure that the bylaws facilitate assessment, payment and collection of strata fees, assessment of fines and interest as well as entitlement to vote or serve on council. Ø Reconsider bylaws which defer or prevent prompt collections activity or deviate from the Act’s processes. Ø Have a clear and consistent collections practice when a payment deadline is missed. 8

A monthly arrears review Ø The strata council are required to make decisions regarding the enforcement of bylaws, imposition of penalties and collection proceedings. Ø A monthly review of all types of claims and receivables will enable council to: Ø Monitor collection actions Ø Consider the right time to file liens Ø Whether further actions are necessary Ø Provide the strata council with an itemized list of all receivables that are identified separately to determine the next course of action 9

Avoiding General Pitfalls Ø Ensure accounting records and owner contact information are consistently maintained correctly and up to date. Ø Ensure that Owners are informed of: Øwhat they owe and how they are expected to provide payment: ØAny strata fee increases and assessment of special levies. ØRequired changes to pre-authorization forms Ø Ensure that Budgets and Special Levies are properly approved, lawfully divided and documented. 10

Avoiding General Pitfalls Ø Check that payments are applied correctly. Do not combine fines with strata fees. Do not rely on a bylaw requiring payment of fines first. Ø Check that any interest is authorized by bylaw and correctly calculated (not in excess of the statutory maximum of 10% per annum or compounded greater than annually) Ø Do not rely on withholding a Form F Certificate of Payment alone to secure or collect charges which could have been protected by lien. Ø Document Council’s decisions properly, but without improper disclosure of personal information. 11

What To do? The procedural basics ØThe Strata Lien and Order for Sale process allows a strata corporation to secure unpaid strata fees and special levies against the value of a strata lot. ØAny Strata Corporation can enforce a properly filed lien applying for Court Ordered Sale of the strata lot without the owner’s consent, and the lien amount is paid from the proceeds of sale. 12

What To do? The procedural basics Ø Sections 112 -118 of the Strata Property Act set out the process, including the procedures for an application to court for an order for sale of a strata lot. Ø Those steps can get complicated and there are nuances and pitfalls, but the basics are as follows: Ø It is mandatory to send a s. 112 notice of arrears with required wording and 20 days notice that specific steps will follow. Ø After the 20 days notice, Strata can register a Lien against the strata lot in the Land Title Office in Form G. Ø Optionally, we try to secure payment from a mortgage lender. Ø Once a lien is filed, there is a three step court process to compel sale of the Strata Lot and recovery of arrears & expenses. 13

Avoiding Pitfalls with Notices Ø Correctly calculate and state the amount owing in the notice and include required wording*. Ø State and observe the 20 day* notice period. Ø The Notice must go to all owners of the strata lot and to any Mortgagee who has requested notice in Form C, Ø Use the correct and current addresses for each recipient Ø Send by valid methods under s 61** Ø Keep proof of proper notice and delivery. 14

What is a Lien? Ø A Form G – Certificate of Lien is a certification by council of the qualifying charges which have accrued. Ø Once properly filed in the land title office by a lawyer or notary, the Lien: Øsecures the amount claimed Øprevents most transactions involving the property until the claim is resolved. Øtakes priority over the owner’s mortgage and many other debts and judgments and Ømakes the Strata Corporation a secured creditor in the event of owner bankruptcy or 15 bank foreclosure.

Avoiding Pitfalls with Liens Ø Double and Triple Check for Errors in the lien document, certification or registration Ø Do not include fines or other debts in a lien which cannot validly be included in a lien. Ø Do not register a new lien every month, but do consider getting advice on whether to register a new lien if the amount owing changes significantly or if a lien contains any error. Ø Do not assume that registering a lien will suspend the limitation period (it does not). Ø Promptly discharge a lien once full payment has been secured. 16

Why BC Supreme Court? Ø The Civil Resolution Tribunal and Small Claims Court have some jurisdiction to address arrears and other debts. They can be the correct choice if the only amounts owing cannot be included in a Lien. Ø However, Only BC Supreme Court has the jurisdiction to compel the sale of the strata lot – which results in payment and avoids the issue of how you enforce a CRT or Small Claims Judgment. Ø The Legal Expenses are recoverable as part of the Lien. 17

There is good news! Ø In 2017, The Court of Appeal confirmed that all of the actual expenses reasonably incurred to place and enforce a strata lien (including legal expenses) are fully recoverable from the owner who has defaulted on their payment obligations. Ø The guiding principles identified by the Court are intended to ensure that the owners who are paying their fair share not burdened with the cost of bringing a defaulting owner into compliance with their payment obligations. 18

The Baettig Decision and Court Cases on Collections Expenses Ø The intention of section 118 of the Act is to help ensure that Strata owners who are fully paid do not also have to pay towards the cost of collecting basic contributions from owners who have failed or refused to pay. Ø Broadly stated, the Court of appeal noted: [68]In my view, the same legislative intent underlies both ss. 133 and 118 of the SPA – that strata owners who comply with the bylaws and rules of the strata corporation should not have to shoulder the financial burden of remedying infractions committed by non‑compliant owners. 19

The Baettig Decision and Recovery of Collections Expenses Ø Other cases have determined that the modest initial cost of sending a section 112 notice isn’t recoverable. Ø That does not follow for two reasons: Ø 1) Sending a S 112 notice is a mandatory part of the lien registration process. Ø 2) The Court of Appeal ruled that other owners should not be burdened with that category of expense. Ø Having a suitable bylaw and running concurrent bylaw enforcement process for breach of the bylaws associated with payment of levies and strata fees might cure that issue. 20

Risks and Pitfalls ØThere are very common pitfalls when strata corporations try to collect without legal assistance. ØErrors in any stage of the process can complicate or even prevent recovery of the Lien charges and collections expenses. ØIf extra steps council directs aren’t reasonably necessary, then the full recovery of expenses can be jeopardized. ØAsk - not all lawyers will review and correct steps taken before their involvement. So, ask! 21

Get Early Advice Don’t delay, but it is especially important to get comprehensive advice early in the process if: Ø Council is withholding a Form F, preventing a sale, registering a lien, making arrangements to pay, or forgiving a debt. Ø The owner in arrears is in a process of insolvency protection, bankruptcy, divorce, tax sale or litigation or is deceased. Ø There are charges on title which might take priority to a strata lien, Ø Amounts may have expired under the Limitation Act, or Ø Council has agreed to payment arrangements 22

Thank you for your attention! Any Questions? 23

Thank you Condominium Home Owners’ Association 1. 877. 353. 2462 www. choa. bc. ca 200 -65 Richmond St New Westminster, B. C. V 3 J 5 Y 5 604. 584. 2462 222 -1175 Cook St. Victoria, B. C. V 8 V 4 A 1 250. 381. 9088 26 -1873 Spall Road Kelowna, B. C. V 1 Y 4 R 2 250. 868. 1195