Strata Collections and Liens in the Age of COVID-19
Alex J. Chang, Associate
Phone: 604-685-1255
Email: ajc@lmlaw.ca
As the economic toll from the COVID-19 pandemic rises, it will become increasingly difficult for many to pay strata fees or levies. However, those payments are required for strata services. Some of those services, such as cleaning, utility payments, maintenance and repairs, are particularly crucial when all residents must stay home. This is why the provincial government has declared such services need to be maintained.
The Strata Property Act provisions that allow the strata corporation to register a lien against a strata lot for fees and levies remain in force despite the pandemic. Strata liens provide added security for the arrears that have priority above most other charges, including mortgages. Stratas that place liens are entitled to add the cost of enforcing those liens to the secured debt, including all reasonable legal costs and filing fees. The only change due to COVID-19 is that a petition for an order selling the property subject to a lien may not be heard until the courts resume normal operations.
The legal obligation to secure fees and levies leaves strata councils in an unenviable position. On the one hand, they must continue to collect money to provide the essential services that owners rely on while wanting to be sensitive to the circumstances of owners that are under severe financial stress during this difficult time.
Strata councils and managers cannot forgive debts for strata fees or levies. Thus, unfortunately, their ability to offer financial assistance to owners is limited. However, we have attempted to put together some information or suggestions that may help some stratas and owners facing difficult financial situations due to COVID-19:
- Owners should be directed to federal and provincial financial assistance programs.
- Owners should understand that their strata fees and levies are meant to be prioritized over most other household expenses. As noted earlier, a strata lien ranks in priority above a mortgage and can also be subject to interest and the strata’s legal costs. Mortgage lenders may also be permitted to pay off the lien and add that cost to the mortgage. Owners should, therefore, be seeking accommodations from their mortgage providers before seeking financial accommodations from their stratas.
- If an owner has fallen into arrears, it may be prudent for a strata first to send a gentle reminder, rather than proceeding with demands and liens within the first or second month of arrears. However, the strata should be clear in its reminder that a formal demand and a lien will follow if the arrears reach a certain amount or age.
- Although not traditionally recommended, owners could be encouraged just to pay their oldest arrears. This process would avoid having owners’ arrears getting too large or too old. However, strata councils considering such a policy will need to put some serious thought into how much arrears it can manage before it must impose liens.
- Strata’s may want to consider temporarily suspending fines and interest for non-payment of strata fees. Unlike interest, fines cannot be added to a lien anyway and, as noted in a previous article, can be burdensome for a strata to enforce.
- Strata councils may consider amending their budgets to freeze or reduce strata fees at their next Annual General Meeting. However, this should not be done at the expense of the strata’s ability to comply with its fundamental duties to meet its financial and legal obligations under the Strata Property Act. Many stratas in BC already have significant shortfalls in their repair budgets and Contingency Reserve Funds. Many do not have any depreciation reports or do not follow the budgeting recommendations in those reports. Thus, recommending the reduction or freezing of budgets should be made with great care and consideration.
As the law has not changed and strata expenses are not going away, strata corporations must still register liens for unpaid fees and levies. That said, stratas can employ the above strategies to ensure constructive communication with owners and help them avoid adding to the burden of their arrears.
WHAT WE DO: Lesperance Mendes would be pleased to assist your strata corporation in responding to issues regarding COVID-19 and strata collections. To make an appointment, please contact Paul G. Mendes, Alex J. Chang, or Amanda Magee.
Caution: As the circumstances surrounding the COVID-19 pandemic is rapidly evolving, we encourage readers to monitor official government and court websites and seek current legal advice based on their particular circumstances.
THIS ARTICLE IS NOT LEGAL ADVICE: This article provides general information and should not be relied upon without independent legal advice with respect to the specific facts of your case.