In the last installment of Condo Talk, I discussed the benefits of having a policy in place for the collection of arrears. This article will add another tool to the Boards’ arsenal in trying to collect fees from unit owners who are behind in their payments.
When an owner is in arrears with respect to condominium fees, The Condominium Property Act, 1993 (the “Act”) allows the condominium corporation to seize the rents of a tenant who is living in a rented condominium unit. In order to do so, the condominium corporation must provide notice of its intention to do so to both the tenant residing in the unit, and the owner of that particular unit. Once notice has been provided to both the landlord and the tenant, the condominium corporation is legally entitled to step into the landlord’s shoes and collect rents on his or her behalf. It can continue to collect rents in place of the landlord until the arrears are satisfied.
To the tenant, there is no material change. The Act specifically provides that any amounts paid to the condominium corporation subsequent to proper notice being provided may be deducted by the tenant from the rent the tenant pays to the owner. If the entirety of the rent is being paid to the condominium corporation, none of the rent must be paid to the landlord.
In order to take advantage of this particular remedy, the condominium corporation must be specifically authorized in its bylaws to do so. If the condominium corporation is acting under the statutory bylaws, meaning that it has not passed any custom bylaws and filed them with the Director of Corporations, then it is already authorized to do so. Section 33 of the statutory bylaws, which are contained in The Condominium Property Regulations, 2001 provides this authorization.
However, if the condominium corporation has enacted and filed custom bylaws, it is important for the directors to either review the bylaws themselves for authorization, or have a qualified lawyer guide them through this process. It is possible, even though the Act provides for the seizure of rent, your particular condominium corporation cannot avail itself of this remedy. Be sure before going ahead, as acting without authorization could put the condominium corporation on the wrong end of a fee dispute.
The last and important consideration, for any condominium corporation taking advantage of this remedy, is to ensure it does not overcharge the tenant. Once the arrears have been satisfied, the condominium corporation no longer has any authority to seize rents from the tenant. Any overages that are inadvertently received should be immediately paid to the proper owner, and notice provided to stop payment for future rents.
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