As there is a different process to collect fines or chargebacks than there is to collect strata fees, special levies and interest on strata fee and/or special levy arrears, this guide is intended only for information regarding the collection of strata fees and special levies. We will be posting a separate Collections Basics for non-lienable charges.
A Strata Corporation has an obligation to collect strata fees and special levies from the owners. There is no mechanism in the Strata Property Act to write off bad strata fee and/or special levy debts, and it is arguably unfair to other owners to do so as other owners would be ‘subsidizing’ the delinquent owners.
The collection of strata fees and special levies is governed by section 112 to 118 of the Strata Property Act.
There has been a very important case law development with respect to strata collection files in the province of British Columbia, dealing with recoverability of legal fees under section 118 of the Strata Property Act. On October 31, 2017 a three Justice panel of the B.C. Court of Appeal unanimously agreed with our submissions that the correct interpretation of section 118 of the Strata Property Act dictates that an owner who has failed to pay qualifying charges will be responsible for the actual full legal expenses of the strata corporation for registering and enforcing a lien – as long as the legal expenses are reasonably incurred – and those legal expenses are added to the lien and take priority over the amount recoverable by a mortgage lender.
The first step to collecting strata fees and special levies is to ensure that the Strata Corporation’s budget and division of fees is consistent with the requirements of the Strata Property Act. If you require assistance with preparing your Strata Corporation’s budget, a Strata Corporation can use the assistance of a strata management company or can contact our office for assistance. Once an owner has fallen into arrears of strata fees or special levies, the Strata Corporation sends a demand letter to the owner advising of the arrears and the need to pay the arrears within 20 days of the date of the letter (although the Strata Property Act only requires 14 days, the Strata Property Act deems delivery after 4 days and the Interpretation Act requires that the first and last days are excluded – therefore, a minimum of 20 days must be provided).
There are several pitfalls associated with this demand letter (the following are a non-exhaustive list of examples):
1. Not sending the letter to all owners of the strata lot
2. Sending the letter by registered mail
3. Providing the incorrect time to pay before a lien is registered
4. Sending the letter to the incorrect address
Once the 20 days have lapsed with no payment or only partial payment, the Strata Corporation signs a Form G – Certificate of Lien and sends the form to a lawyer or notary for registering the lien against the delinquent owner’s strata lot. The Strata Corporation must be very careful in the amount that it registers the lien for as liens can only be registered for strata fees, special levies and interest thereon.
Once the lien has been registered the Strata Corporation can send a final demand letter before enforcing the lien in Court by initiating Order for Sale Proceedings in BC Supreme Court, if the owner and/or mortgagee fail to pay the arrears. This is a complicated procedure that has many pitfalls and can become more complicated by the bankruptcy of the owner or foreclosure of the owner’s strata lot by the mortgagee.
Our office routinely handles collections files for Strata Corporations and can assist with any step of the process: from sending the first demand letter to successfully selling the strata lot through the Court process to recover the Strata Corporation’s strata fees. We can offer different packages for collections depending on the Strata Corporation’s needs. Please contact us if you would like assistance on this subject or more information.
