Strata corporation’s lien ruled invalid for including improper amounts
February 18, 2016
BY Kevin Zakreski
In a recent judgment, the BC Supreme Court has underscored the importance of careful recordkeeping and adherence to statutory procedures for strata corporations. In Terry v The Owners, Strata Plan NW 309, 2016 BCSC 237, the court discharged a lien filed under section 116 of the Strata Property Act because it apparently contained improper amounts for discharged fees, fines, and interest charges.
Facts and issues
Terry involved “a long history of disputes” between the petitioner strata-lot owner and the respondent strata corporation, located in Abbotsford. The petitioner commenced this proceeding “to resolve the central issues between the parties and achieve some finality with respect to the long standing dispute.”
The court provided a succinct rundown of the facts underlying this dispute:
As noted, the dispute dates back to the 1990s. In 1998, the Strata Corporation commenced an action in provincial court against the respondent and her mother seeking recovery of amounts owing in connection with the Strata Lot. A lien was also placed against the Strata Lot (the “Original Lien”). On October 13, 2000, the Strata Corporation obtained judgment in the amount of $3,271.95.
Various payments were made on the judgment by way of garnishing orders issued against the petitioner and her mother. The matter was ultimately resolved and the Original Lien was discharged from the Strata Lot in December 2003.
The dispute over amounts allegedly owing in respect of the Strata Lot nonetheless continued and on October 20, 2008, the lien which is the subject of this proceeding was filed against the Strata Lot in the amount of $18,361.02 (the “2008 Lien”).
No court action has been commenced by the Strata Corporation to collect the amounts allegedly owing, although counsel advised that instructions have now been provided to bring a proceeding.
These facts generated a number of issues, three of which lie at the heart of the court’s judgment.
- Did amounts claimed in the 2008 Lien pre-date December 2003 and thus were discharged with the Original Lien?
- Was the petitioner improperly assessed for legal fees incurred in defending her petition?
- Was the petitioner entitled to a detailed account summary for the strata lot?
Did amounts claimed in the 2008 Lien pre-date December 2003 and thus were discharged with the Original Lien?
As the court noted, it was “common ground between the parties that a lien is a floating charge and it therefore covers all amounts owing up until the time of discharge.” In this case, one lien was discharged in December 2003 and a subsequent lien filed against the strata lot in October 2008. The court expressed some frustration with the state of the respondent’s records, which made it difficult to determine whether amounts discharged in 2003 were included in the claim secured by the 2008 lien:
No explanation was provided by the respondents as to why there are different statements covering the same period of time that include different amounts. Given the different statements, it is not possible to determine whether the amount claimed in the 2008 Lien includes fines or not.
Section 116 limits the lien it authorizes to the following amounts, which don’t include fines:
- 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.
Given the state of the record, the court refocussed this issue to consider the effect of including unauthorized amounts with a claim of lien:
Regardless, the certificate of lien filed against the Strata Lot did include other improper amounts, specifically the pre-2004 amounts and improper interest charges, as detailed above. The question then becomes whether that renders the 2008 Lien invalid, or only unenforceable with respect to the improper amounts.
Ultimately, the court answered its question by determining that the inclusion of amounts discharged in 2003, fines, and interest charges rendered the 2008 lien “invalid.” As support for its conclusion, the court noted that Form G, “which is the Certificate of Lien form, requires that a strata council member or the strata manager certify that the amount claimed in the certificate is owing to the strata corporation pursuant to s. 116. This is inconsistent with the notion that a certificate of lien can be registered for any amount just so long as the owner owes something for strata fees.”
Was the petitioner improperly assessed for legal fees incurred in defending her petition?
This issue called on the court to consider section 167 (2) of the act, which provides that the expense of defending a proceeding is a common expense of the strata corporation, “except that an owner who is suing the strata corporation is not required to contribute.”
This issue also turned on the weakness of the strata corporation’s evidence:
On the state of the evidence, it is not possible to determine whether some or all of the legal fees claimed were incurred directly in relation to the petition or whether some or all relate to more general efforts to collect outstanding amounts owing. Absent a more detailed breakdown of the fees, [the strata corporation’s lawyer’s] vague statement about the legal fees sheds little light on the issue.
In the circumstances, the petitioner is entitled to a declaration that the Strata Corporation may not charge the Strata Lot for any portion of its legal costs incurred in defending this petition and a further order requiring the Strata Corporation to refund any portion of the legal costs that have been improperly charged and paid by the petitioner.
Was the petitioner entitled to a detailed account summary for the strata lot?
The petitioner asked for a number of miscellaneous orders, which met with mixed success. Notably, the court refused to grant a declaration that the strata corporation perform duties required under the act:
Having dealt with the specific issues raised by the petitioner, such general compliance orders are of little value. As noted by Mr. Justice Betton in Mitchell, “there is an obvious redundancy making orders that a strata corporation comply with legislation governing its conduct.” I therefore decline to grant these additional orders.
But the petitioner was successful in obtaining an order for an accounting from the strata corporation.
In the result, the court made the following orders:
- the Certificate of Lien registered against the Strata Lot on October 20, 2008 under No. BB905875 is invalid and shall be discharged at no cost to the petitioner;
- the petitioner is entitled to a declaration that the Strata Corporation may not charge the Strata Lot for any portion of its legal costs incurred in defending this petition and a further order requiring the Strata Corporation to refund any portion of the legal costs that have been improperly charged and paid by the petitioner; and
- the Strata Corporation shall provide the petitioner with a detailed accounting for all amounts charged against the Strata Lot and all payments received dating back to the last $0.00 balance.
The petitioner also received ordinary costs for the proceeding.