A closer look at the Report on Governance Issues for Stratas: If a court or the Civil Resolution Tribunal finds that a charge back for an insurance deductible or expenses incurred due to damage which are less than an insurance deductible is valid, then should the Strata Property Act enable a strata corporation to register a lien on an owner’s strata lot for amounts owing with respect that charge back?
5 February 2019
By Kevin Zakreski
This post is the part of a series highlighting key recommendations in the Report on Governance Issues for Stratas. For other entries in the series, click here.
Brief description of the issue
This issue for reform represents an attempt to respond to enforcement concerns by giving a limited expansion of the range of the strata corporation’s lien. Would such an expansion be acceptable if it were limited to charge backs approved by a court or the Civil Resolution Tribunal?
Discussion of options for reform
The principal advantage of this proposal is its limited scope. It would extend the lien to a compensatory (as opposed to a punitive) amount, something that is consistent with the lien’s existing purposes.
The downside of this proposal is that it would have the effect of substantively reordering priorities among competing creditors. This could harm third parties, which could have knock-on effects for strata-lot owners, if they were, as a result, to find it more difficult to obtain financing from financial institutions.
The committee’s recommendation for reform
In considering the issues for its consultation paper, the committee gave this issue extended consideration. While (at that time) some committee members were attracted to it as a practical extension of the lien that could solve some enforcement problems, others were concerned about its potential impact on other creditors and, indirectly, strata-lot owners. Other committee members noted that a strata corporation already has the power to bring itself within the confines of the lien in similar cases, if it obtains a work order. Ultimately, the committee decided not to endorse this proposal in the consultation paper.
A strong majority of respondents to the consultation paper disagreed with the committee’s tentative recommendation. Upon further reflection of the points raised in the consultation, the committee decided to change this tentative recommendation. The committee’s decision on this issue was also bolstered by discussions it had with insurance professionals as part of its development of the committee’s Consultation Paper on Insurance Issues for Stratas.
While the committee remains wary of calls to dramatically extend the reach of the lien, it has come to view a limited extension as justified. In its view, an insurance deductible is significantly different from, say, bylaw fines. Extending the lien to cover the latter would significantly open up the possibility of abuse. But a limited extension to cover just insurance deductibles wouldn’t create so great a risk for abuse and would help to support other proposed reforms for a difficult area of the act.
The committee recommends:
The Strata Property Act should enable a strata corporation to register a lien on an owner’s strata lot for amounts owing with respect to a charge back for an insurance deductible or expenses incurred due to damage which are less than an insurance deductible, if the charge back has been found valid by a court, an arbitrator, or the Civil Resolution Tribunal.