Strata Alert: Good money after bad? Fining an owner for non-payment of strata fees

 

Good money after bad?  Fining an owner for non-payment of strata fees.

Paul G. Mendes, Partner
Phone:  604-685-4894
Email:  pgm@lmlaw.ca

 

Terry v. The Owners, Strata Plan NW 309, 2016 BCCA 449

Many strata corporations in British Columbia have a bylaw permitting the strata to fine an owner for nonpayment or late payment of strata fees and special levies. These fines are sometimes referred to in the bylaws as “penalties” or “late payment charges.”

There is nothing wrong with this type of bylaw.  Unfortunately, however, many strata corporations do fail to apply these fines correctly. As a result, late payment fines are difficult to collect even if the strata obtains an order for the sale of the strata lot to collect the debt.

In Terry, the strata corporation fined a unit owner $7, 210 for short paying her strata fees by about $5 per month for almost ten years. Although the unit owner knew about the fines for some time, there was no evidence that the strata had complied with the requirements of section 135 of the Strata Property Act (SPA) before it applied fines to the owner’s account.

Our readers will recall that section 135 is the “due process” section of the SPA.  It states that a strata must not fine an owner until it has given the owner “… particulars of the complaint, in writing, and a reasonable opportunity to answer the complaint, including a hearing if requested.”  We have previously published a guide on responding to bylaw infraction complaints. Now would be a good time to familiarize yourself with that guide.

This is what the Court of Appeal said about section 135 in the Terry case:

[27] Section 135 of the Act sets out the procedure a strata corporation must comply with before imposing a fine for contravention of a bylaw. The provision is not complex and its requirements are straightforward. A fine must not be imposed unless the strata corporation has received a complaint about the alleged contravention of a bylaw and given the owner or tenant written particulars of the complaint with a reasonable opportunity to be heard in response, including a hearing if one is requested. The Act does not specify the form in which notice of the particulars of complaint must be given, nor does it define what constitutes a reasonable opportunity to answer the complaint.

[28] In my view, an owner or tenant who may be subject to a fine must be given notice that the strata corporation is contemplating the imposition of a fine for the alleged contravention of an identified bylaw or rule, and particulars sufficient to call to the attention of the owner or tenant the contravention at issue. In addition, the owner or tenant must be given a reasonable opportunity to answer the complaint. What constitutes a reasonable opportunity to be heard in response is a case-specific inquiry that must take account of the nature of the alleged contravention, the context in which the violation is said to have occurred, and the time that might reasonably be required to gather information or evidence needed to answer it.

Section 135 applies to all bylaw or rule enforcement procedures, including fines levied for nonpayment or late payment of strata fees and special levies.  The only exception to this rule is section 135 (3), which states that the strata corporation only needs to comply with section 135 once in the case of a “continuing contravention” of the bylaws.

The BC Supreme Court addressed constitutes a “continuing contravention” of strata bylaws in The Owners, Strata Plan VR2000 v. Grabarczyk 2006 BCSC 1960.  Generally speaking, a continuing contravention of the bylaws is any activity that occurs for more than seven days without interruption. Kind of like a perpetual motion machine. It is unlikely that a Court would view the failure to pay strata fees in full each month as a continuing contravention, so the best practice when it comes to fines for nonpayment is to comply with section 135 each time before the strata imposes the fine.

The strata council should also record the decision to fine an owner in the council minutes before it applies fines to the owner’s account. Without this evidence, it may appear to the Court that the council has delegated its duty to enforce the bylaws to the strata manager, which is contrary to section 26 of the SPA, and standard bylaw 20 (4).  In The Owners, Strata Plan LMS 4555 v. Chan (3 February 2005), Vancouver L040827 (B.C.S.C.), for example, a strata failed to adduce any evidence that the council had decided to fine an owner contravening a noise bylaw. As a result, the court refused to grant judgment for the fines.

As a general rule, I recommend against having a specific bylaw setting out a particular fine for the nonpayment of strata fees for two reasons:

  1. Standard bylaw 1 already requires owners to pay their strata fees on or before the first day of the month to which the strata fees relate. Assuming the strata already has this bylaw, or some similar bylaw, it is not necessary to specify a particular fine amount for the nonpayment of strata fees.
  2. The strata cannot include fines in a Form G Certificate of Lien. Even if the strata complies with section 135 in every respect and obtains a judgment on the fines as part of a forced sale proceeding, that portion of the judgment relating to fines will rank below every other charge registered on title. In many cases, there will not be enough money left over from the proceeds of the sale to pay off the fines once all the other registered charge holders take their cut from the sale.

If your strata wishes to fine an owner for nonpayment of strata fees and special levies, here are simple things you can do to make those fines a little easier to collect:

  1. Consider including section 135 “warning language” on the statements of account that you deliver to the owners each month. This warning language should include a reference to the relevant bylaw, and a statement that the strata may fine the owner if he or she does not bring their account up to date. Including the section 135 notice right on the statements of account makes compliance with section 135 less cumbersome by eliminating the need for a separate section 135 warning letter.  Some strata accounting systems will place this type of language as a system generated entry on all accounts that are in arrears.
  2. Make sure to include a notation in the council minutes that “the council instructed the strata manager to apply a fine of $AMOUNT on all owners who are in arrears on their strata fees or special levies.” Note that it is not necessary to identify the specific strata lots that are being fined in the minutes. What is important is that the minutes show that the council (and not the strata manager or some other delegated person) made the decision to fine the owner.

WHAT WE DO: Lesperance Mendes has been advising and representing strata corporations on bylaw enforcement and strata fee collections since 1997. We also collect unpaid strata fees and special levies on a flat fee, which allows strata corporations with significant AR issues to collect their debts efficiently and economically. To find out more about our bylaw enforcement and strata collection services, please contact Paul G Mendes, partner at 604-685-4894 or by email at pgm@lmlaw.ca

 

Caution:  The content on this website is intended as general information only and should not be relied on as legal advice.  Views expressed in articles, alerts and other publications may not apply to the circumstances of a specific case, and are subject to change as a result of legislative amendments and court or tribunal decisions.  Readers should obtain their own up-to-date independent legal advice before making any decisions that affect their rights.