Guidance on the Registration of S.85 Condominium Liens from the SCC

By Slonee Malhotra and Ashley Hizo

The Supreme Court of Canada (SCC) has recently released a decision to dismiss the leave to appeal in Leslie Arthur Swan v Durham Condominium Corporation No.45 (Swan v Durham). This case concerned Swan, the owner of a unit in a condominium building, and his unsuccessful attempt at seeking an order to vacate a lien registered by Durham Condominium Corporation (Durham) against his unit.

In a previous article, What You Need to Know About Condo Liens under Section 85 of the Condominium Act, we have written that prior to being able to register a s.85 lien to recover fees or costs incurred in the context of a compliance matter, the condominium corporation must first obtain a s.134 order to that effect.

Failing to obtain a compliance order from the Court restricts a corporation to recover only the arrears, interest, legal fees, and actual expenses incurred in collecting the arrears. The case of Swan v Durham provides several guiding principles regarding the limited nature of obtaining such order.

Factual Background of Swan v Durham

The relevant parties in this case concerned Durham, a condo corporation and Swan, a unit owner and former director of Durham.

On or about July 12, 2009, Durham advised all unit owners not to append anything to the common element roofs of their unit. Despite being apprised of the notice, Swan attached a satellite to the roof of his unit. A Section 98 Agreement is required to be registered against a unit’s title if a unit owner wishes to complete an installation or renovation which attaches to common elements. We have previously written about Section 98 Agreements here. In the Durham case, a Section 98 Agreement was not entered into at time of installing the satellite. In providing the earlier 2009 notice, Durham effectively refused the proposed improvement.

The factual background of this case concerned Durham seeking an order requiring that Swan remove, at his expense, the satellite dish installed on the common elements appurtenant to his unit and to restore, at his expense, the common elements to the condition they were in prior to the installation of the satellite dish. In addition, Durham also sought a declaration that Swan had breached the applicable standard of care as a director and that Swan was a vexatious litigant.

A declaratory judgment was then obtained. Specifically, the judge found that Swan had breached his standard of care as a director, was not a vexatious litigant and rendered the satellite dish issue moot since by the time of hearing, Swan had already removed it.

Following the declaratory judgment, on or about February 2013, Durham gave Swan notice that pursuant to s.85 it would be registering a lien against his unit for $225,841.81. On or about March 2013, Durham then registered a lien for $218,908.70 (recalculated with the assistance of an assessment officer) which represented its legal costs to date.

Guidance from Swan v Durham

At issue was whether the declaratory judgment obtained by Durham could be a compliance order, and therefore comprise a condominium lien, within the meaning of s.134. The Court held that yes, consistent with the language in s.134, the declaratory judgement is a compliance order. However, the condominium lien as registered was required to be amended.

The Court held that the rationale for s.134 is to permit a condominium corporation that was successful on an application to add the costs assessed by the Court and the actual costs of the application to the unsuccessful owner’s common expenses. In addition, the Court held that costs can be awarded against an owner even where the owner addressed the conduct complained of prior to the hearing of the application.

While the declaratory judgement could comprise the condominium lien, the Court found that the lien as currently registered exceeds Durham’s claim and must be amended to reflect actual amounts Durham is entitled to under the CA. The Court then provided some guidance that the language of s.134 is limited and does not entitle the condominium corporation to claim all legal costs associated with compliance. Rather, it is limited to situations where the condominium corporation obtained an award of damages or costs in an order made against an owner. This case serves as a reminder that any legal fees incurred for matters unrelated to compliance of the Act cannot comprise a condominium lien.

As a result, the motion judge then revised the amount of the lien that Durham had registered against Swan’s unit to $204,791.56. Both the Ontario Court of Appeal and the SCC dismissed the appeal.

This decision serves as a cautionary tale to Condo Corporations: Be vigilant in preparing a S.85 notice of lien and in registering each condo lien as failure to do so may result in the Condo Corporation being denied costs that otherwise would have been awarded.

For any questions related to this article or legal assistance regarding condominium liens, please reach out to one our experienced real estate or condominium development lawyers at SorbaraLAW.