Toronto Condominium Corp. 1462 v Dangubic, 2018 ONSC 491

March 2018

Toronto Condominium Corp. 1462 v Dangubic, 2018 ONSC 491

Overview

This case explores the ability of a condominium to capture, or lien, arrears outside of the ninety (90) days afforded in the Condominium Act, 1998. Referred to as “first-in, first-out accounting” or “FIFO”, this case confirms the right of a condominium to use FIFO, thereby moderating the iron clad application of statutory liens only capturing arrears less than 90 days old.

Facts

A problematic Unit Owner breached the Act and the Condominium’s by-laws by throwing excessively noisy parties in the party room, getting into verbal confrontations with other unit owners, and leaving threatening voicemails with his neighbours. The Condominium retained legal counsel to draft compliance letters requesting that the Unit Owner cease such behaviour. The legal costs associated with drafting compliance letters totaled over $3,100 and the Condominium sought to be indemnified for these costs by adding them to the Unit Owner’s common expenses. This process is commonly referred to as a ‘chargeback’. Eventually, the Unit Owner’s common expenses fell into arrears and the Condominium registered a lien against the unit. The outstanding legal issue in Dangubic was whether the lien was registered within the three-month period following the default.

The Condominium’s lawyers sent enforcement letters in November and December 2015 and charged back the cost to the Unit Owner’s common expenses following delivery. The chargebacks for the enforcement letters remained unpaid and a lien was registered against the Unit in March 2016; in this case, the lien was registered outside the three-month period following the default. The Unit Owner claimed that the lien was invalid because the lien registration fell outside the three-month period following the chargeback for the enforcement letters. However, between November 2015 and March 2016, the Unit Owner continued to pay his base common expenses through automatic withdrawal. The Condominium applied the March 2016 monthly payment to the November 2015 arrears. Arrears then arose for March 2016, which were within the three-month window, were liened. Despite the Unit Owner’s objection, the Court accepted the Corporation’s accounting practices of applying common expenses arrears on a rolling forward basis, akin to FIFO. Dangubic confirms that condominiums, when acting as a creditor, can allocate payments toward common expense arrears on a first in first out basis. In other words, payments towards common expenses can be attributed to the most dated outstanding common expense arrears. First in first out accounting means that default arrears keep rolling forward, as the oldest arrears are paid by the most recently received payments. In Dangubic, the lien was deemed valid and the Unit Owner was required to pay the outstanding common expense arrears along with the Condominium’s legal costs amounting to over $10,000.

Bottom Line

A condominium should always strive to register liens within the three-month window following demand for payment of common expense arrears. However, if this period is missed, this case confirms that FIFO recovery may be permitted to secure the arrears with a lien, in certain circumstances.

Written by Benjamin Baena, edited by Robert Mullin and Chris Mendes.