Strata corporation’s liens discharged for lack of proper notice
January 20, 2016
BY Kevin Zakreski
In a case decided late last year, the BC Supreme Court considered the interplay of two provisions in the Strata Property Act: section 116, which authorizes a strata corporation to register a lien against a strata lot if its owner has failed to make certain listed payments to a strata corporation, and section 61, which describes how a strata corporation is to give notice under the act. The Owners, Strata Plan BCS 3372 v Manji, 2015 BCSC 2503 shows how a failure to give notice in one of the ways specified in section 61 can result in the loss of security afforded by a lien under section 116. The case also makes some interesting comments on other aspects of the procedural steps needed to lay the foundation of a successful collection of money owing by an owner to the strata corporation.
Facts and issues
The strata property at issue was a “40-unit residential strata lot building” in the city of North Vancouver. Construction was completed in 2009, but the majority of the strata lots “did not sell right away,” leaving about 30 strata lots rented out to tenants.
The respondent Mr. Manji and his family members owned five strata lots. They were among the rented strata lots.
The strata manager collected rent for the rented strata lots. The respondent had a practice of collecting the rent for the five strata lots owned by him and his family from the strata manager and at the same time delivering a cheque to cover the strata fees. Beginning in May 2013, this practice broke down, apparently through the respondent’s inadvertence.
In October 2013, the strata manager sent demand letters to the owners of the five strata lots. The letters were sent by registered mail, but they were all addressed to the same strata lot.
The respondents failed to respond to the demand letters or to pay the November and December 2013 strata fees. So, in December 2013, the petitioner strata corporation registered liens on title to each of the strata lots. The amount claimed in each certificate of lien included the strata fees in arrears plus a series of what the court called “lien charges.”
The respondent ultimately learned about the liens and, early in 2014, attempted to pay the outstanding strata fees and to contest some of the lien charges. This led to some back-and-forth communications between the petitioner and the respondent. Meanwhile strata fees for March and April 2014 were unpaid, apparently due to a misunderstanding about a pre-authorized payment plan. In May 2014, the petitioner’s lawyer sent out a second set of demand letters. The led to further communications and, in the end, to the petitioner commencing proceedings in court in September 2014.
The court defined the issues before it as follows:
- Was notice of the First Demand Letters properly given to the respondents?
- Was it a proper demand pursuant to s. 112(2) of the SPA?
- Was the filing of the Certificate of Lien proper, including the amount claimed?
- Was the commencement of this proceeding appropriate pursuant to s. 112(2) of the SPA?
- Is the petitioner entitled to all, some or none of the amounts claimed?
Was notice of the First Demand Letters properly given to the respondents?
The court had two concerns with the notice given in the first set of demand letters. First, it found some problems in the evidence of the strata manger’s “reliance on registered mail”:
As proof of service, Mr. Reinert attaches documents apparently produced by Canada Post regarding the registered mail of the First Demand Letters. It may be that these documents are meant to indicate that someone who was an addressee to the registered mail showed identification and then signed for and received the mail. However, the face of the document does not reveal this.
On the Canada Post documents there is some form of signature box but it has been digitalized and pix[e]lated and is completely useless for identifying the signature. If this is Canada Post’s method of proving that registered mail has been received, it is very deficient.
The second problem was lack of compliance “with the provisions for notice in the SPA.” As the court explained there were both further problems here with registered mail and problems with “whether the notice in the form of the First Demand Letters was addressed to the respective strata lots. It turns out it was not.”
Each notice was addressed to unit #209, which is the address of only one of the strata lots, Strata Lot 15, which is owned solely by Mr. Manji. That means that only one of the First Demand Letters was properly addressed, the one in respect of Strata Lot 15. As such, irrespective of the status of registered mail under the SPA, notice was not properly given for the other four of the five strata lots.
I therefore conclude that the petitioner has not proven that it gave proper notice of the First Demand Letters to any of the respondents as required under s. 61 of the SPA.
The court saw these findings as being enough to call for dismissal of the petition, “based as it is on a chain of actions founded on proper notice having been given prior to the Liens being filed.” Nevertheless, out of an abundance of caution, it went on to consider the other issues.
Were the first demand letters a proper demand pursuant to s. 112(2) of the SPA?
After examining the first set of demand letters against section 112 of the act, the court found that they “imposed too short of a deadline for payment”:
The SPA requires two weeks’ written notice demanding payment before the lien may be filed, pursuant to s. 112(2); but notice is not deemed to have taken effect until four days after mailing, pursuant to s. 61(2). It was therefore an error for the property manager to say that payment had to be made within 14 days of the date of the letter. It might be prudent in the future for the property manager to simply pick a date that is greater than 14 days plus four days from the date of mailing, and advise of that date as the deadline.
Apart from this flaw, the court concluded that the letters “were in the correct form of a demand to precede the filing of a lien.”
Was the filing of the Certificate of Lien proper, including the amount claimed?
This issue involved consideration of the lien charges included in the certificate of lien. Section 118 of the act allows for the addition of certain “costs of registering a lien.” The court concluded that
the petitioner erred in the preparation of the Liens, by unilaterally rolling its own estimation of s. 118 costs into the figure which it claimed was the “amount owing” under the Liens. Here the proper figure to be used for the “amount owing” under s. 116 was only the outstanding strata fees.
Was the commencement of this proceeding appropriate pursuant to s. 112(2) of the SPA?
The court concluded for this issue that, as a result of the procedural defects with the first set of demand letters, it “follows that the subsequent steps to enforce the Liens as taken by counsel for the petitioner by way of the Second Demand Letters and commencement of these proceedings, were also not appropriate.”