Strata corporation’s attempt to characterize fines as strata fees unsuccessful
December 1, 2016
BY Kevin Zakreski
The Owners, Strata Plan BCS3648 v Podwinski, 2016 BCSC 2253, a short oral judgment made in August, tackles an interesting issue. Section 116 of the Strata Property Act allows a strata corporation to “register a lien against an owner’s strata lot . . . if the owner fails to pay the strata corporation any of the following with respect to that strata lot:
- strata fees;
- a special levy;
- a reimbursement of the cost of work referred to in section 85;
- the strata lot’s share of a judgment against the strata corporation.”
Conspicuous by its absence from this list is a fine applied to an owner for a bylaw or rule contravention.
Sometimes an owner will take issue with a fine and refuse to pay it. This owner may continue to pay strata fees as they come due. Can the strata corporation accept such a payment, apply it first to the amount owing for the fine, claim that the resulting shortfall means the owner is now in default of paying strata fees, and thereby obtain the security afforded by the statutory lien?
This is the situation that presented itself to the court in Podwinski. The case concerned “a multi-family, apartment-style condominium complex located in Surrey.” The respondent was a strata-lot owner. The petitioner was the strata corporation.
The strata corporation claimed that the owner was in default of bylaws relating to tenancy and pets. It fined the respondent, in an amount that totalled, by the time the case was before the court, “in the range of $3,000.” The validity of these fines wasn’t at issue in the case.
The respondent regularly paid her strata fees “by way of pre-authorized payments from her bank.” “Approximately two years after the fines were imposed,” the court noted, “the by-laws of the strata corporation were amended. The amended by-laws include the following provisions:”
1 (1) An owner must pay strata fees on or before the first day of the month to which the strata fees relate;
(9) Monies received by the strata corporation from an owner on or behalf of the owner shall be applied against the account relating to that owner’s strata lot in the following order of priority:
(a) The oldest charge on the strata lot account followed by the next oldest charge and any other charges based on chronological order of original entry of those charges.
Such bylaws are not uncommon. They appear to be based on a rule in banking law known as the rule in Clayton’s Case.
The strata corporation argued:
due to the implementation of the new by-law, effective November 1, 2014, the monthly strata fees that Ms. Podwinski was paying were to be applied against the fines that were outstanding from 2012. On this basis the strata corporation maintains that strata fees, and not fines, are currently owed by Ms. Podwinski, and therefore the strata corporation is entitled to file a lien against Ms. Podwinski’s strata lot. The strata corporation seeks to enforce the lien in accordance with the relevant provisions of the Act.
“The respondent’s position,” as the court described it, “is that the pre-authorized payments were for strata fees, that all fees have been paid, that the amounts owing, if any, are for fines, and that she is entitled to dispute those fines in court or through the Civil Resolution Tribunal, whichever is the applicable forum.” The strata corporation rejected this approach, arguing:
the owner cannot stipulate that the amounts paid are for fees only. It argues that no matter what interpretation may be made of the pre-authorized payment form, the owner is bound by the strata corporation’s by-laws, including those respecting the allocation of funds by the strata corporation.
The court sided with the respondent. Its conclusions were as follows:
In my view, the effect of the strata corporation’s argument is to preclude owners from contesting or refusing to pay fines while continuing to pay strata fees.
It is also my view that to give effect to this interpretation of the by-law would render the by-law contrary to the intent and plain wording of the Act. The Act is clear that a strata corporation may register a lien for unpaid strata fees but not for unpaid fines.
In my view, the by-law is invalid to the extent that it would preclude an owner from stipulating that fees are being paid and that fines are not, thereby denying the owner the remedies set out in the Act. The by-law must be read down in order to avoid that result.
In addition, on the facts of this case, I find that in keeping with the terms of the pre-authorized payment form, Ms. Podwinski has paid the strata fees. I find that the strata corporation accepted the monies on that basis and only that basis. I reject the strata corporation’s argument that the terms of the by-law override the terms of the pre-authorized payment form.
In the result, the petition was dismissed, with costs to the respondent.