As discussed in my blog,  Introduction to Condominiums, the term "condominium" refers to a system of ownership where a unit is owned separately by the individual who purchases it, while the common elements (hallways, elevators, lobby, walkways, swimming pool, front and back yards etc.) are owned in common by all the unit owners. When you own a condominium, you have individual title to your unit. At the same time, each unit owner has an interest in the common elements in a fixed proportion.

In order to facilitate this form of communal ownership of property, individual unit owners have to make "common expenses" payments in order to maintain the common elements of the condominium.  Since each individual unit owner depends on the others to make their payments in order to maintain the property, the Condominium Act, 1998 provides assistance in enforcing the payment of common expenses.  If a unit owner defaults in payment of his or her common expenses payments, the condo corporation has a lien right against the defaulting owner's unit. The lien covers the unpaid amount of common expenses as well as the interest, reasonable legal costs, and legal expenses incurred by the corporation in collecting the outstanding payment.

Registration of Liens

While the corporation's lien arises immediately and automatically upon default, there are several legal steps that must be taken.  First, a Certificate of Lien should be registered within three months after the default first occurred.  A lien is only enforceable for non-payment going back three months prior to registration.  For instance, if default began on January 1, but a lien was only registered on April 30, the condo corporation would only have an enforceable lien for arrears owing after February 1. However, once registered the lien is effective for any continued non-payment that occurs after registration.

As well, notice of the lien should be provided to the unit owner 10 days before registration personally or by registered mail.  It should also be provided to any others who have a legal interest in the unit, such as a bank holding a mortgage, on or before registration.

Consequences

If these requirements are fulfilled, the lien becomes a powerful tool for enforcing payment because it then takes priority over every other interest in the land, including any mortgages, even if they were registered against title before the lien was.  As a result, the Act also provides that all mortgages agreements automatically include terms allowing the bank to pay off the lien on behalf of the unit holder and then add the amount paid off to the mortgage debt.  That way the bank can protect its mortgage.  If the unit owner does not reimburse the bank for the payment of the common expenses forthwith, the bank is entitled to "accelerate" the mortgage and demand repayment of the entire mortgage debt.

Conclusion

The end result is that properly registered condo liens are strong incentives for a defaulting unit owner to pay up his or her common expenses.  If the expenses are not paid, one's entire mortgage may become payable.  In addition, if one does miss a common expenses payment, one should attempt to get up to date before the condo corporation registers its lien.  The amount of the lien includes the corporation's legal expenses in enforcing the lien.  Registration of a lien usually involves a lawyer and the lawyer's legal fees can increase the amount of the lien considerably.  Acting quickly to remedy the default will minimize the amount needed to be paid.

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